The State of Recreational Cannabis (Is Texas Playing It Safe? Or Just Missing Out?)
Texas Cannabis Laws are conservative at best in the Lone Star State. New representatives at the Capitol need to be voted in for a real cannabis program to begin to take place in Texas.Be sure to know your candidates this coming Spring Election in 2022 to act with your Vote on Cannabis.
The fact that the Lonestar state is still vehemently anti-cannabis (at least in legislation at the state level) despite being surrounded by a sea of green is a true testament to the independent Texas spirit. It seems Texas is more likely to secede from the United States than it is to legalize recreational cannabis.
America’s coalition of green – or pro-weed – states is vast, snaking from Washington state down the West Coast, then east to Arizona and New Mexico, up over the Texas panhandle into Oklahoma; and from Arkansas, it goes straight north to Canada and all the way along the Gulf of Mexico to Florida. And that’s not including several other Southwestern states, as well as most of the Mid-Atlantic and Northeastern states.
As of this writing, a grand total of 18 U.S. states have legalized recreational cannabis for personal use, including our immediate neighbors Colorado and New Mexico; and three others, Arkansas, Oklahoma and Louisiana, are part of 18 states that allow only medical cannabis (and, therefore, have the infrastructure to fully legalize in the coming years.)
The 12 states without some kind of cannabis industry, aside from hemp and CBD, are now the minority. We can’t blame it on politics either. Even blood-red states like Montana, Alaska, Alabama and West Virginia have some version of legalization.
But don’t think Ol’ Big Red is bone-dry on the sticky-icky. Far from it. Consider these numbers:
Given the likelihood of steady, easy transport of cannabis into Texas from these red-eyed neighbors (in addition to the cartel-sponsored black market already operating here), the state of about 30 million people likely has, at any time, more illegal cannabis than several other legal states. Just look at population alone: Less than 750,000 people live in both Alaska (legalized in 2014) and Vermont (2018); Montana’s (2020) population is just over 1 million.
If that probability doesn’t convince you that Texas is one of the most weed-heavy states, consider the average age of a Texan is just 34.6 years old, a Millennial; and Millennials love getting down on some ganja. A new Gallup survey says as much as 20 percent of those belonging to my generation say they currently use cannabis. But that number doesn’t include much of the other 80 percent too stoned to complete the poll.
Perhaps Texas is just being strategic in entering the country’s multi-billion-dollar legal cannabis market that is reported to reach $41 billion in annual sales by 2026. That means it could soon be about the size of the craft-beer market. In 2020 alone, legal sales across the U.S. hit a record $17.5 billion, up 46 percent from 2019. Colorado, one of the first to sell recreational cannabis, grew by 26 percent to hit $2.2 billion. California, America’s largest cannabis economy at $3.5 billion, increased sales by more than half a billion dollars. (Yet illicit cannabis sales, via the black market, are estimated at more than $100 billion every single year.)
But here’s some relief: At least local governments are getting on board. Several of Texas’s most populated regions have decriminalized possession of cannabis, including the cities of Austin, Dallas, Cedar Park and El Paso, as well as major counties (Bexar, Harris, Travis and Williamson).
Then there’s hemp, at least. Thanks to the 2018 Farm Bill, Texas politicians are embracing the hemp-derived CBD market, expected to reach $23.7 billion in 2023.
And at least Gov. Abbot is starting to come around to this magical plant. When he’s not crusading to ban books from children, he’s doing what he can (but not all he can) to help Texans suffering from cancer and PTSD. In 2021 he very compassionately signed a bill into law that allows the increase of the current 0.5 percent THC cap on “medical cannabis” to a whopping 1 percent! Tax dollars well spent.
If this legislation is any indication of cannabis progress in the Lonestar state, start saving your beer money for a trip to New Mexico or Colorado. Because it’s going to be a long while before legal weed comes to Texas.
Cannabis activist and pioneer Steve DeAngelo discusses how hemp can literally save the world, about its likelihood as an industry disrupter, and what cannabis legalization may look like under President Biden.
Don’t at all be fooled by his mellow demeanor or by his trademark pigtail braids and pork pie hat, because Steve DeAngelo is all business. A pioneering activist for the cannabis reform movement, Mr. DeAngelo has dedicated his life to advocating the cannabis plant first and foremost as a connoisseur, but also as an author, educator, investor and entrepreneur.
He is credited with co-founding Harborside in 2006 as a nonprofit medical cannabis dispensary, when the company was granted one of the first medical licenses in the country. His other achievements are quite impressive: the Discovery Channel miniseries Weed Wars; he was the lead organizer and fundraiser for I-59, Washington D.C.’s medical cannabis initiative; also, Mr. DeAngelo, who studied at the University of Maryland School of Law, successfully litigated against the Department of Justice’s last-ditch effort in 2011 to shut down California’s medical cannabis dispensaries; and he also played a major role in the passage of Prop 64, which legalized recreational cannabis for adults in California.
The Texas Hemp Reporter caught up with the legend himself earlier this year, not long after he parted ways with Harborside Inc, a California-focused cannabis enterprise that is currently a publicly listed company on the Canadian Securities Exchange, where he was co-founder and, most recently, chairman emeritus.
TEXAS HEMP REPORTER:Is the legalization of cannabis on the federal level likely to happen during the Biden presidency?
STEVE DeANGELO: We are likely to see some significant reform at the federal level. I’m not sure that’s going to include what we would call complete legalization. President Biden and Vice-President Harris have a long history of working with law enforcement. They both have a record ‒ not a good record ‒ of passing and enforcing laws that really hurt a lot of people. Kamala Harris, when she was the attorney general of California, oversaw many, many, many cannabis prosecutions. There are still people in prison today because of her prosecutions for something that is legal now. And after she was elected with a lot of the help from the [medical] cannabis industry, she failed to come to our assistance in 2011 when the federal government tried to shut down the California industry. In fact, in a TV interview, she basically laughed about the idea of cannabis reform. So, with that said, I think both Biden and Harris are creatures of a political center. That’s where they want to position themselves; and now the whole Democratic Party is in favor of cannabis ‒ as well as a big chunk of the Republican Party. And, really, cannabis is the only bipartisan consensus issue between the two parties today. Sixty percent of Americans are in favor of legalization. So I do have faith that Biden and Harris will figure out where the political center is on on this, and the more help we give them to do that, the sooner we’ll see reforms and the more likely they’ll be complete.
THR: Now that you’ve cut ties with Harborside, what’s going to be your biggest focus going forward?
SD: I’m really interested in the ESG space, which to some means “Equity, Sustainability, and Governance.” Some people call it “Environmental, Social, and Governance.” There’s a whole sector of investors for whom the whole sector of ESG investing is a growing and increasingly important sector ‒ probably the most rapidly-growing investor sector today. And on the company side, we have many cannabis companies that are going to be headed up by licensees who receive social-equity licenses. And those licenses frequently have a really difficult time finding financial resources that they need to develop their licenses. So that’s a problem I would really like to help solve, and I think there’s a win-win solution there for equity licensees and for investors who are interested in making an impact.
THR: Of course you’ll be focusing on the Last Prisoner Project, too. Tell us, essentially, what the nonprofit is fighting for.
SD: The mission of the Last Prisoner Project is really narrow. We hope someday to put ourselves out of business. Its mission is simple: And that’s to make sure that, as this new, global, legal cannabis industry is built, every single person on the planet who’s imprisoned on cannabis charges is released. It comes out of a basic notion of fairness. We shouldn’t keep punishing people for it. In today’s atmosphere, it’s just completely unacceptable for white guys with Ivy-League degrees working on Wall Street to come into legal cannabis and get licenses and grow and sell tons and tons of cannabis at the same time that there’s mostly black and brown people who are imprisoned for cannabis crimes involving far, far smaller quantities. Eighty-seven percent of cannabis prisoners in the federal system are people of color. Our mission is really focused on cannabis prisoners; it becomes a social-justice mission just by virtue of the fact that so much of the prohibition in the United States is racially driven. … What we do is work for the release of prisoners, and then we also work to make their reentry [into society] productive and fruitful.
THR: On your website is a very compelling, convincing video of you saying how hemp can save the world, how it could replace all the materials that are sickening us as well as the planet. Can you expound on this?
SD: For me, it’s all one plant. There’s this unfortunate confusion of terminology that’s come into place, largely because there’s a loophole under hemp regulation to allow ‘hemp to be grown for human consumption’ as long as it doesn’t contain THC. I think that’s really the wrong way of looking at it. For me, there’s just two kinds of cannabis: cannabis that is produced for human beings to consume, whatever its cannabinoid and terpene profile is; and cannabis that’s produced to make something out of. I don’t muddy those definitions up with THC, because THC is just one of 140 different cannabinoids that prohibition has an obsession with. But that doesn’t mean that we should. I absolutely see industrial hemp as being a critical part of the revolution that’s underway here. Mother Nature was incredibly kind to us. She gave us one plant that wakes up our minds and brings us closer in touch with nature, and at the same time gives us the raw materials that we need to build the new economy, a life-affirming economy. Part of it is raising the consciousness with cannabis, and part of it is just the raw material. Hemp is such an extraordinary raw material. Not only can you make everything and anything out of it the way you could with petroleum, trees or cotton; there’s all these other amazing things you can make out of hemp that you can’t make out of petroleum, trees or cotton, like graphene. There’s a company now that’s making hemp graphene, a semiconductor critical in making cell phones. It’s currently mined in Africa at an extraordinary cost, both financial and social. And now a company has figured out how to make it out of hemp. They’re talking of making houses and airplanes and cars out of hemp graphene. The whole outer parts of our buildings and our cars, maybe even our clothing, could be solar-collection devices. Let me be clear: I’m not talking about CBD. I’m not talking about consumable cannabis. That for me is a different conversation. When we look at industrial hemp in the United States, it is underdeveloped for one major reason, and that is because there is no infrastructure in existence to make sure the hemp crop is turned into the products that the market wants. I’ll give you one example. One of the greatest uses for hemp is in textiles. You can make these absolutely super high-quality textiles out of hemp. You can blend them with cotton, you can make it 100 percent hemp. Levi’s right now is making a jean that is 30 percent hemp fibers and 70 percent cotton. They would like to increase the amount of hemp in there. But the hemp fibers, they’ve had to cottonize them. This is an example of infrastructure. Hemp is the longest, strongest natural fiber on the planet, but because cotton has been such a dominant textile fiber in the United States for so long, we don’t have bast-fiber spineries. We don’t have a way to turn hemp fiber into a hemp yarn without doing what Levi’s is doing, which is basically blowing it up and making it into very, very short, and hence very weak, fiber, rather than trying to take advantage of the full qualities of hemp. Just because the infrastructure is not there. So once we have a sufficient commitment of vision and capital to build that infrastructure, then we’re going to see hemp disrupt every single kind of industry you can imagine. Just about anything that is made, hemp is going to disrupt. Because it’s such a great raw material when done at scale. Anything you can make out of other raw materials can be made out of hemp and it’s usually a much higher-quality product and no more expensive. Then there’s all these things that hemp does that nothing else does. Hemp sequesters 20 tons of atmospheric carbon for every hectare that you harvest. That means that we could stop Global Warming just by planting enough hectares of hemp and harvesting them. And then it makes really simple products like hempcrete, a remarkable material that is as strong as concrete, lighter than concrete, more mold-resistant, more fire-resistant, and less expensive, and not only carbon-neutral but carbon-negative. The hempcrete also sequesters carbon as it dries. Hempcrete is probably the place where we have the least infrastructure problem. I would say that the construction-materials sector is probably the place where we will see the disruption of existing industries by hemp in the shortest period of time in North America, because you don’t really need the complicated infrastructure to produce and use something that most builders can use on the building site.
THR: It’s been a pleasure, Mr. DeAngelo. Good luck to you and thank you for all you do for hemp and cannabis.
Late last year, Scott Bailey appeared on the Texas Hemp Show podcast with Texas Hemp Reporter magazine’s publisher Russell Dowden. There, the certified public accountant at the Raleigh-based firm Carr, Riggs & Ingram (where he is also partner) discussed research grants, opportunities in the hemp industry, market recovery after an over-saturated 2019 growing season, as well as challenges hemp farmers faced in the pandemic year.
Now Mr. Bailey, formerly the treasurer for the North Carolina Industrial Hemp Association, has returned just in time for tax season to provide Texas hemp farmers (and even those considering getting into the industry) sound advice in navigating their financial futures.
He wants hemp farmers to realize, first and foremost, that hemp is a very unique crop, one that grows and is farmed quite similarly to tobacco. “It takes on a lot of character of the soil that it’s planted in,” Mr. Bailey said. “So if you have soils with pesticides and fungicides, which can have traces of heavy metals in the soil around where you’ve planted hemp, then that plant will take on those characteristics. That creates risks, because if you have pesticides and fungicides not approved by the FDA, you can’t sell hemp flower.”
TIPS FOR HEMP FARMERS DOING THEIR 2020 TAXES
Plan Early. Filing and paying tax liabilities earlier than standard corporate and business deadlines can create some relief in making estimated tax payments. This way, before the crop actually comes in, you’re not having to estimate your income or make estimated payments.
Find the Right CPA. Do your research, really doing a deep dive into the tax professional with whom you would be working. Do specific Google searches, and thoroughly read a tax professional’s website, pu and LinkedIn page. Also, try asking a CPA directly about what they know about the hemp-farming industry. “You’ll know pretty quickly if they know what they’re talking about,” Mr. Bailey said.
ADVICE TO ROOKIE HEMP FARMERS
Know the BIG THREE Long Before You Harvest. Know your seed, your soil and your source of sales. Will where you plant a specific seed variety produce strong yields? Is the soil clean and free of heavy metals and contaminants? Lastly, be sure you can convert this profitable plant to cash by knowing well in advance how and where you’re going to sell your product.
Line Up Your Testing Lab Early. Being such a new industry, there’s a shortage of testing labs in the U.S. So early in the business-development process be sure that you have a working relationship with a lab so that you can make sure your product has less than the legal threshold of 0.3 percent THC content.
Start Small. Not until there is a standard commodity price for hemp will crop insurance be available for hemp farmers, as a standard commodity price can be the only surefire way for insurance companies to accurately evaluate risk. “Our advice for a lot of people getting into hemp farming is, start small, get used to it, get good at it, and then increase your quantities. Be as sure as possible that what you’re growing you know you can sell.”
Hire a Knowledgeable CPA to Help You Jump through the Hoops of Grant Funding. An accountant who understands the hemp industry can you help apply for various types of grants, assisting you as you navigate your way through additional accounting requirements such as state and federal grant fund expenditures and various compliance’s.
California’s wine industry is quite the behemoth, a staple in the American economy.
If it were its own country, the state would be the fourth largest wine producer in the world. California makes 81 percent of all U.S. wine, and three out of every five bottles sold in the country comes from the Golden State.
Just look at last year’s numbers for more proof: In 2019, 241.5 million nine-liter cases of California wine were sold within the U.S., amassing an estimated $43.6 billion in sales. Also in 2019, American wine exports totalled $1.63 billion, with 95 percent coming from California wineries.
California wine sales in the U.S. grew 6 percent in 2019, despite the state legalizing adult-use cannabis in January 2018, which some feared would eat into the state’s wine market.
But 2020 may tell a vastly different story for the industry, says Robert P. Koch, president and CEO of the San Francisco-based Wine Institute. “This year will be more challenging, especially for small- and medium-sized wineries, because of the closure of tasting rooms and restaurants,” he says in a wineinstitute.orgarticle.
These changes have emerged because of COVID-19, of course, and while it is too early in the year to predict a drop in the California’s total revenue from wine, we can surely expect a noticeable dip based on the recession alone: People with a slash in their disposable incomes are less likely to buy a $50 bottle of Cabernet Franc from the Napa Valley, perhaps opting instead for $8 bottle from Argentina.
So considering this inevitable dip, should California vineyards, each with hundreds of acres perfect for agriculture (bountiful sun and cool air from the Pacific Ocean), consider pivoting to a crop with perhaps an even more promising future? Such as hemp?
After all, according to the Brightfield Group, the market for hemp-derived CBD is expected to reach $23.7 billion by 2023, thanks in part to the passing of the 2018 Farm Bill. And this doesn’t even include the market for hemp alone, which can be grown for construction, textiles, clothing, food, paper, bioplastics, insulation and biofuel.
And so the hemp market doesn’t rely on a selective niche of consumers that use its product for recreational purposes only (such as wine drinkers and cannabis users). Just about everyone could benefit from hemp in one way or another.
Also, unlike wine grapes which take several months to grow and several months to ferment before they ever become drinkable wine, hemp plants can mature in just a few months.
But, say, a commercial vineyard in a place like the Sonoma Valley wants to reserve a few acres of its property for growing hemp. Does the growing of either crop affect the other’s final product?
A Wine Spectator article titled “Can Cannabis and Wine Coexist?” tells how the drift of fungicides (used by many California winemakers to prevent mildew) have been known to render a cannabis harvest unsaleable when the crop is tested for regulation. And one can speculate the same would apply to hemp plants, especially if they’re used for CBD products.
The opposite occurs, too. “On the flip side, cannabis can release organic compounds called terpenes,” the article’s author Aaron Romano writers, “one of which is eucalyptol, known for tainting the flavor of grapes.” It should be known that hemp plants also have terpenes.
Corey Beck, CEO of Francis Ford Coppola Winery and former president of the Sonoma County Vintners, was quoted in the article, saying, “If cannabis can co-exist with the right regulations, and not be intrusive to our neighbors, then it should be available to a farmer who needs to put food on the table for their family.” He added that the wine industry is changing because of consumers drinking less and, therefore, wineries growing few grapes.
“I’m not suggesting the trend is here to stay, but if you are a grapegrower and can’t find a buyer in the short term, your choice in agricultural crops which provide a return such as grapes are limited.”
When you tell Seattle residents you moved to Seattle from Austin, you generally get two very different follow-up questions, depending on the person: One is, “What tech company do you work for that brought you here?” (It’s a tech hub very much like Austin, with Amazon having the largest presence in the city.) The other is, “Did you move here for the legal weed?”
The latter is the most ubiquitous response, I’ll be honest, because Washington was among the first states (with Colorado) to legalize cannabis for recreational use. This was in 2012, 14 years after the state first legalized medical marijuana. And the strange thing is, after having lived here a year, going to a dispensary is no more exciting than buying a bottle of wine at the grocery store. I’ve heard some people stopping by “the weed store: while running errands after work or before their weekend grocery run.
And while legal cannabis is an everyday part of life here, one might be shocked to learn that it took the state much longer to come around to hemp. The state had no problem breaking federal laws when it legalized cannabis eight years ago; and it turned out very lucrative: In 2018 alone, the state’s total retail sales of cannabis hit $1 billion, when the state collected $362 million in cannabis excise tax in the 2018 fiscal year; then in 2019, total retail sales hit $1.1 billion, with $387.6 million in excise tax. Washington’s cannabis market was projected to hit $2.1 billion in 2020.
The Green Rush of the 21st Century boomed with WA, & CO to join CA in allowing recreational marijuana in 2012.
But yet the state waited until the 2014 farm bill to pass legislation to allow for the planting of some 180 acres of hemp in 2017, and this was all under the umbrella of the Industrial Hemp Research Pilot program, which allowed for only the licensed “research”of hemp in the state.
Finally, earlier this year, almost two full years since the 2018 farm bill was passed, which legalized the cultivation and selling of hemp at the federal level, Washington state repealed and replaced its pilot program with one that allowed for people in the state to become fully licensed to grow hemp.
Of course this approach to regulating the state’s hemp industry likely stems from the nature of the national hemp industry, the market for which is not limited to a single state and up to state laws like cannabis. In other words, a hemp producer in Washington doesn’t have to rely on consumers solely within the state; now that hemp is legal federally, and no longer a Schedule I drug, the producer can ship its product all over the country regardless of where it’s grown.
However, if the Washington state hemp growers want a piece of the hemp-derived CBD consumer products market in the U.S., which is predicted to be worth anywhere from $6 billion to $7 billion in the year 2025, then Washington state will have to catch up to the other states that are taking a bigger market share, ones like Kentucky, Montana, Colorado and North Carolina that are producing and selling much more hemp. They’ve been doing it longer and have better infrastructure and more efficient supply chains to successfully grow, market and sell this cash crop.
The state should make hemp a major priority much like it has cannabis, that is if its growers want to exploit the huge demand we’ve seen this year for smokable hemp, which Nielsen researchers say will likely total $70 to $80 million in 2020 and could likely grow five times that number by 2025.
