Vanessa Cantu pours out hemp oil after removal of Isopropyl alcohol in a hot water bath. The alcohol is used to extract CBD, THC, phytochemicals and terpenes from the hemp plant at the CWHemp facilities in Boulder on July 6, 2016. The company was made famous by a CNN documentary for its Charlotte's Web strain of hemp, used to treat children with epileptic seizures. (Paul Aiken, Daily Camera file)

Legal challenge filed against DEA’s new marijuana extract rule

The hemp industry has taken the DEA to court in the wake of a controversial new rule on marijuana extracts.

Denver’s Hoban Law Group, representing the Hemp Industries Association, Centuria Natural Foods and RMH Holdings LLC, on Friday filed a judicial review action against the U.S. Drug Enforcement Administration, alleging the agency overstepped its bounds when enacting a rule establishing coding for marijuana derivatives such as cannabidiol (CBD) oil. The action, Hoban attorneys allege, puts at risk a booming cannabis and hemp industry and a wide variety of hemp-based products currently on the market.

“We’re talking about jobs and the economy and agricultural (revival),” attorney Bob Hoban said in an interview with The Cannabist on Friday.

The DEA last month confounded many in the cannabis industry with the filing of a final rule notice establishing a Controlled Substances Code Number for “marihuana extract,” and subsequently maintaining marijuana, hemp and their derivatives as Schedule I substances.

DEA officials said the code number would assist in the tracking of materials for research and would aid in complying with treaty provisions. However, compliance attorney Hoban and others expressed concern at the time that the language could result in federal agencies viewing products produced from marijuana and hemp as illegal.

The rule was set to take effect Friday — the same day Hoban filed suit in the U.S. Court of Appeals for the 9th Circuit in San Francisco.

Hoban’s petition seeks a judicial review of the final rule on the basis that the action was inconsistent with the law — including the U.S. Controlled Substances Act and the Agricultural Act of 2014, or the Farm Bill — and effectively amounts to a scheduling action.

A scheduling action, Hoban said, would need congressional approval.

According to the lawsuit:

“Additionally, the final rule creates this new drug code, indicative of being a controlled substance, for substances which are in fact not controlled pursuant to the (Controlled Substances Act),” Hoban attorneys wrote in the lawsuit. “Specifically, the final rule dictates that the mere presence of ‘cannabinoids,’ which are not controlled substances, is the determinative factor of whether a compound is a ‘marihuana extract.’

“Further, the final rule overbroadly defines ‘marihuana extract,’ without reflecting that certain portions and varieties of the genus Cannabis sativa L. are congressionally exempted from the CSA and/or are exempted from being treated as controlled substances altogether pursuant to the relevant laws, as enacted by Congress.”

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Hoban said Friday that his firm also intends to file an administrative petition next week with the DEA, formally requesting the administration to rescind the definition.

“(The new rule) certainly has caused quite a chill in the marketplace over the last three or four weeks,” Hoban said, adding that he’s heard from producers who have had trouble keeping their products on e-commerce or retailer platforms. “The number of calls we get on a daily basis, you couldn’t even quantify. … That is indicative to me of an environment where people are scared, they’re nervous.”

Hoban said he does not expect a spike in enforcement — especially as long as spending bill provisions stay in place — but he encouraged producers to maintain strict processes and to conduct an audit of their businesses to ensure that they are in compliance with state and federal regulations.

DEA spokesman Russ Baer said he could not comment on a petition that he has not yet seen.

Earlier Friday, Baer addressed the agency’s positions on CBDs, marijuana and hemp extracts in an e-mail:

CBD oil and other extracts derived from cannabis (which includes hemp) have been and will continue to be Schedule I controlled substances, unless and until they are determined to have a current accepted medical use. We need conclusive scientific evidence to make these determinations and the lack of evidence regarding the efficacy of cannabis is impressive. To handle any controlled substance, an entity or individual must be a DEA registrant to be authorized to conduct research with the particular controlled substance.

Under U.S. law (the CSA), the definition of marijuana includes all parts the cannabis plant that are the source of cannabinoids. The CSA definition of marijuana also includes “every compound, manufacture, salt, derivative, mixture, or preparation” of such parts of the cannabis plant – and CBD produced from the cannabis plant clearly falls within this category. Thus, CBD, being a derivative of marijuana, is marijuana under U.S. law (and hemp is marijuana). Accordingly, because marijuana is a schedule I controlled substance under the CSA (as set forth in 21 U.S.C. ยง 812(c), Schedule I(c)(10)), CBD is a schedule I controlled substance under the CSA.

And as for hemp, specifically:

The Farm Bill did not remove industrial hemp from the list of controlled substances and, with certain limited exceptions, the requirements of the Federal Food, Drug, and Cosmetic Act and the CSA continue to apply to industrial hemp-related activities, nor did it change the requirements of the CSA that apply to the manufacture, distribution, and dispensing of drug products containing controlled substances.

DEA cannot provide an exhaustive list of “hemp” products that are exempted from control. Nonetheless, in order to provide clarity to your question, the following are some of the more common “hemp” products that are exempted (non-controlled), provided they are not used, or intended for use, for human consumption: paper, rope, and clothing made from fiber derived from cannabis stalks, industrial solvents made with oil from cannabis seeds, and bird seed containing sterilized cannabis seed mixed with seeds from other plants (or other ingredients not derived from the cannabis plant). Personal care products (such as lotions and shampoos) made with oil from cannabis seeds are also generally exempted.

Baer previously said that the new rule on extracts does not change the DEA’s enforcement priorities.

John Hudak, deputy director of the Center for Effective Public Management and a senior fellow at the Brookings Institution, said earlier this week that the extracts rule was not a change in policy but rather “a clarification for an industry that for a long time has misinterpreted policy.”

The biggest challenge is that marijuana laws have become a “telephone game” in which rumors, guesses or ideas are translated from one person to another to the point where they’re viewed as facts, he said.

As Baer stated Friday: “DEA has consistently opined that marijuana and its constituent parts or derivatives, including CBD and hemp, are Schedule I controlled substances – so these determinations are deeply rooted in the CSA and not new.”

And that was the case with extracts.

Products such as CBD oil were regarded as not subject to the same control requirements as marijuana and extracts could cross state lines and international waters without issue.

“The government was aware of this and issued (the final rule notice),” Hudak said, adding that officials effectively conveyed, “‘Listen, you have misinterpreted our laws regarding CBD and you have one month to become compliant.”