Virginia’s First Large-Scale Industrial CBD Processing Opening

RICHMOND—A company will invest more than $3 million to establish Virginia’s first large-scale facility to process hemp and to extract CBD oil, Virginia Gov. Ralph Northam has announced.

The project will create 22 new jobs and that the company has committed to buying 90 percent of its hemp from growers in Virginia, the governor’s office said in a statement Thursday.

Company BRD Extraction, LLC will do business under the name Blue Ribbon Extraction. It will be located in the Town of South Boston in Halifax County, which is outside of Danville and near the North Carolina border.

The Democratic governor said the company will spend $70 million on payments to Virginia farmers over the next three years. Many of them are current or former tobacco farmers.

The company’s founders and primary investors are Richmond residents Rick Gregory and Sterling Edmunds. They are both natives of Halifax County .

Short for cannabidiol, CBD is a non-intoxicating molecule found in hemp and marijuana. Both are cannabis plants, but only marijuana has enough of the compound THC to get users high. The vast majority of CBD products come from hemp, which has less than 0.3% THC.

CBD has garnered a devoted following among people who swear by it for everything from stress reduction to better sleep.

Hemp in Virginia

The Agriculture Improvement Act of 2018 (2018 Farm Bill) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (CSA) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (USDA) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp. Our attorneys track these developments in real-time on behalf of multiple clients, and we provide those clients with a 50-state matrix showing how states regulate hemp and hemp products.

In light of the rapidly evolving legislative changes, we are also presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (Hemp CBD). Today we turn to Virginia.

Earlier this year, the Virginia Department of Agriculture and Consumer Services (VDACS) submitted its plan to regulate hemp production to the USDA for review and approval. Shortly thereafter, the USDA requested that VDACS revise and resubmit its plan, which is now under second review. According to the VDACS hemp webpage, the state agency expects its plan will go into effect on October 31, 2020. This means that until then, the VDACS will continue to operate under the 2014 Farm Bill.

Virginia’s hemp rules mandate that hemp growers, handlers and processors wishing to engage in the production of hemp secure a registration from the VDACS.

Virginia is also one of the states that expressly regulate the production of hemp products intended for human consumption.

Under Virginia law, “hemp product” means

any finished product that contains industrial hemp, including rope, building materials, automobile parts, animal bedding, animal feed, cosmetics, oil containing an industrial hemp extract, or food or food additives for human consumption.”

On July 15, 2019, the VDACS Commissioner announced it would treat hemp-derived extracts intended for human consumption, such as a Hemp CBD oil, as approved food additives. Yet, neither Virginia law nor the VDACS rules overtly addressed the sale and marketing of these products. Then, in April, the governor signed into law SB 918, which helped clarify this issue. The new law, which went into effect upon its passage, provides that hemp extract that contains no more than 0.3 percent THC shall be treated as a food. A food is defined as:

any article that is intended for human consumption and introduction into commerce, whether the article is simple, mixed, or compound, and all substances or ingredients used in the preparation thereof. ‘Food’ does not mean drug as defined in § 54.1-3401.” (Emphasis added)

Therefore, the sale of these products is now expressly allowed, provided they meet “specific laws, regulations, or criteria that pertain to the manufacturer of industrial hemp extracts or food containing an industrial hemp extract in the location in which such manufacturing occurs.” It is unclear whether this law applies to both in-state and out-of-state hemp extracts or food, but this issue will likely be clarified by the VDACS, which is tasked with adopting labeling and testing requirements for these products.

Although the manufacture of cosmetics infused with Hemp CBD is allowed, their sale is not expressly addressed under Virginia law. This is likely due to the fact that the VDACS does not have jurisdiction over this category of products. Nevertheless, because cosmetics can be lawfully manufactured in the state, it seems reasonable to infer that the sale of these products is allowed so long as they contain no more than 0.3 percent THC and are safe for human consumption.

On March 23, the governor signed into law HB 962, which clarifies that the sale of Hemp CBD smokable products is lawful, provided certain packaging requirements are met and the products are not sold to any person under 21 years of age. This new law will go into effect on July 1.