The heart of the argument is whether Delta Extraction violated state law by selling THC concentrate derived from out-of-state hemp
OG Article: here
View our Fair Use Policy: here
Jason Sparks is an Oklahoma man who almost single-handedly created the distillate that led to Missouri regulators’ decision to pull more than 60,000 marijuana products off the shelves in August and revoke the license of Robertsville-based Delta Extraction.
Now, he’s the star witness in a hearing scheduled to begin Monday morning, where Delta will try to convince the Administrative Hearing Commission to reverse its license revocation and allow it to sell its product in Missouri.
In the days leading up to Monday’s much-anticipated hearing, the state and Delta Extractions filed hundreds of documents detailing the investigation into marijuana products the state has deemed illegal and the company is aggressively arguing against.
Among them is the eight-hour testimony Sparks, who the state’s attorney called one of its “most important witnesses.”
Delta Extraction contracted Sparks’ company, SND Equipment Leasing, to make the distillate — or a THC concentrate that goes into the vape cartridges and edibles.
When he first began in March 2022, Sparks was making the distillate only for the marijuana brand Conte, a Oklahoma-based company.
Sparks’ wife, Tania Conte, owns Conte. As an out-of-state company, Conte can only make its products at a Missouri licensed manufacturing facility that can legally obtain marijuana.
But in the spring of 2023, the supply for marijuana distillate was low across the state and Sparks began making large amounts that Delta sold to about 100 other Missouri manufacturers.
The heart of the case is what’s in the distillate.
Sparks extracted a small amount of THC from Missouri-grown marijuana, which the state heavily regulates. Then he added a THC oil that was extracted from hemp, a product that is completely unregulated.
The state says Sparks’ testimony is important because it speaks to one of their biggest concerns — health and safety. Sparks testified that he can’t recall where he bought his hemp-derived THC oil or if it was tested before he added it to the Missouri marijuana oil.
“It’s such an unregulated market that it’s not even a second thought,” Sparks said, of the hemp product. “I know that’s frustrating for, you know, the state…that’s truly how it’s been running for years.”
However, the company will argue that it’s not illegal to add intoxicating hemp products to marijuana because hemp is legal.
Sparks’ testimony and those of Delta’s leaders also clearly show that the company had been making the product since 2022.
It’s unclear how much the state knew about the production of one of the top-selling distillates in the state. Delta’s attorney, Chuck Hatfield, said several documents show that state compliance officers knew what the company was doing long before the recall in August.
He said Missouri didn’t specifically ban adding hemp-derived THC-A to marijuana products until the state’s final rules went into effect on July 30.
“Internal emails show that Compliance Officer Heather Bilyeau believed Delta’s use of THCa was lawful, prior to the July 30 rule change,” Hatfield told The Independent on Friday.
Sparks testified that during the week he worked as a manager for Conte Oklahoma, where he oversaw the production of the products and customer relations.
In January 2021, Sparks started his own company in Missouri to rent cannabis extraction machinery to companies and produce distillate on the weekends, according to state business registration records.
For a brief time, he said in his testimony, Sparks contracted with another manufacturer, Heya, to make the same hemp-marijuana distillate at the center of the Delta recall.
Heya, which currently has four marijuana manufacturing licenses, was also producing Conte products.
After Conte and Heya parted ways, the leaders of Delta Extraction saw an opportunity and asked Sparks and Conte to enter a partnership, which began in March 2022, according to testimony from a Delta owner, Jack Maritz.
Ever since that time, the distillate used in Conte products was made exclusively by Sparks on weekends, as was Delta’s top-selling bulk distillate the company later sold to other manufacturers.
And according to records state investigators obtained, the majority of the THC in the distillate came from the hemp-derived THC-A oil — which the state doesn’t regulate — and a very small amount of Missouri-grown marijuana.
Missouri requires that marijuana is tracked from the time the seed is planted all the way until it goes into a final product. No one from Delta monitored the distillate production, Maritz testified.
Sparks purchased all of the oil made of THC-A, which is a cannabinoid that has to be heated to produce a high. Delta had no knowledge of where he bought it, Maritz said, and Sparks said he didn’t keep records of that.
Oftentimes, Sparks testified that he paid with cash or traded his extracting services for the THC-A oil and relied on verbal agreements. That’s common practice in the industry, he said.
“You build up a network of relationships that you know are solid people,” Sparks said, “that you know care about the product.”
Sparks said he has no record that his suppliers tested the oil before he got it. But Delta’s team would test the final products and input them into the state’s tracking system called Metrc.
When sold on its own, the distillate was not required to be tested, Maritz said, but they did test it to ensure the quality.
The cost to make the hemp-marijuana mix was much less expensive compared to 100% Missouri-grown marijuana, both Maritz and Sparks testified.
Sparks said this practice is not an anomoly.
“People are switching farms to grow THC-A hemp,” he said. “Nobody wants to deal with the marijuana. First of all, it’s too uptight and it’s not federally legal, so nobody wants to mess with it anymore. So everything literally is going to hemp.”
Maritz said Delta leaders believed the state understood what they were doing and had given them permission when they approved their “standards of procedures,” or details of the processes they used.
Inversion
The state’s Division of Cannabis Regulation is accusing the company of inversion, or illegally importing marijuana product from out-of-state and adding it to Missouri-grown marijuana products.
Hatfield said the division never communicated that adding the hemp product was against the rules until the company’s license was suspended on Aug. 2.
In an interview with The Independent, Hatfield pointed to an email that Adam Whearty, a compliance team supervisor with the division, sent two days before Delta’s suspension, which was uncovered during the appeals process.
Hatfield said it shows that Whearty and compliance officer Heather Bilyeu — who was Delta’s main contact in the compliance office — were confused about whether what the company was doing was allowed.
“Heather thinks they found a loophole in the [emergency] rules, prior to 7/30, as does not think THC-A fell into the category of not being able to be used,” until the final cannabis rules took effect on July 30, Whearty wrote. “Heather and I are concerned about what we were to tell [Delta] about modified product in their inventory…”
However, during the appeals process, the state has argued that the emergency rules filed on Jan. 20 prohibited the practice.
Carole Iles of the Administrative Hearing Commission sided with the state in an Aug. 29 order. The only thing the cannabis regulating agency added to this line in the final rules, she wrote, was the clause “such as THC-A …”
“We agree with the department that language added to the permanent rule … did not change the requirement of the emergency rule that THC in marijuana products could only be derived from marijuana cultivated by a Missouri-licensed cultivation facility,” the order denying a stay on Delta’s suspension states.
Delta’s use of the hemp THC-A was not the only reason for revocation, Amy Moore, the director of the Division of Cannabis Regulation, has previously said.
“While Delta Extraction’s use of out-of-state cannabis in our regulated system has been well-publicized and is a critical issue, [the Division of Cannabis Regulation] also found numerous other violations of rules at this facility,” Moore said in a press release in November.
The division also said Delta did not properly maintain video surveillance footage or have necessary safeguards to prevent intrusion at the facility. The division argues that Delta falsified product tracking records and that regulators could not ensure the product was properly tested.
In a November letter to the state’s attorney, Hatfield countered that the company did test the product in compliance with the law.
Delta also agreed to pay for retesting of any Delta product, Hatfield wrote in the letter, as well as to destroy all the product in its facility in order to reach a settlement with the state.
“Should the parties not reach an agreement, Delta intends to challenge the Department’s authority to regulate hemp-derived products,” Hatfield’s letter states.
The courts will not entertain a legal challenge against the state until Delta Extraction’s appeal process is completed, a judge has already ruled.
Missouri would then be among several states where companies are challenging the state cannabis regulators’ authority to regulate hemp. Unlike marijuana, hemp has very little psychoactive properties naturally — which is why it was taken off the federal controlled substance list in the 2018 farm bill.
But since then, businesses have been in a race to create ways to produce the most predominant psychoactive active element in marijuana, delta-9 THC, using the hemp plant.
On Sept. 8, a federal judge in Arkansas granted a preliminary injunction in a lawsuit against the state, saying that hemp-derived cannabinoids, like THC-A, are protected under the 2018 farm bill.
“Should Delta succeed in that challenge,” Hatfield wrote, “the industry would be free to engage in bringing in industrial hemp products from out of state for use in marijuana products.”
The company released a statement to The Independent that Delta “is eager to defend its reputation” during the hearing.
“We are confident that the facts presented will show the revocation of our license was unwarranted,” it states, “and reveal the inconsistencies and overreach that have characterized [the division’s] process.”
Comments