From Henry’s Desk

August 20, 2016

From Henry’s Desk:


Dear Friends, Partners, and Shareholders,


The following are some of the new and/or revised DPS Regulations for SB 339. One of the major issues that was addressed is that regulatory compliance testing can be done by  Testing Laboratories owned and operated by Dispensing Agent Licensees meaning you can test your own product and have it be approved by the DPS. Additionally, all processing and production of edibles, oils, pills, etc. must be done in a location that would pass the same type of inspection guidelines as a restaurant. For example, all work stations must be sanitized and chemicals be stored properly, effectively and labeled to avoid contamination. Secondly, all products must be tracked whether it be with low THC cannabis as well as any products used in the processing/production of the finished manufactured goods. All Licensees must now carry Commercial General Liability insurance coverage against claims of liability for damage to property of third parties and for personal injuries to third parties, including bodily injury, property damage, and product liability, with limits of: $1,000,000 each occurrence $2,000,000 General Aggregate limit $1,000,000 Product Liability.


Cultivation Facilities:

Insofar as there are no pesticides authorized for use in the cultivation of marijuana, and the unauthorized application of pesticides is unlawful, a licensee may not apply pesticides in the cultivation of marijuana.

Low-THC cannabis products and production methods must comply with the United States Department of Agriculture’s organic standards reflected in Code of Federal Regulations, Title 7, Part 205.

Processing Facilities:

All facilities must be inspected and approved for their use by a local fire code official, or by the State Fire Marshal, and must meet any required fire, safety, and building code requirements.

Other applicable standards including following all applicable fire, safety, and building codes in processing and the handling and storage of the solvent or gas.


Any processing equipment using a flammable or combustible liquid shall be located within a hazardous exhaust fume hood, rated for exhausting flammable vapors.

Electrical equipment used within the hazardous exhaust fume hood shall be rated for use in flammable atmospheres.


Heating of flammable or combustible liquids over an open flame is prohibited, with the exception that the use of a heating element not rated for flammable atmospheres may be used where documentation from the manufacturer or a nationally recognized testing laboratory indicates it is rated for heating of flammable liquids.

All product processing sites shall be located at least 1000 feet from any private or public school or day care center that existed prior to the date of initial license application.


Extraction Process:

The Extraction Process must be continuously staffed during operations by registered personnel trained in the extraction process, the transfer of LP-gas where applicable, and all emergency procedures.

All staff training records shall be maintained on-site and made available upon request by the department or local law enforcement or regulatory official.

Licensees must provide certification by a Texas licensed professional engineer that the extraction system to be used to produce low-THC cannabis products was commercially manufactured, safe for its intended use, and built to codes of recognized and generally accepted good engineering practices.


All electrical components within the extraction room shall be interlocked with the hazardous exhaust system and when provided, the gas detection system.

When the hazardous exhaust system is not operational, or the gas detection system is activated, light switches and electrical outlets shall be disabled while leaving lights on that are necessary for evacuation. The electrical systems shall include: (1) Extraction room lighting; (2) Extraction room ventilation system; 10 (3) Solvent gas detection system; (4) Emergency alarm systems; (5) Automatic fire extinguishing systems; (6) Vent failure alarm system; and (7) Emergency power backup system.

For extraction processes utilizing gaseous hydrocarbon-based solvents, a continuous gas detection system shall be provided. The gas detection threshold shall be no greater than 25% of the LEL/LFL limit of the materials.


Mechanical ventilation shall be in accordance with the International Mechanical Code and shall have: (1) Mechanical ventilation in the room or area of rate of not less than 1 cubic foot per minute per square foot; (2) Exhaust system intake from a point within 12 inches of the floor; and (3) Ventilation operating at a negative pressure in relation to the surrounding area.


Any liquid extraction process using flammable and combustible liquids in which the liquid is boiled, distilled, or evaporated must operate in compliance with this section and NFPA 30.


Licensees are responsible for determining whether specific waste materials or waste water constitute hazardous waste under applicable federal or state regulations and for ensuring disposal of any such waste complies with applicable disposal regulations. All waste materials must be stored on the licensee’s premises prior to destruction and disposal


Security of Facilities:


During the regular course of business activities, a licensee may not allow access to the facility's cultivation, processing, or product storage areas by unauthorized personnel or to the public.


All cultivation of low-THC cannabis shall take place in an enclosed, secured or an enclosure within a building that provides reasonably adequate protection against the diversion of low-THC cannabis or raw materials used in or by-products created by the production or cultivation of low-THC cannabis.


Access to the facility’s cultivation, processing or product storage areas by authorized personnel shall at a minimum be restricted by a physical barrier with a mechanical locking device that must be kept closed and lock at all times when not immediately being used to enter or exit the area. These areas shall be clearly and conspicuously marked at all access points. When unregistered individuals, are to be present they must be recorded in a daily log that included the full name of each visitor entering the regulated premises, the time of arrival, the time of departure, and the purpose of the visit. The requirements of this subsection do not apply to representatives of the department or other law enforcement agencies who tour the facility as part of their official duties.


Licensees must have an alarm system capable of continuously monitoring the regulated premises for intrusion by means of camera recording, door switches, and motion sensors. The system must have the capability of immediately alerting local law enforcement of a security breach during non-business hours, and of being manually activated by staff during business hours.