In 2020, 8,550 retail cannabis dispensary licenses were held across the U.S.,1 and in such a crowded marketplace, cannabis manufacturers are turning to extraction labs for an edge.

For instance, THC variant Delta 8, a milder and federally legal variant, and Delta 9, a stronger THC product, are in high demand. However, both are dangerous to make and can create significant liability for cannabis businesses.

That’s because solvents like alcohol, propane, butane, and carbon dioxide are commonly used to separate cannabinoids and terpenes from plant material, are easy to misuse and can result in a fire or explosion. Similarly, extraction equipment and processes are often altered when cannabis operations grow to scale production.

Major dangers in extraction
Cannabis extraction occurs through different processes, including:

  • CO2 extraction: High heat and pressure turns the gas supercritical (between those of a gas and a liquid) where it extracts the oil from the plant material.
  • Butane-Propane extraction: Solvent is pressurized and heated, transforming it from liquid to vapor and making it easier to remove the final product.
  • Ethanol-Butane extraction: Ethanol passes through plant material and the resulting solution is placed in a vacuum oven; evaporation purges ethanol and any other foreign contaminants.

Extraction equipment can employ pressures as high as 10,000 per square inch: As a result, improper design, installation, modifications and maintenance of equipment can easily result in an explosion.

Risk management and insurance considerations for cannabis extraction
Here are seven ways to minimize risk in cannabis extraction:

  1. Take extra care in storing flammable solvents. Because of the risks of working with flammable materials, smoke detectors and carbon dioxide detectors are essential. Smoke detectors must be placed in strategic locations and regularly tested, preferably with a formal maintenance schedule.
  1. Provide training, training and more training. An extraction operator needs ongoing education and training to keep up with safety protocols and the use of new equipment, but high industry turnover makes extraction operations question the need for continuing education. Not only will training make for a safer workplace but can engender loyalty and reduce turnover.
  1. Protect with PPE. Employees involved in extraction are exposed to toxic chemicals, often at high pressures. An extraction business needs to provide personal protective equipment (PPE) to prevent inhalation of solvents. State laws will determine minimum PPE standards, but any operation should give employees PPE that goes beyond minimum standards.
  1. Test for product contaminants. The presence of multiple hazardous materials and dry product presents the potential to contaminate products. Formalized extraction processes — documented and regularly reviewed — that include contingencies for regular testing reduces the chance of contamination. Product recalls are costly and difficult to emerge from for small cannabis operators.
  1. Implement hazardous waste handling procedures, if needed. It’s important to have proper waste management procedures of used plant materials; depending on the extraction method, there might be residual solvent, and the waste product could be classified as hazardous.
  1. Consider extraction risk as an M&A risk. The industry is undergoing some consolidation. If merging or acquiring a business with extraction operations, conduct due diligence on the merged company’s extraction safety protocols. See how seriously the other entity approaches extraction safety.
  1. Remember that new cannabis biproducts have unknown risks. Technology advancements have led to cannabis derivative Delta 8 THC, which is consumed as edibles and in vape pens. Delta 8 THC is pink in its natural form, but because consumers want a clear product, the plant is bleached during the extraction process, adding toxicity. Have a pulse on what products you are creating via which processes and the chemicals used. Remember: Never bleach any consumable products.

It is critical for cannabis extractors to develop and regularly update standard operating procedures to ensure compliance with shifting local, state and federal regulations and to keep employees safe.

Contact your HUB cannabis risk expert for more on safe cannabis extraction and off-loading your risk to cannabis insurance coverage.

1 Canix. “How Many Dispensary Licenses are in the US?” August 23, 2021.