The packages smelled strongly of marijuana.

That is what a UPS employee advised Albany police and a Linn County sheriff’s deputy Jan. 18, when 4 parcels addressed to Key Compounds, a CBD processing firm in Albany, arrived from Massachusetts.

That decision sparked a monthslong felony investigation of the corporate, which processes hemp to create cannabidiol oil, resulting in the search and seizure of a lot of the enterprise’s belongings. Investigators even tried to acquire a search warrant for the workplace of the lawyer who represents Key Compounds, a extremely uncommon transfer.

Alex Reyter, CEO of Key Compounds LLC, says he was making an attempt to observe the foundations when he acquired the 4 packages of CBD. Regulation enforcement disagrees.

“I nonetheless consider that what that they had was marijuana and marijuana extract by definition,” Linn County prosecutor Coleen Cerda wrote in a Might 30 electronic mail obtained by WW to one among Reyter’s attorneys.

The Linn County Sheriff’s Workplace declined to remark as a result of its investigation continues to be open, however the case highlights yet another side of the complicated nature of working a enterprise by which state and federal legal guidelines don’t align.

Congress opened up the commercial hemp trade when it handed the 2018 Farm Invoice, which permits farmers to ship hemp merchandise throughout state strains, as long as they comprise not more than 0.three p.c THC. However that locations the burden on native legislation enforcement, which can not have experience in hemp, to acknowledge the distinction between what’s authorized and what’s not. Hemp is completely different from cannabis as a result of it doesn’t comprise sufficient THC to present customers a excessive.

The difficulty carries significance past the mid-Willamette Valley. Hemp producers and processors throughout Oregon see a promising future for the trade in value-added merchandise which were extracted from the underlying agricultural product, very similar to Oregon’s wine producers flip widespread grapes into extremely sought-after wines.

However, because the Linn County case exhibits, there’s nonetheless confusion, and typically hostility, round Oregon’s latest agricultural trade.

Key Compounds is an Oregon processor of CBD, one of many chemical compounds present in cannabis and industrial hemp vegetation, and has been in enterprise for 2 years. The 10-employee agency processes hemp into CBD oil, eradicating the hint quantity of THC present in hemp, and sells the oil to everybody from Walgreens to Walmart. Run by Reyter, his firm had raised $7 million and aimed to ascertain an industrial hub for hemp manufacturing in Albany in two brief years.

“Industrial hemp is the No. 1 rising trade in Oregon, by far. It is producing important jobs,” says Reyter. “[ CBD oil] goes to cabinets of CVS and Walgreens and different nationwide chains.”

Reyter received in hassle as a result of he sends his CBD oil to Phasex Corp., a North Andover, Mass., firm that filters the oil, eradicating impurities and most THC, earlier than transport it again to Key Compounds in Oregon.

On Jan. 18, Phasex mailed again nearly 63 kilos of oil to Key Compounds after eradicating the THC. One container within the bunch, nevertheless, contained the waste product generated by the method. And this waste product had a THC degree that was unlawful to ship throughout state strains.

Reyter’s Portland lawyer, Bear Wilner-Nugent, says the waste was shipped by mistake and may have been destroyed in Massachusetts. In any other case, Wilner-Nugent says, his shopper adopted federal and state guidelines round producing CBD.

The CBD processor and his lawyer see the investigation as the beginning of a battle in opposition to the hemp trade.

“Linn County has determined it does not need any a part of hemp,” Wilner-Nugent says. “That is the launch of their assault.”

Reyter says he has been open with legislation enforcement about his intent to destroy any THC extracted from his CBD oil. Nonetheless, he could face prosecution, and most of his enterprise’s belongings had been seized as proof in a March 15 drug raid.

“That is going to have a major chilling impact on the commercial hemp trade, probably not simply in Linn County however in Oregon,” Reyter says. “Principally, legislation enforcement in Linn County is telling us we’re manufacturing THC just by separating molecules. In case you are in manufacturing and you’ve got a alternative of counties, you need to by no means go to Linn County. They’ve declared a struggle on a federally authorized trade.”

Gregory Newman, a Linn County sheriff’s narcotics deputy who investigated the scent of cannabis wafting from Reyter’s packages, confirmed some skepticism of hemp, going as far as to name CBD merchandise “questionable medicines” in a police report.

Newman examined the merchandise within the packages with a subject drug take a look at, which modified coloration to point the presence of marijuana.

Wilner-Nugent says it does not matter if the sector take a look at was correct— CBD oil is legally allowed to comprise as much as 0.three p.c THC, and the take a look at can’t decide how a lot of the psychoactive chemical is current within the oil.

Linn County District Legal professional Doug Marteeny tells WW he can’t remark particularly in regards to the investigation as a result of the case is ongoing. Nevertheless, Marteeny did focus on his views on charging cannabis and hemp companies that run afoul of Oregon’s legal guidelines, both deliberately or by accident.

“We’re a nation of legal guidelines,” Marteeny says. “If some don’t love these legal guidelines, they need to petition the legislative department to vary them. Companies which might be cautious to observe all felony legal guidelines and native codes do not wish to must compete in opposition to companies that aren’t cautious to take action.”

Robert Bovett, who helped draft the 2018 Farm Invoice as authorized counsel for the Affiliation of Oregon Counties, says Reyter’s firm took a threat by transport any of its product throughout state strains.

“Technically talking, you may’t be transport marijuana gadgets out of state,” he says. “And that definition of ‘ marijuana gadgets’ truly covers industrial hemp and hemp commodities which might be over that 0.three proportion of THC. It is fairly darn clear.”

Hannah Chinn contributed reporting to this story.