Massive Houston hemp facility has its eyes on a cannabis-infused future – Houston Chronicle

There is a distinct aroma wafting through the offices of Bayou City Hemp, where the skunky odor of cannabis mixes with the sweet smell of optimism.

One of the first and largest hemp processing plants in Texas, the two-year-old company is planting the seed for a legal cannabis industry its founders say is sure to come. Until then, Bayou City is focusing on clean forms of extraction of cannabidiol CBD oils from the hemp plant, turning it into items such as edible gummies, drinkable mixers and inhaleable vape pens. Products it manufactures can put you to sleep, ease your pain and even get you high.

Ben Meggs and Jeromy Sherman were friends and colleagues working in the oil and gas industry before forming Bayou City Hemp in 2019. The business is meant to fill a void in the budding Texas market regulators legalized the industry in 2019 as a way to help farmers squeezed by Americas trade war with China. Once they started planting and harvesting, the farmers needed a place to process the raw hemp.

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We saw the bottleneck in the industry was going to be on the processing side, Sherman said. We created the company we couldnt find.

House Bill 1325, enacted two years ago, made it legal to manufacture, distribute and sell consumable hemp products in Texas in an emerging industry now regulated by the Texas Department of State Health Services. The legislation followed passage of the federal Farm Bill in December 2018, which redefined hemp as a low-THC cannabis product with (0.3 percent or less THC) and removed it from the definition of marijuana in the Control Substances Act.

While by law hemp differs from its cousin marijuana by THC content they are the same species of cannabis plant nature often doesnt draw a clear line. If hemp grows to be too high in THC, federal regulators require it be destroyed.

The legalization of hemp ushered in a new wave of production and brought an end to a gray area in which retailers had previously operated. Hemp is now used as an ingredient in everything from drink mixers to shampoo. Trade publication Hemp Industry Daily projects retail hemp sales in the U.S. will reach $3.9 billion this year, an increase of $1.6 billion over last year. Retail sales are expected to reach nearly $6.3 billion in 2022.

But farmers have so far struggled to launch the crop in Texas, where the climate differs from that of northern states from which they order seeds.

Last summers harvest was the first in Texas, and since then Bayou City has processed hemp from a half-dozen farmers and expects to add to that list as more figure out better seed sourcing and how to grow under Texas conditions.

Bayou City Hemp employee Cameron Gonzales uses the CO2 extractor to pull oil from the hemp plant on Thursday, June 24, 2021, in Houston.Bayou City Hemp is one of the largest hemp manufacturing outposts to launch since Texas legalized hemp in 2019. Founding executives left the oil and gas industry after the bill passed and got into the growing CBD industry.

Self-funded, and with investments from friends and family (they declined to say just how much), Sherman and Meggs brought on Karen Trotter, who previously worked financing oil and gas startups as the companys chief financial officer to make sure they had the capital they needed to hit the ground running. More than two dozen people now work at the company, ranging from chemists and equipment operators to marketing and accounting professionals.

The partners started outfitting their Park Row lab last summer and started seeing product in September. Were still in startup mode, Trotter said.

To that end, Bayou City is helping Texas farmers source more successful seeds, advising them on how to grow and helping them with testing in addition to the eventual extraction and processing.

Theres no playbook for this, Sherman said.

Its an industry that didnt exist before, Meggs said.

Texas hemp farmers have struggled so far to yield full harvests, citing poor seed genetics and issues with insects and mold. Hemp prices also crashed in 2019 as farmers clamored to plant the newly legal cash crop and overproduction reigned.

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The bottom fell out as soon as we were ready to go to market, said Scott Meiers, co-owner and president Texas Premium Hemp Producers in Brenham.

Meiers, a cattle farmer, said he almost gave up on hemp last year because it was so challenging to grow and difficult to make a profit. His mind changed when he saw how CBD gummies helped his nephew, who is autistic and, until that point, nonverbal.

He came up and patted me on the back and said, Good job while I was barbecuing, Meiers recalled. I about cried. It really, really changed his life.

When Meiers decided to give it another go, Bayou City Hemp helped him better source his seeds and supplied him with hemp products to sell on the farm to help make ends meet until he could sell his own hemp. Meiers said he expected to harvest his first crop next month.

Calvin Trostle, an agronomist with Texas A&M, said in a recent university publication the hemp industry in Texas will take time to research and perfect. And costs will need to come down in order for it to take off as a cash crop.

As an alternative crop, the hemp industry in Texas is still in its infancy, Trostle said. There is a massive amount of education going on, but were still trying to determine what varieties are adaptive so that we can help producers avoid headaches.

Bayou City Hemp CFO Karen Trotter opens the rotary evaporator, which creates winterized extracted hemp oil, during a tour of their facilities on Thursday, June 24, 2021, in Houston.Bayou City Hemp is one of the largest hemp manufacturing outposts to launch since Texas legalized hemp in 2019. Founding executives left the oil and gas industry after the bill passed and got into the growing CBD industry.

When it came to building the lab, Sherman and Meggs said they took the high road, outfitting it according to the good manufacturing practices standard in the medical industry and creating an internal system that scans and tracks every batch of CBD oil it creates.

We wanted to plan for FDA regulation, said Sherman, who recruited an extraction expert with 40 years of experience with Dow Chemical to be chief operating officer as well as a general manager with more than a decade of experience in cannabis extraction in other states.

Bayou City also opted to use a carbon dioxide process as a cleaner way to extract hemp oil from the plant. Less expensive ethanol-based methods used in the industry yield hazardous waste, they said, while extracting with carbon dioxide leaves behind plant matter still high in protein that research pending may be used as cattle feed.

Our COO uses it in his garden and he says his broccoli has never been bigger, Trotter said.

Extracting CBD oils from the hemp plant is a multi-step process. The first is removing stems from the hemp flower and putting it through a grinder, yielding a fine powder. Then, staff at Bayou City heat it to activate the cannabinoids inside, readying them for extraction.

Fats and waxes get separated in the lab, resulting in an oil they then distill three times to increase potency and remove impurities, ending up with a purity of around 80 percent. In a reactor room, they prepare an isolate that is 99 percent pure.

For those that prefer some THC in their CBD, they leave it in, labeling it as a full-spectrum oil. For others, they remove it and label it a broad-spectrum oil. Some want the cannabis-like effects, so they convert it to what is known as delta-8 THC, an intoxicating molecule similar to the THC in marijuana but with a different atomic structure.

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Kristen Nichols, editor of Hemp Industry Daily, said delta-8 appears to bind less readily to cannabinoid receptors in the brain, producing milder results than the type of THC that is illegal federally and regulated only by state cannabis laws.

Nichols said she at first considered delta-8 a cheap knock-off, a loophole people are exploiting.

I have since had my mind changed, she said. There are folks who want an in-between.

Full cannabis extraction would be a welcome pivot for the business, Meggs said, as the product is less expensive to work with and they can sell it for about three times more than CBD. But first, Texas needs to go the route of its neighbors and legalize it.

Were excited for that day, Meggs said. But for now, were living in CBD world.

amanda.drane@chron.com

Twitter.com/amandadrane

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Massive Houston hemp facility has its eyes on a cannabis-infused future - Houston Chronicle