“None of these numbers are lining up. None of the labs are adding up. We have no idea where the extra volume is coming from.”
By Darrell Ehrlick, Daily Montanan
One of Montana’s few in-state laboratories that had participated in the rollout of the recreational and medical marijuana programs said that it has closed its doors, largely based on concerns the owners have with scientific accuracy of testing the formerly banned substance.
Stillwater Laboratories owners Ron and Kristine Brost said they’re concerned that a software program the state uses may inadvertently approve large lots of marijuana without complying with the state’s testing standards, leading to a market that has increased the volume of marijuana without a commensurate increase in testing. Furthermore, they told the Daily Montanan the huge increase in sales statewide since the implementation of recreational marijuana should have resulted in an equally large jump in testing, but they said those numbers don’t match.
However, Kristan Barbour, the director of the state’s cannabis program with the Department of Revenue, said that while the initial launch of the state’s recreational program, which happened after it was legalized for medical cardholders, had some bumps as it transitioned from the state’s Department of Health and Human Services to the Department of Revenue, that testing is tracking with sales and the department is in the process of hiring more staff to keep tabs on the budding industry.
One of the former lab owners’ most pressing concerns is that the state has made the laboratories the de facto marijuana police.
“They’ve used the labs as proxy regulators because they don’t want to touch the stuff,” Kristine Brost said. “They don’t want to touch marijuana because of the federal ban.”
The problem has been documented in other states that have had legalized marijuana programs longer than Montana, like Colorado and California, where large batches have escaped testing, leading to uncertainty about the drug’s potency.
Nathan Kosted, who was employed at Stillwater Labs until it shuttered, said the biggest problem may have been moving the cannabis program from one department to another.
“Their purpose is tax collection,” Kosted said. “They haven’t seen anyone vomiting or freaking out. The DOR is in the business of regulating income and taxation.”
Stillwater Labs spent hundreds of thousands of dollars to ramp up for what it believed would be more testing after the state legalized recreational marijuana. State lawmakers also placed a moratorium on out-of-state operators. State officials argued that limiting the number of retailers, growing operations and testing would help protect consumers and allow the state to get the process correct.
“Testing was the reason,” Kristine Brost said. “It was because of our ability to test that it was made legal. Testing was the center.”
Barbour pushed back against the notion that the Cannabis Control Division within the state’s Department of Revenue was only focused on the financial side of the operations. In fact, she said no one within the Cannabis Control Division is responsible for taxes of any type.
“This is handled by an entirely separate division called the Business and Income Taxes Division,” Barbour said. “Our program is regulatory in nature and the focus of that work is public health. This has been an evolving process as our program is still young in its development.
“We have already seen advantages of the laboratory program staff collaborating more closely with inspectors, legal experts, and the administrative team to help build out a more robust laboratory auditing program. We are working on updating testing and lab rules, creating and refining data analytics for better monitoring of testing results, and identifying areas where further investigation is warranted.”
METRC vs. metrics
The Brosts said that a software program used by the state, METRC, has glitches, or ways to skirt the testing. State law requires that marijuana must be tested in lots of no more than five pounds. However, they said that a software glitch can apply the test results that would normally be used to approve five pounds for as much as 50 pounds.
Stillwater Labs said that they didn’t encounter products that were laced with anything like fentanyl or other drugs, but said consumers may not be certain exactly what they’re receiving when it comes to things like potency.
“METRC doesn’t care,” said Ron Brost. “It’s a multi-state program.”
That’s true, Barbour said. Because she told the Daily Montanan that since the marijuana field is fairly new, software companies have been racing to manufacture products that track marijuana from growing operations to harvest to testing to selling. But every state has its own set of rules and regulations, Barbour said. That means the Department of Revenue continues to work with METRC to adapt the program to state law.
However, Barbour said that with the addition of more staff because of the transition from the DPHHS, they are investigating any number of issues with retail operations. Like other software programs in different industries, she told the Daily Montanan that nothing prevents a bad actor from inputting false entries into the system.
She said the department has been working with the software vendors to close any state-specific loopholes (different states require testing batches of marijuana of various amounts).
Barbour confirmed that Montana is aware of the issue, and said House Bill 128, sponsored by Rep. Josh Kassmeier (R-Fort Benton) helped create a Cannabis Control Division Inspection Unit that is looking into the irregularities.
“Harvest test lots identified in the report where tested lot quantities exceeded the five-pound lot requirement, and greater than five pounds of flower sourced from these test lots was sold at licensed dispensaries are being considered for further investigation and possible enforcement action,” she said.
Testing vs. sales
Barbour said it wasn’t until July 1 of this year that the program fully switched from the DPHHS to the Department of Revenue—something mandated by lawmakers, and determined by the beginning of the state’s fiscal year.
Stillwater Labs said that it consulted with other labs throughout the state, and they’re concerned that the volume of marijuana being tested should be increasing by roughly the amount that sales are rising.
“Based on the revenue that the DOR is collection, there should be two to three times more marijuana being tested than is currently,” said Ron Brost.
“None of these numbers are lining up. None of the labs are adding up,” Kristine Brost said. “We have no idea where the extra volume is coming from.”
Barbour provided numbers to the Daily Montanan that showed that from 2021 to 2022, there was a 29 percent increase in samples tested. That was the time period in which recreational marijuana became legal in Montana, and represents the single biggest jump in testing since the state legalized any form of marijuana, Barbour said.
Barbour said that sales versus testing may follow the same general pattern, but that tracking the numbers in a lock-step fashion isn’t how the system works. She said that before the rollout of legalized recreational marijuana, many dispensaries sent products for testing in smaller amounts. However, the state allowed lots of as much as five pounds to be tested at once. Since recreational marijuana, more dispensaries and cultivators have tested their product in larger lots, closer to the maximum five-pound lots, taking advantage of the testing capacities.
“Cultivators and manufacturers were likely able to lower their average testing cost, per unit of product produced,” Barbour said. “This is a cost accounting principle that occurs in all manufacturing and production-oriented industries, and cannabis certainly was not immune from experiencing the benefits of economies of scale with regards to their lab testing costs in 2022. As production and corresponding revenue increases, certain operating expenses will decrease as a ratio of unit produced.”
From 2021 to 2022, the Cannabis Control Division reported an increase of 51.1 percent in the testing package size. In other words, the average cannabis testing lot size increased, demonstrating that many testing lots prior to recreational marijuana were less than the maximum of five pounds.
Barbour also said that in that same time period, there was a 194 percent increase in source-infused product quantity. This would likely cover things like edibles and tinctures.
From pre-rolls to rollout
Rep. Mike Hopkins (R-Missoula) carried much of the cannabis legislation in 2023, trying to mix and match ideas from a multitude of opinions about how the state should regulate recreational marijuana, which included moving the department from the DPHHS to the Department of Revenue. Some of the controversial debate also swirled around how much deference should be given to already-established dispensaries and cultivators.
In the end, Hopkins said Montana has set the standard for rolling out a smooth transition to recreational marijuana sales.
“Personally, from what I have heard from constituents who go into the dispensary, is that they’re very satisfied with the product,” he said. “The state had to set up this whole new industry, and it’s currently working very well. That doesn’t mean the discussion or conversation will end.”
Hopkins said he believes the rollout of the marijuana programs in Montana has hit fewer snags than Colorado or California.
He said Montana lawmakers were interested in helping grow local businesses while keeping marijuana out of every storefront.
He said ultimately what software any state uses or where the cannabis division is housed doesn’t make as much difference as the policies and procedures.
“You know, I look at it: Government is government. You can have whatever name you want and whatever agency,” Hopkins said. “It’s about the standards and the practice. Are they doing a good job, and I think they are.”
Photo courtesy of National Institute of Standards and Technology.