CBD oil processor offers THC ‘remediation,’ but regulators urge caution

HILLSBORO, N.D. — A North Dakota and Minnesota company in the organic CBD oil processing business is hoping eventually to become a bigger value to hemp producers who inadvertently produce crops high in THC, the psychoactive compound found in marijuana. But regulators urge caution.

Rebecca “Becca” Dufner, president of the company 1881 Extraction Co. LLC, of Hillsboro, said her company soon will have available a “THC remediation” process that reduces the THC to legal and economic amounts. She acknowledges that federal and state laws currently don’t allow farmers to remove raw hemp biomass from a field if it exceeds 0.3% THC.

Doug Goehring , North Dakota agriculture commissioner, who regulates industrial hemp production in the state, said that under current law, farmers and producers can’t ship high-THC product to a processor or even harvest it.

Goehring said his agency urges farmers to plant varieties known not to exceed the THC standards, but cautions that environmental factors can stress the crop and make it fall out of compliance inadvertently. Goehring urges farmers to test and retest in-season to make harvest before they fall out of compliance. State inspectors can verify that the material is legal, and are required to destroy it if it is not.

There are two overall categories of hemp crops.

First, there are the grain-fiber crops grown by farmers.

Second, there are CBD crops grown in smaller plots and acreages.

Goehring said there were more than 3,000 acres of industrial hemp grown in the state in 2020. About 25 farmers grew for the seed and fiber down, down from about 90 producers a few years ago. To compare, 44 producers in the state are growing hemp for the CBD market for processors. Many of these growers range from 100 square feet to 10 acres. The CBD hemp varieties are the ones most likely to exceed THC levels, Goehring said.

1881 Extraction was established May 25, 2019. The company is named for the town’s founding year.

The company is established as an ingredient supply company for companies wanting a premium, organic distillate. Dufner and partners would like to grow into the “tolling” market, which could be both organic and conventional hemp biomass.

1881 Extraction Co. today has three partners.

First is the duo of Becca and her husband, Joe Dufner, who separately raise organic crops and conventional red potatoes near Buxton, N.D. The second is Pat Muller (pronounced “MEW-ler’), a Hillsboro farmer and entrepreneur who mostly farms conventionally. Third is Beecher Vaillancourt III (pronounced VAL-en-court), a “formulator” from Minneapolis.

“Once we get all of the product into the oil farm, we send it to Minneapolis to be put into products to be formulated,” Dufner said.

(Vaillancourt also is an owner of Global Organic Distro, based in Minneapolis, which has retail stores of various types in Minnesota, North Dakota (including Infinite Vapor & CBD, in Grand Forks) and Wisconsin. All of the businesses sell CBD oil products.)

The Dufner family are notable organic farming pioneers.

Joe, now 50, grew up at Buxton, where his father, Don Dufner, in the late 1970s started growing crops for what would become the “organic” market. Among a range of organic pulse crops, Don grew organic potatoes, and sold them to his brother, Hugh Dufner, who washed and marketed them for Hugh’s Gardens of Halstad, Minn. (Don, now 83, retired from farming in 2020. Hugh died Dec. 20, 2020, at age 75.)

Joe started his own farming entity in 1996. Joe and Becca have been together for 18 years. Their farm is about 2,000 acres, certified through MCIA of Minnesota. (Separately, Joe’s brother, John, farms in an organic enterprise near Buxton.) They grow organic crops, and conventional dark red potatoes.

Becca, 42, grew up at Hillsboro, N.D., where her father worked in “deep freeze” activities at American Crystal Sugar Co. She graduated from high school and started a tanning salon business at Hillsboro. The Dufners have a family of five children, ages 14 to 25. Their youngest, William, helps on the farm.

In the past, the farm would sell products to other companies and elevators. Becca established UpNorth Organics LLC, at Buxton, N.D. Becca heads that company, marketing the farm’s organic oats and dark red and white kidney beans, black beans and pinto beans to such entities as Amy’s Kitchen, S & W Organic Black Beans (a brand of Faribault Foods Inc.) and Eden Foods Inc.

The CBD world changed when Congress passed the Agriculture Improvement Act of 2018. The multiyear farm bill for the first time allowed growing of hemp, provided concentrations of THC are 0.3% or less. There are two hemp oil-type markets from types of hemp plants — the oil seed/fiber market. The “seed oil” plants look more like a grain (flax) product, and it is labeled simply as “hemp oil.”

Then there are CBD-oil hemp plants that look more like Christmas trees, and produce oil from flowers and buds.

The Dufners wanted to grow CBD hemp. And — realizing there was no certified organic processor to sell to — got into processing.

CBD hemp was a hot new crop. A liter of crude CBD oil was going for $3,000, but since has gone down to $500 per liter, due to overproduction.

For their farm, in 2019, Joe and Becca in 2019 bought seed from a Colorado supplier — “good genetics” and put in 24 acres certified, which is “a lot (of space) when you’re putting in CBD” hemp. They planted with a “vacuum planter” seeder, not the “clones” that some people were planting.

The year turned out too cool for hemp, and winter came early. And then the early snow and freezing took down plants in the field. “And there’s no crop insurance on CBD hemp,” Becca said. “It was a lesson learned for us.”

In 2020, they planted a one-acre test plot, but only 30% of the seeds germinated or came up.

To replace that production for their processing, they found other Midwest producers to supply their developing processing company with certified “organic biomass.” At today’s production levels, a single substantial Wisconsin producer brings in 10 tote bags of biomass at a time — shucked” or “bucked” flowers and leaves — about 250 to 300 bags per year, each weighing about 200 to 300 pounds.

Getting into organic CBD processing has been an education in itself.

Organic production requires that three entities — the grower, processor and formulator — all be certified organic.

Becca flew around the country, shopping for an extraction machine maker.

“I didn’t have a background in it, so a lot of it was learning for me,” she said. “It was fun.”

1881 Extraction bought a food-grade extracting machine from a Fort Collins, Colo., maker. The machine pressurizes its “vessels” with carbon dioxide, rather than using chemical solvents that most CBD processors employ.

(Technically, the term is “super-critical” CO2, which means the CO2 is under extremely high pressures, causing it to maintain its liquid properties.)

The extraction machine itself is about $700,000.

1881 Extraction takes in the raw plant. They mill and pack two extraction cylindrical vessels in the machine. “We’re able to separate everything into (repeatable) ‘recipes’ inside,” Becca said. “If we do different growers, we can put their name into it. Every single time we put theirs in it’ll extract the same. We’ll get the exact flavor, the exact taste, smell, everything, every single time.”

1881 Extraction’s machine has two extraction vessels and three “separators.” Extraction vessels are cylindrical, stainless steel tanks with top and bottom end-caps. Separation vessels are smaller. The biomass is reduced by a 7-1 ratio into crude oil.

The whole extraction process takes about 80 minutes for one round.

Pressure separates the oil from the chlorophyll and unneeded resins. This produces a golden “crude” oil, which is the consistency of a thick honey. “It makes completely certified organic."

For the distillation phase, they bought a $400,000, two-stage distillation unit and hired an engineer to run it at Hillsboro. They sold their first distillate in late 2019.

This “post-process” equipment moved to Minneapolis, in conjunction with partner Vaillancourt’s businesses. In a related but separate phase, Global Organic Distro “formulates” the distillate into retail products. Becca noted 1881 Extracting Co. can produce non-organic products at all levels for farmers on a “toll” basis. CBD products are often sold as a dietary supplements or included in creams and other personal care products; they are unregulated as supplements by the Food and Drug Administration as long as companies make no health claims.

1881 Extracting Co. LLC, of Hillsboro, N.D., recently launched “tincture” products called U by 1881 (with the slogan "Our products are right for U.”) It markets various concentrations of “isolates” that contain zero percent THC, labeled as a “wellness supplement.”