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Lessons Learned From Setting Up a Cannabis Extraction Facility

By Alexander Beadle

Published: Aug 17, 2022   
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Cannabis extraction is one of the fastest growing sectors in the US cannabis industry. And with some market reports forecasting a compound annual growth rate for the sector of 15%, reaching more than one billion USD by 2027, it’s not hard to see why one might want to set up a cannabis extraction facility. 

Though setting up an extraction lab can be a potentially lucrative endeavor, there are also many important factors that an industry hopeful will need to consider in order to build a successful extraction business.

Speaking at the Analytical Cannabis Science of Cannabis Extraction Online Symposium 2022, Michelle Sprawls, laboratory director at CULTA and a scientific advisory board member at CloudLIMS, offered advice for potential new operators based on lessons learned from her time in the cannabis sector. This included advice on environmental considerations, equipment selection, and how a good informatics solution can help support compliance with local regulations.

Factors to contemplate before setting up your cannabis extraction lab

One decision that can be beneficial to new and established extraction labs alike is the choice to implement in-house testing. Acquiring a high pressure liquid chromatography (HPLC) or gas chromatography mass spectrometry (GCMS) setup can allow extractors to test new formulations internally before they are sent to third-party testing facilities. As Sprawls explained, this can help an extractor to understand their extraction process and how it can be run optimally, as well as ensuring the quality and safety of the formulations produced.

“When we were launching new products, or we were developing new products, having our in-house HPLC, or GCMS really helped us dial in those formulations,” she said. “That way, when we were sending our samples out to a third-party testing facility to be able to sell these products to the market, we were able to verify those with our own in-house analytics first.”

In-house testing might be a fairly obvious point of consideration for a new lab. Possibly less-often discussed are the geographical considerations that come with establishing a new extraction facility.

“Unlike other businesses, you can't just set up a cannabis extraction facility wherever you find an ideal location,” Sprawls said. “The first thing that you want to do is ensure that you're in a state where it is legal to set up an extraction facility and the type of extraction method that you're wanting to implement. Then you're going to need to apply for a state license that allows you to operate a cannabis extraction facility practicing those methods.”

Issues such as supply chain management or waste disposal will also be handled very differently in a facility that is set up in a city’s industrial district versus one that is located in the rural countryside, for example. Proximity to customers and resources will need to be balanced against potential rent savings. And while each state will have its own set of rules and regulations governing the cannabis industry, individual county and/or city zoning laws will also need to be consulted carefully.

“Zoning laws are very specific, and therefore you will need to get acquainted with ones that apply in your planned jurisdiction,” Sprawls said. “For example, in Chicago, the local zoning ordinances prohibit setting up cannabis extraction facilities less than 660 feet away from a residential district.”

Regulatory compliance for cannabis extraction operations

Though there is variation in regulations from state-to-state, some similarities cut across the board.

“Many cannabis extraction facilities today are required to operate under current good manufacturing processes, or cGMP, regulations,” Sprawls explained.

“cGMP regulations dictate the minimum requirements for facilities, processes, and controls used in manufacturing, processing, and packaging of a drug product. The aim is to guarantee that the product sent to market contains the ingredients and the strength that they claim to have, and are safe for use.”

In addition to passing inspections and achieving cGMP certification, extraction facilities should also consider relevant codes and standards put forward by the National Fire Protection Association (NFPA). Extraction methods that rely on ethanol or hydrocarbon solvents should pay particularly close attention to NFPA standard 45, which relates to fire protection for laboratories using chemicals. This standard outlines requirements for the safe storage of flammable solvents and determines the hazard classification of a lab.

“There are other reference and enforced codes for cannabis extraction facilities,” Sprawls continued. “Those include the NFPA 1: Fire Code, the NFPA 58: Liquefied Petroleum Gas Code, and the NFPA 70: National Electrical Code. It's important to ensure that your extraction facilities are designed to meet the specifications of these codes.”

Like any other workplace, cannabis extraction laboratories must also comply with OSHA regulations for workplace safety and health standards. This covers guidance for recording and reporting occupational injuries, creating fire prevention plans, managing hazardous waste safely, and implementing emergency response training.

Extraction equipment selection and management

Arguably the most important decision to be made is which extraction equipment to buy. Solvent extraction solutions for cannabis tend to revolve around either ethanol, hydrocarbon, or supercritical CO2 extraction methods. Each method presents different hazards and involves different operational processes, so it is important to consider each option carefully.

“It is really important to judiciously select equipment and make sure that before you're purchasing anything, you do a thorough background search and do a lot of research on the pros and the cons of each piece of equipment,” Sprawls said.

“Before setting up the extraction equipment, ask yourself what extraction method you prefer to use, what products you want to make, and make sure that your regulatory body will allow that extraction method and then choose your equipment.”

Extraction facilities might also want to consider purchasing an extraction booth that comes prefabricated with proper ventilation, fire suppression, and gas detection features. Such booths can make regulatory compliance a much simpler affair compared to retrofitting an existing shell of a building with all of the necessary functionality to act as an extraction facility. Booths can also be a good way to divide up different classes of hazardous locations, as defined in the NFPA National Electrical Code.

“Within that booth, you create a Class 1 or Class 2 division location,” Sprawls explained. “You will be able to operate parts of your equipment within the classified section that are more tightly regulated, and put your heaters and chillers and other supporting equipment outside of your Class 1 Division 1 or Class 1 Division 2 location.”

In addition to fire code compliance, equipment manufacturers will often have their own guidelines which can help to determine where equipment will be situated and what it needs to operate safely. Achieving UL certification or other certifications granted by the American Society of Mechanical Engineers (ASME) or Pressure Safety Inspectors (PSI) is another way for facilities to demonstrate their commitment to safety and quality.

Enhancing regulatory compliance with LIMS

To make it easier to keep up with all of these regulations, Sprawls recommends that new extraction facilities use a laboratory information management system (LIMS) from day one of operations.

“An informatics solution helps automate laboratory workflows, it streamlines in-house testing processes, and provides real time access to laboratory data. Furthermore, it helps manage analytical instruments, staff training, SOPs [standard operating procedures], and supports compliance with regulations,” Sprawls said.

“I understand that some people aren't given the luxury to also bring in software on top of everything else, but in terms of keeping everything in line and accessible for inspections, it is so much easier to go with a software system than to have to enter things manually or do paper logs.”

Modern LIMS are often also able to integrate directly with the other instruments or systems that are in use within an extraction facility. Data from in-house testing apparatus can be directly transferred to the LIMS where they are organized and archived. Some LIMS are also compatible with enterprise resource planning (ERP) or billing software, which can help to streamline routine business processes.

“Humans create a lot of great data. But also, keystroke errors are very, very common, especially when you have a lot of samples that you are inputting and you are trying to log as many runs in a day as you can,” said Sprawls. “But a good LIMS system can seamlessly be integrated with analytical instruments for bi-directional data transfer, therefore reducing turnaround time and eliminating chances for transcriptional errors.”

Alexander Beadle

Science Writer

Alexander Beadle has been working as a freelance science writer since 2017 and has covered the cannabis industry for Analytical Cannabis since 2018. He has also written for our sister publication, Technology Networks, and the cannabis industry consultant firm Prohibition Partners, among others. Alexander holds a Master's in Materials Chemistry from the University of St. Andrews, where he won a Chemistry Purdie scholarship, and conducted research into zeolite crystal growth mechanisms and the action of single-molecule transistors.


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