U.S. Bank closes accounts of local hemp business, complicating new local industry
Owners of Treasure Valley Extractions, based in Ontario, believe the decision hinged on the company’s production of CBD oil.
A hemp field east of Vale. (The Enterprise/file)
VALE – As Vale native Jim Hutchens geared up for the hemp harvest, the financial institution he banked with for more than 40 years threw him a curve ball.
Hutchens learned “out of left field” last week that U.S. Bank was going to close all of his accounts.
“I have six accounts with U.S. Bank,” said Hutchens.
The reason for the sudden decision? Hutchens said he believes the bank is cutting ties with his business – Treasure Valley Extractions – because it harvests hemp and then processes it into an organic oil known as cannabidiol, or CBD oil.
“We found out from a client that buys our product,” said Hutchens.
Demand for the oil, used as an over-the-counter treatment for everything from epilepsy to arthritic pain, is growing.
Hutchens, with a group of local investors, spearheaded a $2 million outlay for a CBD oil extraction processing plant at the former Ontario Golf Course last year.
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Treasure Valley Extractions signed a 20-year lease with the city for the golf course and invested $400,000 in machinery. The Ontario plant will be capable of processing 1,500 pounds of hemp per day and the firm contracted with 15 to 20 area farmers for the crop. Now, Treasure Valley Extractions employs 11 people, and Hutchens said he plans to expand to about 25 employees in the future.
Hutchens said when he talked to the bank, he was told that his accounts were to be closed for “cause.”
“And I think this is discrimination against our industry,” said Hutchens.
Hutchens said he is confused because hemp production is legal and was ratified as a commercial crop in 2018 federal farm legislation. Hemp is a hybrid cousin to marijuana but as long as the CBD oil produced from it contains no more than 0.3% THC – the psychoactive ingredient that gets people high – it is legal.
In Oregon, most hemp production is managed by the Oregon Department of Agriculture.
“It isn’t marijuana,” said Hutchens.
U.S. Bank declined to comment on the matter.
“We do not discuss customer relationships,” said Cheryl Leamon, senior vice president of public affairs and communications for U.S. Bank.
Dave Eyler, a partner in Treasure Valley Extractions, said he too believes the bank closed the firm’s accounts because of its hemp crop.
“The farm bill should give us access to banking,” said Eyler. “I think the people at U.S. Bank are opposed to it (hemp) and CBD.”
Now under federal law banks are required to file a suspicious activity report if a customer is believed to be involved with cannabis or marijuana. That’s because both violate the Controlled Substances Act.
According to the Federal Deposit Insurance Corp., though, banks don’t have to file such a report for people who grow hemp because the crop is legal.
One possible answer to the bank’s decision may rest with the U.S. Department of Agriculture’s implementation of the farm bill. The federal agency is still finalizing its new regulations regarding hemp.
“Generally, there are still challenges with hemp farmers and related businesses obtaining banking due to the fact that the 2018 farm bill that legalized industrial hemp is still being implemented by the USDA,” said Linda Navarro, president and chief executive officer of the Oregon Bankers Association.
Many banks, said Navarro, are wary of lending to hemp producers.
“Banks often won’t lend on the hemp crop itself because the collateral is subject to being burned if the THC level exceeds the limits set under the law,” said Navarro.
John Huffman, the state director of the USDA rural development program in Oregon, said there is still a lot of “gray area” regarding hemp production even though the farm bill authorizes its production.
The agency’s work to finalize regulations on the crop, he said, is a “slow process.”
“I do know it’s affecting a lot of things, from banking to crop insurance. Crop insurance, for example, is not an option right now (for hemp). There is a lot of angst and concern about waiting for the rules, people waiting on these rules to be published to find out where they stand,” said Huffman.
Molly Jenkins, a spokesman for U.S. Rep. Greg Walden said the farm bill also charged the Food and Drug Administration with overseeing specific elements of hemp production.
“The farm bill authorized hemp but preserved the authority of the FDA over the food and drug element so CBD oil is a food and drug element,” said Jenkins.
Jenkins said Walden and his staff met with FDA and USDA officials and told them “that both need to get their regulations in place.”
“It is definitely something we are looking into and we know producers in Oregon are concerned about it,” said Jenkins.
Hutchens said the U.S. Bank decision cost his firm money.
“It will take two or three days of my time with a new bank, if they will even take us, and we are going from a national brand to a credit union,” said Hutchens.
Eyler said the bank decision hit Treasure Valley Extractions hard.
“Imagine trying to run your business and your bank says we are going to shut you down. It affects us when we do payroll. It is inconvenient and expensive,” said Eyler.
Until the new federal rules are fully implemented, banking problems for businesses like Treasure Valley Extractions may continue.
That is no small issue in Malheur County where there are now nearly 2,500 acres of the crop planted, said Stuart Reitz, county extension agent.
“It is a significant amount. You’ll see hemp fields pretty much all over,” said Reitz. “USDA still hasn’t decided where CBD falls in terms of pharmaceuticals.”
Reitz said that he believes it is too early to speculate about how the hemp crop will do this season.
“Everyone is just trying to get to harvest, to see how it turns out,” said Reitz.
Huffman said hemp production is expanding rapidly in Oregon.
“The hemp market in Oregon has grown exponentially,” said Huffman. “There is a lot of eyes on that as a growing crop and growing industry and market for Oregon.”
Hutchens will move ahead without U.S. Bank.
“The thing that gets me is, CBD helps people, but those national banks will do business with big pharma and the tobacco industry but they won’t do business for us,” said Hutchens.
News tip? Contact Reporter Pat Caldwell: [email protected] or 541-473-3377.
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