New startup 1881 Extraction to process CBD oil in Hillsboro

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Posted: Friday, August 16, 2019 6:00 am

Investors in a new agribusiness that specializes in the processing of cannabidiol oil plan to open a multimillion-dollar processing facility in Hillsboro.

The owners of 1881 Extraction Co. expect to hire 10 to 12 employees this fall to process agricultural hemp and sell CBD oil to buyers in North Dakota and across the country.

“This will bring a good deal of economic development to Hillsboro,” said Pat Muller, an 1881 Extraction investor who also serves as president of Total Ag Industries in Hillsboro.

Muller, along with Buxton farmers Joe and Becca Dufner and Twin Cities businessmen Beecher Vaillancourt and Gavin Rydell, shared plans for the company’s future Tuesday.

The Dufners, who sell organic beans and grains through their family-run venture UpNorth Organics, met Vaillancourt and Rydell at a trade show in Rochester, Minn., in January.

The future business partners were in Rochester for a hemp convention that offered growers tips on raising hemp for CBD oil production.

“(We) told them about our interest in growing organic CBD hemp and they were very interested,” said Becca Dufner. “(So) we exchanged business cards.”

The following week, the Dufners pulled in Muller to talk about equipment development for hemp processing, which led to Muller agreeing to house 1881 Extraction inside Total Ag Industries’ state-of-the-art facility along Interstate 29.

“He was … excited and asked us if we would like to partner” with him, Becca Dufner said. “We all had the same visions for this company and we all decided to be partners.”


Public education

Legally produced hemp as a cash crop appears poised to catch fire in North Dakota.

State lawmakers agreed to legalize CBD products this spring after the new farm bill removed hemp from the U.S. Drug Enforcement Agency’s list of controlled substances.

North Dakota is one of 16 states that allow CBD hemp, a cousin of the marijuana plant which contains virtually no THC, the chemical that gets users high.

As 1881 Extraction ramps up, company execs say they’re planning to educate the public on the benefits of CBD oil – and explain the differences between hemp and marijuana.

“There’s still a misconception out there that when people hear ‘hemp’ they think it’s going to get them high,” Rydell said.

“For some people, they have been told their whole lives that it’s bad. It’s illegal. So we have to do a little bit of education, especially for older people.”


In demand

CBD products have exploded nationwide the past few years in retail and online stores and can be found in products such as oils, creams and pills.

Supporters say the product can treat ailments ranging from easing muscle and joint pain to skin conditions, digestive issues and seizure disorders.

Muller said 1881 Extraction will use organic farming methods to extract CBD oil, making the Hillsboro-based operation an anomaly in the industry.

“Our facility is going to be kicking out the most premium form of the product that’s out there,” said Andy Richards, the company’s chief operating officer. “We care about the processing. We care about the ingredients. We want consumers to have the full effect that (CBD oils) can do them. We want them to feel better.”


In the field

Between 1,500 and 2,000 hemp plants can be grown on a single acre, although varying amounts of oil will be produced per plant, said Vaillancourt.

Joe Dufner estimated farmers involved in 1881 Extraction planted 25 acres of CBD-producing hemp this year.

The Dufners’ first hemp field was planted June 7. Those plants stand 5 feet tall. A second field was planted June 27 and those plants have reached 3 feet.

In order to keep the processing facility in Hillsboro running around the clock, workers will need oil extracted from 70 to 80 acres of hemp, Joe Dufner said.

The state Department of Commerce announced in July that Muller had received a $26,250 grant to develop a prototype for new harvest equipment for high-CBD hemp.

“Right now, harvesting hemp is labor intensive,” Muller said. “We’re trying to develop a method for (hemp) harvest and drying the biomass.”

Farmers interested in raising hemp for the company continue to be sought, although not every grower who expresses interest will be brought on board.

“We want to reach out to those farmers who are conscious about farming organically,” Vaillancourt said. “We won’t just bring in anyone with money. We’re taking much bigger steps than putting CBD on a bottle and making a quick buck.”


Road ahead

The explosion of hemp products could be impacted by consumer trends and whether the U.S. Food and Drug Administration takes a heavy-handed approach to CBD oil.

CBD hemp producers could face a backlash from other industries, such as the pharmaceutical field, Rydell said.

“There’s a lot of harm reduction than can come from CBD from eliminating joint pain to general wellness of the body,” he said. “Pharmaceutical companies may not like that.”

Joe Dufner said 1881 Extraction may be insulated from outside market forces.

The company’s extraction equipment will allow the business to diversify and produce coffee, lavender and essential oils for clients, he said.

Becca Dufner said the group plans to start hiring workers as soon as Sept. 1.

One of the company’s major pieces of equipment will arrive next week with more expected in November.

“Hopefully by then we’re up and running and in full production,” she said.

The business will ship products to other CBD manufacturers and distributors and a number of those have been lined up already, Muller said.

Becca Dufner said the company wants to focus on making its products available in North Dakota to create a “market-to-shelf” pipeline.

It’s possible some of the locally produced CBD oil could find its way onto store shelves in Hillsboro at some point, Vaillancourt said. “It would save on shipping,” he added.

Muller, who has a diverse business portfolio and has been involved in talks with city officials on a planned residential development along I-29, appears to be sold on CBD oil.

“I’ve started using it to help me sleep,” he said.

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