Legislature(2019 - 2020)BARNES 124

04/18/2019 08:00 AM COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
08:03:43 AM Start
08:04:33 AM Presentation(s): Status of Industrial Hemp in Alaska
09:25:17 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Status of Industrial Hemp Industry TELECONFERENCED
in Alaska by
-David Schade, Acting Dir., Dept. of Natural
Resources, Div. of Agriculture
-Rob Carter, Plant Materials Center Manager
-Joan Wilson, Assistant Attorney General
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                         April 18, 2019                                                                                         
                           8:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Harriet Drummond, Co-Chair                                                                                       
Representative Sara Hannan, Co-Chair                                                                                            
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Steve Thompson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Matt Claman                                                                                                      
Representative Sharon Jackson                                                                                                   
Representative Josh Revak                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S): STATUS OF INDUSTRIAL HEMP IN ALASKA                                                                            
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROB CARTER, Manager                                                                                                             
Plant Materials Center                                                                                                          
Division of Agriculture                                                                                                         
Department of Natural Resources (DNR)                                                                                           
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Offered the first part of the presentation                                                               
on the Status of Industrial Hemp in Alaska.                                                                                     
                                                                                                                                
DAVID SCHADE, Acting Director                                                                                                   
Division of Agriculture                                                                                                         
Department of Natural Resources (DNR)                                                                                           
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Gave the second half of the presentation on                                                              
the Status of Industrial Hemp in Alaska.                                                                                        
                                                                                                                                
DAN SADDLER, Legislative Liaison/Communications Director                                                                        
Office of the Commissioner                                                                                                      
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered a  question during the presentation                                                             
on the Status of Industrial Hemp in Alaska.                                                                                     
                                                                                                                                
JOAN WILSON, Assistant Attorney General                                                                                         
Commercial, Fair Business Section and Child Support Section                                                                     
Civil Division (Anchorage)                                                                                                      
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:       Provided   information   during   the                                                             
presentation on the Status of Industrial Hemp in Alaska.                                                                        
                                                                                                                                
AARON RALPH, Owner/Manufacturer                                                                                                 
Alaska Cannabis Exchange (ACE) CBD Products                                                                                     
(No address provided)                                                                                                           
POSITION  STATEMENT:   Testified during  the presentation  on the                                                             
Status of Industrial Hemp in Alaska.                                                                                            
                                                                                                                                
SHAWN MCDONOUGH                                                                                                                 
(No address provided)                                                                                                           
POSITION  STATEMENT:   Testified during  the presentation  on the                                                             
Status of Industrial Hemp in Alaska.                                                                                            
                                                                                                                                
KERBY COMAN, Co-owner                                                                                                           
Hempire Co.; Owner                                                                                                              
Green Degree                                                                                                                    
Wasilla, Alaska                                                                                                                 
POSITION  STATEMENT:   Testified during  the presentation  on the                                                             
Status of Industrial Hemp in Alaska.                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:03:43 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HARRIET   DRUMMOND  called  the  House   Community  and                                                             
Regional  Affairs Standing  Committee  meeting to  order at  8:03                                                               
a.m.    Representatives  Kreiss-Tomkins,  Thompson,  Hannan,  and                                                               
Drummond were present at the call to order.                                                                                     
                                                                                                                                
^PRESENTATION(S): STATUS OF INDUSTRIAL HEMP IN ALASKA                                                                           
      PRESENTATION(S): STATUS OF INDUSTRIAL HEMP IN ALASKA                                                                  
                                                                                                                              
8:04:33 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND  announced that  the  only  order of  business                                                               
would  be a  presentation on  the  Status of  Industrial Hemp  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
8:06:39 AM                                                                                                                    
                                                                                                                                
ROB  CARTER,   Manager,  Plant  Materials  Center,   Division  of                                                               
Agriculture,  Department of  Natural Resources  (DNR), began  the                                                               
PowerPoint  presentation  on the  Status  of  Industrial Hemp  in                                                               
Alaska.   He directed attention to  slide 2, "What is  Hemp?"  As                                                               
shown  on  the  slide,  he noted  that  AS  03.05.100(5)  defines                                                               
industrial  hemp  as  "all  parts  and  varieties  of  the  plant                                                               
Cannabis  sativa  L. containing  not  more  than 0.3  percent  of                                                               
delta-9-tetrahydrocannabinol  (THC)."   To  slide  3  - "What  is                                                               
CBD?" - he explained that CBD  is short for cannabidiol, which is                                                               
one  of the  compounds  found in  Cannabis plants.    It is  used                                                               
widely  in "wellness  applications."   Recently the  Federal Drug                                                               
Administration  (FDA)  approved  Epidiolex, the  first  medically                                                               
approved CBD  compound used to treat  seizures.  He said  CBD can                                                               
be added to  food, water, tinctures, and salves for  use in "what                                                               
is  believed  as  a  wellness  product."   Turning  to  slide  4,                                                               
"Division of Agriculture Authority,"  Mr. Carter said Senate Bill                                                               
6  was  passed  in  2018   [during  the  Thirtieth  Alaska  State                                                               
Legislature]  to  create  an industrial  hemp  pilot  program  to                                                               
research  the growth,  cultivation, and  marketing of  industrial                                                               
hemp  and to  promulgate regulations  necessary to  implement the                                                               
program.                                                                                                                        
                                                                                                                                
8:09:47 AM                                                                                                                    
                                                                                                                                
MR.   CARTER  directed   attention  to   slide  5,   "Agriculture                                                               
Improvement Act of  2018 (Federal Farm Bill),"  [also referred to                                                               
as "the  2018 farm  bill"], which he  said "somewhat  changed the                                                               
process for  the legality of  industrial hemp cultivation  in the                                                               
United States,  and will continue  to change that as  the [United                                                               
States Department  of Agriculture] (USDA)  Agricultural Marketing                                                               
Service  begins to  regulate or  provide guidance  to the  states                                                               
that are  regulating industrial hemp."   He said one of  the most                                                               
important parts  of the  2018 farm  bill is  that it  will remove                                                               
industrial hemp and  hemp parts from the federal  schedule I drug                                                               
listing,  which  would  allow  the  USDA to  set  model  law  and                                                               
regulation in collaboration  with states that have  the intent to                                                               
produce  industrial   hemp.    Prior   to  that,   he  explained,                                                               
individual  states created  their  own pilot  programs under  the                                                               
limited guidance  of [the Agricultural  Improvement Act  of 2014,                                                               
also referred  to as "the  2014 farm  bill."]  He  indicated that                                                               
the USDA may come out with guidance  by the end of the year.  Mr.                                                               
Carter related  that another  important aspect  of the  2018 farm                                                               
bill  is  that  although  CBD will  remain  illegal  "across  the                                                               
federal board," it will be up  to each individual state to create                                                               
exceptions.  As long as the  products are derived from hemp grown                                                               
in    a   "farm    bill-compliant    state"    by   a    licensed                                                               
cultivator/processor/marketer  and  meet   production  and  state                                                               
regulations, those products will be legal in the market.                                                                        
                                                                                                                                
8:12:15 AM                                                                                                                    
                                                                                                                                
MR.  CARTER turned  to  slide 6,  "Pilot Program."    He said  as                                                               
approved  by the  2014 and  2018  farm bills,  DNR's Division  of                                                               
Agriculture is  the state agricultural  agency that  will conduct                                                               
hemp-related research,  including growth trials and  THC testing.                                                               
The plants shown in  a photo on the slide are  being grown by the                                                               
division.  He  said without the regulations  in place, producing,                                                               
processing,  and  marketing industrial  hemp  and  hemp parts  is                                                               
illegal.                                                                                                                        
                                                                                                                                
8:13:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN  asked how  big the test  production will  be and                                                               
how the hemp is grown.                                                                                                          
                                                                                                                                
MR. CARTER answered  that seedlings were started  in a controlled                                                               
environment [a  greenhouse], but there  are plans to  do in-field                                                               
trials, as well.   He noted that industrial hemp  seeds are "much                                                               
harder  to come  by than  one  would expect"  and at  significant                                                               
cost.   The plan is  to propagate the plants  to hold on  to them                                                               
after the THC testing is complete.                                                                                              
                                                                                                                                
8:15:15 AM                                                                                                                    
                                                                                                                                
DAVID   SCHADE,  Acting   Director,   Division  of   Agriculture,                                                               
Department of  Natural Resources (DNR),  gave the second  half of                                                               
the presentation on  the state of industrial hemp in  Alaska.  He                                                               
directed attention  to slide 7,  "Regulations -  Current Adoption                                                               
Timeframe,"  and announced  that  the division  has committed  to                                                               
have a  regulations package  ready for public  notice by  May 15,                                                               
2019.  He said there is a  high level of interest in the project.                                                               
He estimated that by September  or October, the final regulations                                                               
will  be  in  place.     Turning  to  slide  8,  titled  "Program                                                               
Challenges: Private Sector Lab Testing  Is Limited," he explained                                                               
that  one  challenge is  in  writing  regulations that  meet  the                                                               
current  status  of  the  2014  farm bill  while  to  the  extent                                                               
possible  meeting the  requirements of  the 2018  farm bill.   As                                                               
shown on the  slide, he said one challenge is  in meeting the 0.3                                                               
percent delta-9  THC requirement.   He mentioned other  tests for                                                               
which there  would be additional  requirements, such  as ensuring                                                               
pesticides are not being consumed by animals and humans.                                                                        
                                                                                                                                
8:18:25 AM                                                                                                                    
                                                                                                                                
MR.  SCHADE  turned  to  slide  9,  "Program  Challenges  -  USDA                                                               
Regulations," and said the USDA does  not expect to have its hemp                                                               
regulations in place  for at least one year and  is not accepting                                                               
any state program proposals for  approval.  He explained that the                                                               
Division  of  Agriculture  will operate  under  its  state  pilot                                                               
program but will  have to wait until the USDA  regulations are in                                                               
place before the program is approved.   He said the division will                                                               
remain in its "experimental mode" while it waits.                                                                               
                                                                                                                                
8:19:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS referred to  slide 8 and asked what                                                               
percentage of THC exists in Cannabis.                                                                                           
                                                                                                                                
MR. CARTER  answered that  most of  the recreational  Cannabis on                                                               
the market  is greater  than 15  percent and  up to  about mid-20                                                               
percent "as a raw flower product."                                                                                              
                                                                                                                                
8:20:33 AM                                                                                                                    
                                                                                                                                
MR. SCHADE directed attention to  slide 10, "Program Challenges -                                                               
CBD Products."   He said the division tried to  figure out "where                                                               
we  are  in  relationship  to  the industry."    Surveys  by  the                                                               
division  showed  over  300 manufacturers  using  CBD  and  1,000                                                               
retail  establishments.    He  said  CBD  is  still  illegal  for                                                               
interstate commerce, yet these products  are out there for animal                                                               
and human consumption.  The  division takes seriously its role in                                                               
getting  these   products  into  legal  status   to  ensure  that                                                               
"anything hemp-related  is being done  by the law,  properly, and                                                               
protective of the public."                                                                                                      
                                                                                                                                
MR. SCHADE turned to slide  11, "Program Challenges - Resources."                                                               
He said the  division currently lacks adequate staff  to meet all                                                               
hemp  program needs  and would  need  additional direct  services                                                               
staff for  PMC and  regulatory work.   The division  estimates it                                                               
will   require  approximately   $500,000  in   receipt  authority                                                               
annually.  He said Senate Bill  6 mandated that the industry pays                                                               
for  program-related services,  which  requires  the division  to                                                               
have receipt authority.   He said the program  could start midway                                                               
through the fiscal year  and "ramp up."  He said  he is not aware                                                               
of the  receipt authority  being in the  budget for  the division                                                               
beyond the regulatory phase.                                                                                                    
                                                                                                                                
8:24:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON asked  what "GFPR" - shown on  slide 11 -                                                               
means.                                                                                                                          
                                                                                                                                
MR. SCHADE answered it means general fund program receipts.                                                                     
                                                                                                                                
MR. SCHADE continued to slide  12, "Program Challenges."  He said                                                               
the program  needs to be  coordinated with the  Marijuana Control                                                               
Board  and law  enforcement.   He said  his untrained  eye cannot                                                               
differentiate between  a hemp  plant and a  marijuana plant.   He                                                               
talked  about reporting  requirements  regarding registrants  and                                                               
ensuring all  phases of the  program are compliant with  the law.                                                               
He noted  that law enforcement in  some rural areas of  the state                                                               
is challenging and the division's  jurisdiction is statewide.  He                                                               
said the division has determined  there will be statutory changes                                                               
to be made  under the 2018 farm bill.   He explained the division                                                               
is currently  working under the 2014  farm bill.  In  the future,                                                               
there will  be "tweaks"  needed in statute  so that  the division                                                               
can  be compliant  with federal  regulations  promulgated by  the                                                               
USDA.                                                                                                                           
                                                                                                                                
8:26:27 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN said that Alaska's  state law regarding marijuana                                                               
conflicts with federal  law.  She stated her  assumption that the                                                               
interest in  complying with federal  law over hemp is  for export                                                               
to other  states so that Alaska  does not get into  an interstate                                                               
commerce problem.   She asked if Alaska needs to  be as concerned                                                               
about   federal  regulations   when   creating  regulations   for                                                               
production of CBD oil.                                                                                                          
                                                                                                                                
MR.  SCHADE answered  that Representative  Hannan  is right,  and                                                               
that is why  the division is moving forward  with its regulations                                                               
under the  2014 farm bill.   He said, "That  allows us to  do the                                                               
instate use  of the industry."   However, the concern  is whether                                                               
the  federal  government  will  change  its  enforcement  in  the                                                               
future.   He said the  good news  is that the  federal government                                                               
will be  removing hemp [and hemp  parts] from the list  of drugs.                                                               
He  said both  industries  can  be managed  within  Alaska.   The                                                               
difference between marijuana and hemp  is that hemp will be legal                                                               
in both state and federal law.                                                                                                  
                                                                                                                                
CO-CHAIR HANNAN  asked if the  Division of Agriculture  asked for                                                               
program receipt  authority in  order to  get through  the current                                                               
fiscal year with its commercial operation.                                                                                      
                                                                                                                                
8:28:49 AM                                                                                                                    
                                                                                                                                
DAN SADDLER, Legislative  Liaison/Communications Director, Office                                                               
of  the  Commissioner,  Department of  Natural  Resources  (DNR),                                                               
offered  his understanding  that receipt  authority comes  in the                                                               
following budget  year; therefore,  the answer  to Representative                                                               
Hannan's question  would be  no.   He allowed that  he is  not an                                                               
expert in this area.                                                                                                            
                                                                                                                                
8:29:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON  deduced from the photos  that hemp grows                                                               
10 feet  or higher and he  asked how that affects  trying to grow                                                               
it indoors.  He also asked how long it takes to grow that big.                                                                  
                                                                                                                                
MR. CARTER  answered that  growth rate and  height is  related to                                                               
the cultivar.   Hemp varieties vary  from 24 inches tall  to over                                                               
12 feet.   He explained  that the  taller variety would  be grown                                                               
for fiber production, whereas a  smaller variety is grown for oil                                                               
production.                                                                                                                     
                                                                                                                                
8:31:21 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN  surmised that the  division could have  three to                                                               
four  crop  cycles grown  within  a  year,  each tested  for  CBD                                                               
thresholds.                                                                                                                     
                                                                                                                                
MR. CARTER confirmed  that is correct.  At this  point the intent                                                               
is not about yield but  about identifying genetics that grow well                                                               
in  Alaska.   He said  the division  has the  ability to  produce                                                               
clones that maintain certain genetic material.                                                                                  
                                                                                                                                
CO-CHAIR HANNAN  asked if the  intent is for the  Plant Materials                                                               
Center to be  the source for the legal seed  and clone stock that                                                               
could produce CBD for commercial growth in Alaska.                                                                              
                                                                                                                                
MR. CLARK  answered, "I believe  that would actually be  a decent                                                               
function of  the Plant Materials  Center."  He said  the division                                                               
currently maintains a significant  amount of plant materials made                                                               
available for  the state:   61 grass  varieties and  25 different                                                               
grain  species  "known  to  do   well  as  a  vessel  from  grain                                                               
production   to  reclamation   statewide."      He  offered   his                                                               
understanding that  it is not the  intent of the division  or the                                                               
department  to "forever  maintain  that," but  rather  it is  the                                                               
intent  that the  division  identify which  of  the cultivars  or                                                               
species can be  produced legally to meet the 3  parts per million                                                               
threshold and then  to maintain some of that  genetic material to                                                               
keep it in Alaska.                                                                                                              
                                                                                                                                
CO-CHAIR  HANNAN  asked if  the  division  has already  initiated                                                               
conversations with  state regulated  labs to  do the  testing and                                                               
whether  multiple  labs would  be  utilized  in order  to  ensure                                                               
consistent results.                                                                                                             
                                                                                                                                
MR. CLARK  answered that the division  has spoken to many  of the                                                               
private  labs currently  working with  the recreational  Cannabis                                                               
industry.   He mentioned getting  good baseline data in  order to                                                               
protect the producers,  processors, and consumers in  Alaska.  He                                                               
indicated that multiple  tests would be done  "through any avenue                                                               
that we can."                                                                                                                   
                                                                                                                                
8:35:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  THOMPSON  asked   about  the  distance  necessary                                                               
between plants to prevent crosspollination.                                                                                     
                                                                                                                                
MR. CLARK answered  that isolation distances can  change.  Pollen                                                               
from  Cannabis  can  travel  long distances.    In  a  controlled                                                               
environment, the intent  is to grow "floral  material" and remove                                                               
the male  genetics that produce  pollen.  In grain  production or                                                               
"large-scale fiber  biomass production,"  using feed that  may be                                                               
"both  male   and  female  genetic"  requires   consideration  of                                                               
isolation distances.                                                                                                            
                                                                                                                                
8:36:40 AM                                                                                                                    
                                                                                                                                
MR. SADDLER,  adding to his  previous answer to  Co-Chair Hannan,                                                               
stated he  just discovered  that receipt  authority has  not been                                                               
requested in the governor's fiscal year 2020 (FY 20) budget.                                                                    
                                                                                                                                
8:37:00 AM                                                                                                                    
                                                                                                                                
CO-CHAIR DRUMMOND  remarked that  that is  "easy enough  to fix."                                                               
She then  asked for confirmation  that isolation  distances don't                                                               
apply to recreational  Cannabis and hemp because of  the way they                                                               
are grown.                                                                                                                      
                                                                                                                                
MR. CLARK answered that is correct.                                                                                             
                                                                                                                                
CO-CHAIR  DRUMMOND  asked  how   many  outdoor  Cannabis  growing                                                               
operations there are in Alaska.                                                                                                 
                                                                                                                                
MR. CLARK  responded that  he does  not know  the total  but does                                                               
know of at least four.                                                                                                          
                                                                                                                                
CO-CHAIR  DRUMMOND surmised  that  her question  would be  better                                                               
asked of the Marijuana Control Board.                                                                                           
                                                                                                                                
8:38:26 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN  asked for more details  regarding lab production                                                               
and test growing.                                                                                                               
                                                                                                                                
MR.  CLARK  answered that  currently  the  division is  the  only                                                               
entity  doing   the  production;   however,  once   the  [federal                                                               
regulation]  is  in  place,  anyone   will  be  able  to  pay  an                                                               
application  fee  and  take  part  in  whatever  portion  of  the                                                               
industrial  hemp  program is  of  interest.    In response  to  a                                                               
follow-up question  from Co-Chair Hannan, he  confirmed that this                                                               
opportunity should  be available  by this fall,  but he  hopes it                                                               
could be sooner.                                                                                                                
                                                                                                                                
8:41:14 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND  noted  that  apparently  the  division  needs                                                               
receipt authority before it can issue any "test licenses."                                                                      
                                                                                                                                
MR. SCHADE confirmed that is correct.                                                                                           
                                                                                                                                
CO-CHAIR  DRUMMOND  asked why  the  division  has not  asked  the                                                               
legislature for the receipt authority.                                                                                          
                                                                                                                                
MR. SCHADE replied that the issue  has been managed by the Office                                                               
of Management  & Budget; the  division is not working  the budget                                                               
process.   He requested Co-Chair  Drummond work with  Mr. Saddler                                                               
to get an answer to that question.                                                                                              
                                                                                                                                
CO-CHAIR DRUMMOND asked  how many inquiries have  been made since                                                               
passage  of  Senate  Bill  6  by  people  interested  in  growing                                                               
industrial hemp.                                                                                                                
                                                                                                                                
MR. SCHADE answered that the division receives calls daily.                                                                     
                                                                                                                                
8:43:01 AM                                                                                                                    
                                                                                                                                
MR. CARTER added  that prior to passage of Senate  Bill 6, people                                                               
were unaware  of "the  social ramifications  of Cannabis  and the                                                               
relationship  of industrial  hemp  to that."    Since passage  of                                                               
Senate  Bill   6,  approximately  1,400  people   have  expressed                                                               
interest  by  giving  him  their   contact  information,  and  he                                                               
receives 6-11 phone calls daily.                                                                                                
                                                                                                                                
CO-CHAIR DRUMMOND responded that it  sounds like it would be hard                                                               
for the division  to move forward without  receipt authority, and                                                               
she said  she would like  to help.  She  said it sounds  like the                                                               
[2018] farm bill  "confused the issue," because  the division was                                                               
all "set  to proceed"  based on  the interpretation  under Senate                                                               
Bill 6 of the 2014 farm bill.                                                                                                   
                                                                                                                                
MR. CLARK answered that's correct;  there was a slow-down process                                                               
that  resulted from  the  2018  farm bill.    He  said there  are                                                               
specific changes  in the 2018  farm bill  that are not  in Senate                                                               
Bill 6 that differ  greatly from the 2014 farm bill.   There is a                                                               
transition  "away  from  pilot  programs to  make  this  a  valid                                                               
commercial agricultural industry."                                                                                              
                                                                                                                                
CO-CHAIR DRUMMOND  said it  sounds like the  test phase  is being                                                               
skipped to go straight into production.                                                                                         
                                                                                                                                
MR. CARTER told Co-Chair Drummond she  is correct.  He said there                                                               
were four years of production  done in other states; Kentucky was                                                               
the leader.  He indicated  that [Kentucky] has about 25,000 acres                                                               
registered for  production.   He stated,  "So, they  believe that                                                               
through their  program, through other  state programs,  they have                                                               
identified the viability of growing  Cannabis cultivars that meet                                                               
that  federal  definition of  hemp,  and  that  it is  a  revenue                                                               
generator to agricultural producers around the country."                                                                        
                                                                                                                                
CO-CHAIR  DRUMMOND  asked  if  the division  is  allowed  to  buy                                                               
samples of those  cultivars for the Alaska  project directly from                                                               
Kentucky.                                                                                                                       
                                                                                                                                
MR.  CARTER answered  yes, but  emphasized  that this  is a  gray                                                               
area,  even on  the federal  level, regarding  whether interstate                                                               
commerce is "a  viable feed."  He said the  division has procured                                                               
some  of  its  feed  through  other  recognized  industrial  hemp                                                               
programs in  Oregon, Colorado,  and Kentucky,  as well  as having                                                               
feed shipped,  donated, to  the division  "for trials  with folks                                                               
interested in Alaska."                                                                                                          
                                                                                                                                
CO-CHAIR  DRUMMOND  asked  how the  legislature  could  help  the                                                               
division by providing receipt authority.                                                                                        
                                                                                                                                
8:47:05 AM                                                                                                                    
                                                                                                                                
MR. SCHADE deferred to Joan Wilson.                                                                                             
                                                                                                                                
8:47:15 AM                                                                                                                    
                                                                                                                                
JOAN  WILSON,   Assistant  Attorney  General,   Commercial,  Fair                                                               
Business  Section  and  Child  Support  Section,  Civil  Division                                                               
(Anchorage),  Department  of Law  (DOL),  stated  that she  would                                                               
leave the  issue of receipt  authority to "the agency"  but would                                                               
discuss changes to Senate Bill 6  that could be made under HB 81.                                                               
One  change would  be to  the  definition of  industrial hemp  to                                                               
conform  with the  federal definition.   She  explained that  the                                                               
federal   definition  specifies   the   inclusion  of   extracts,                                                               
particularly CBD  oil, within the definition  of industrial hemp,                                                               
and  while DOL  interprets  Alaska's  definition, which  includes                                                               
"all  parts  and  varieties  of   Cannabis  sativa",  to  include                                                               
extracts, that  language could  be made  clearer "to  reflect the                                                               
federal definition."                                                                                                            
                                                                                                                                
MS. WILSON  said Section 297(b)  of the  Agricultural Improvement                                                               
Act [of  2018] states there  will be eight requirements  of state                                                               
plans,  and one  is  that  a state  plan  must maintain  relevant                                                               
information regarding  the land upon  which hemp is  produced for                                                               
at least  three years.  There  also must be state  procedures for                                                               
testing,   disposal  of   plant,   compliance  with   enforcement                                                               
provisions,  annual inspection  of random  samples of  producers,                                                               
submittal  of  information  to  USDA,  and  -  more  important  -                                                               
certification that the  state has the resources to  carry out all                                                               
of the above.                                                                                                                   
                                                                                                                                
MS. WILSON noted  that the federal law provides  that "any person                                                               
convicted  of a  felony related  to controlled  substances on  or                                                               
before the effective date of  the subtitle shall be ineligible to                                                               
participate in a  state or federal plan for 10  years."  She said                                                               
Alaska does not currently have  such a provision from Senate Bill                                                               
6.    The legislature  would  need  to  add  "a federal  bar  for                                                               
participation"  under Title  XII.   She noted  that under  Senate                                                               
Bill  6,   the  definition   of  production   includes  "growing,                                                               
harvesting,  possessing,  transporting, processing,  selling,  or                                                               
buying industrial hemp."  She said  she does not think the intent                                                               
was  to make  any  person who  purchases CBD  oil  a producer  of                                                               
industrial hemp.   Ms. Wilson  next pointed out  an inconsistency                                                               
regarding "what  penalties are a  violation."  She said  under AS                                                               
03.05.076(h), the  only punishable  fine is $500;  however, under                                                               
AS 03.05.090, people can be charged with class A misdemeanors.                                                                  
                                                                                                                                
8:50:52 AM                                                                                                                    
                                                                                                                                
MS. WILSON stated that beyond  receipt authority, the legislature                                                               
could take  steps to "move  our state toward compliance  with the                                                               
federal requirements."  She highlighted  that the 2018 Act states                                                               
that the 2014  Act will be repealed one year  after the secretary                                                               
of agriculture establishes a federal  plan; therefore, "the pilot                                                               
programs will remain  in place to one year after  we have federal                                                               
regulations."  She  offered her understanding that  the intent of                                                               
that is  "to allow for  a seamless transition from  pilot program                                                               
to state and federal plan."                                                                                                     
                                                                                                                                
8:51:38 AM                                                                                                                    
                                                                                                                                
MR.  SCHADE stated  that if  receipt authority  is not  addressed                                                               
under HB  81, the plan  is to make  a request of  the Legislative                                                               
Budget and Audit Committee during Interim.                                                                                      
                                                                                                                                
8:52:14 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND pointed  out  that  the statutory  definitions                                                               
mentioned  by   Ms.  Wilson  would   need  to  be   made  through                                                               
legislation during session.                                                                                                     
                                                                                                                                
MR. SCHADE confirmed that is correct;  however, he said he is not                                                               
concerned  with  them  being  done   this  session,  because  the                                                               
division has one year beyond  the final regulations from the FDA.                                                               
He  emphasized the  intent to  make all  the right  changes.   He                                                               
concluded,  "We're in  good position  right now  to move  forward                                                               
with the law we have on the books."                                                                                             
                                                                                                                                
8:53:30 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HANNAN  indicated  to  Ms.  Wilson  that  the  goal  in                                                               
compliance with  the 2018 farm bill  would be to ensure  that any                                                               
industrial hemp  industry developed  in Alaska  would be  able to                                                               
use federally regulated banking and export to other states.                                                                     
                                                                                                                                
MS. WILSON replied  that that is part of [the  intent].  She said                                                               
the  other  part  is  ensuring state  plans  for  regulation  are                                                               
compliant with the federal standard.   That will, in turn, permit                                                               
the large, interstate market to which Co-Chair Hannan referred.                                                                 
                                                                                                                                
CO-CHAIR HANNAN observed that even  if Alaska law does not comply                                                               
with  federal law,  the state  would  still be  able "to  operate                                                               
industrial   hemp  within   Alaska   for  Alaskan   consumption."                                                               
Complying  with the  changes  would allow  Alaska  to export  its                                                               
product.                                                                                                                        
                                                                                                                                
MS.  WILSON   acknowledged  Co-Chair  Hannan's  comments.     She                                                               
explained that a  federal Act - the 2014 farm  bill - gave Alaska                                                               
permission  to operate  a state  industrial  hemp pilot  program.                                                               
That authority under  the 2014 Act goes away under  the 2018 farm                                                               
bill.   She said  she does  not believe Alaska  can have  a state                                                               
plan  absent a  federal  plan.   She  reiterated  that the  major                                                               
change that would  be made under the 2018 farm  bill, would be to                                                               
remove  industrial hemp  from schedule  I controlled  substances.                                                               
She  indicated there  is benefit  in aligning  state and  federal                                                               
regulation, because under federal regulation,  hemp is not in the                                                               
same class as Cannabis sativa.                                                                                                  
                                                                                                                                
CO-CHAIR  HANNAN  said  she is  perplexed  that  the  legislature                                                               
passed a state law that does  not give the authority "to operate"                                                               
unless the state complies with the federal law.                                                                                 
                                                                                                                                
MS.  WILSON responded  that every  state's industrial  hemp pilot                                                               
program can exist only because of  the 2014 farm bill, so federal                                                               
law  is giving  the states  authority to  regulate the  industry,                                                               
even in the pilot status.                                                                                                       
                                                                                                                                
8:58:39 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND   observed  that  slide  5   states  there  is                                                               
currently no effective date in  removing industrial hemp and hemp                                                               
parts from the  federal schedule I [controlled  substances].  She                                                               
asked  for  confirmation  that  Ms.  Wilson  had  said  "that  is                                                               
effective now."                                                                                                                 
                                                                                                                                
MS. WILSON  suggested that that  would have been a  good question                                                               
to  have asked  the Division  of Agriculture  when the  2018 farm                                                               
bill  came out,  except that  the government  was in  shutdown at                                                               
that point.   She offered her understanding  that industrial hemp                                                               
is no longer  regulated as a schedule I  controlled substance, so                                                               
long as it is industrial hemp from a regulated pilot program.                                                                   
                                                                                                                                
CO-CHAIR DRUMMOND  concluded, "So,  the ...  test project  at the                                                               
plant  materials center  is not  in trouble  with the  schedule I                                                               
drug  listing,  because  it  ...  has  been  withdrawn  from  the                                                               
listing."                                                                                                                       
                                                                                                                                
MS. WILSON replied, "That is my  belief."  She suggested that Mr.                                                               
Carter may have another take on that.                                                                                           
                                                                                                                                
MR. CARTER added he has heard  "a multitude of other things" from                                                               
other states related to the lack  of an effective date.  He said,                                                               
"We do believe that each  individual state programming, including                                                               
ours, are free  from any federal prosecution;  we're not breaking                                                               
the law  for what  we are  doing."   That would  not apply  to an                                                               
individual  producing  without  being  registered  in  the  pilot                                                               
program.   He  indicated  that the  attorneys  from many  states,                                                               
including  Alaska,  are  "trying  to  rectify  with  the  federal                                                               
government to  better understand  the legal  avenues for  ... our                                                               
state and our producers and our ... retail outlets."                                                                            
                                                                                                                                
9:01:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  THOMPSON remarked  that it  sounds like  he could                                                               
grow marijuana in his backyard, but not hemp.                                                                                   
                                                                                                                                
MS. WILSON responded, "Yes."                                                                                                    
                                                                                                                                
9:01:56 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND   said  she  thinks  the   limit  for  growing                                                               
recreational marijuana is  up to 12 plants per  household, but no                                                               
hemp.   She said this is  a conundrum, but Mr.  Carter is working                                                               
through these  issues and  testing the  hemp cultivars  that will                                                               
work in Alaska.                                                                                                                 
                                                                                                                                
9:02:12 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND  announced  that   the  committee  would  hear                                                               
invited testimony.                                                                                                              
                                                                                                                                
9:02:41 AM                                                                                                                    
                                                                                                                                
AARON RALPH,  Owner/Manufacturer, Alaska Cannabis  Exchange (ACE)                                                               
CBD  Products, stated  that the  intent of  Congress is  to label                                                               
naturally  occurring  CBD  from  the  hemp  plant  as  a  dietary                                                               
supplement and  food product;  however, the FDA  does not  have a                                                               
regulatory  process "to  have a  feasibly  new drug  go into  the                                                               
mainstream market and  ... constituents of it  be herbal products                                                               
and food items."   He said the  FDA will have to  "make a special                                                               
category  for this  to occur."    He noted  that Scott  Gottlieb,                                                               
before leaving the FDA, set up CBD  as a priority, and the FDA is                                                               
taking public testimony on May 30,  2019, to start the process of                                                               
regulating hemp like any other herbal  food or product.  He noted                                                               
that Mr.  Gottlieb has stated that  "it would be quicker  to have                                                               
legislative directive via  a bill."  Mr. Ralph  said the industry                                                               
is working  on creating a "coal-type  memo" with the FDA.   There                                                               
is an  understanding that these  products will be  regulated like                                                               
any other  dietary herbal product.   He said the  American Herbal                                                               
Product  Association, Vote  Hemp,  and several  other groups  are                                                               
working towards a bill or memo  with the FDA.  He noted concerns,                                                               
including  that the  product is  not  adulterate and  that it  be                                                               
labeled   in  accordance   with  food   and  dietary   supplement                                                               
requirements.    In  response   to  Co-Chair  Drummond,  he  said                                                               
Congress  is telling  [the FDA]  to figure  out a  framework that                                                               
"allows for this wording to be  added."  He said never before has                                                               
a pharmaceutical product  gone into trials at the  same time that                                                               
products are being marketed mainstream.                                                                                         
                                                                                                                                
9:06:35 AM                                                                                                                    
                                                                                                                                
SHAWN  MCDONOUGH said  he  owns a  couple  small businesses  that                                                               
distribute CBD  products in Alaska.   He offered his  belief that                                                               
those  products are  "a  great  benefit to  the  community."   He                                                               
opined that  hemp provides an  opportunity for farmers  in Alaska                                                               
to  have  another  crop  to  grow.   He  said  he  has  purchased                                                               
properties  in the  Homer and  Anchor Point  areas of  the state,                                                               
with  the intent  to  grow  hemp under  the  pilot  program.   He                                                               
observed  the  industry seemed  to  be  moving forward  but  then                                                               
slowed  down.    He  said  his background  is  in  the  aerospace                                                               
manufacturing industry, where  he has seen products  made by hemp                                                               
that  can replace  petroleum-based plastics.   He  said he  would                                                               
love farmers  in Alaska to  be given the same  opportunity others                                                               
in the rest of the world have been given.                                                                                       
                                                                                                                                
9:08:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN asked Mr. McDonough  for examples of the products                                                               
that can be made with industrial hemp.                                                                                          
                                                                                                                                
MR.  MCDONOUGH  listed  dashboards   of  vehicles  and  mentioned                                                               
airplane parts,  and he reiterated  that many  products currently                                                               
made with plastic could be made with hemp.                                                                                      
                                                                                                                                
CO-CHAIR  HANNAN noted  most available  research focuses  on hemp                                                               
used for fibers  and CBD oils, but Mr. McDonough  has mentioned a                                                               
new area of  hemp use she had not previously  thought much about.                                                               
She  asked if  his  interest  in growing  hemp  was in  producing                                                               
products to replace plastics.                                                                                                   
                                                                                                                                
MR.  MCDONOUGH responded  that that  is  just one  avenue he  has                                                               
considered.   He said  the first  avenue is  CBD extraction.   He                                                               
related that he  also has a company, called  "Alaska Grown Hemp,"                                                               
which  is a  clothing line  based on  hemp products  he currently                                                               
must source from outside Alaska.                                                                                                
                                                                                                                                
CO-CHAIR  HANNAN asked  about the  source  of hemp-based  plastic                                                               
alternatives.                                                                                                                   
                                                                                                                                
MR. MCDONOUGH indicated  that the biofuel from the  hemp plant is                                                               
used.  He deferred to Mr. Carter.                                                                                               
                                                                                                                                
MR. CARTER replied that a multitude  of products can be made from                                                               
hemp.   At this point,  he noted, plastics used  in manufacturing                                                               
are being reinforced with hemp fibers.   He said 100 percent hemp                                                               
plastic is  deemed a  bioplastic, which is  a combination  of oil                                                               
expelled from  the seed  as well  as the  internal fibers  of the                                                               
plant.  In  response to Co-Chair Drummond, he  confirmed that all                                                               
those  products must  have less  than 0.3  percent of  THC to  be                                                               
approved for  production.  He  noted that the hemp  seed contains                                                               
almost zero  THC.  He  said that  is why a  person can shop  at a                                                               
grocery store for hemp seed oil for culinary use.                                                                               
                                                                                                                                
9:13:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN  asked Mr.  Carter if it  would be  possible that                                                               
Alaska could find  itself with a hemp industry  that is primarily                                                               
seed production,  because enough oil  could be produced  from the                                                               
seeds to produce bioplastics.                                                                                                   
                                                                                                                                
MR. CARTER  answered that he does  not think it would  be a "one-                                                               
item  industry."     He   listed  parts   used:     roots,  seed,                                                               
cannabinoids,  and terpenes.   He  said CBD  is just  one of  the                                                               
extractions  that people  are using  for wellness  benefits.   He                                                               
noted that terpenes  are used in flavor additives.   He said many                                                               
products are  made from the hurd,  which is the interior  part of                                                               
the hemp stalk.   He related there is  consideration of producing                                                               
hemp in  large scale  for biomass,  for biofuel,  as well  as for                                                               
reclamation services to spray on  unstable slopes.  He noted that                                                               
hemp  plants  are   being  used  to  remove   heavy  metals  from                                                               
contaminated sites.  For these reasons  he said he does not think                                                               
it could  be said that  industrial hemp  in Alaska will  focus on                                                               
primarily one part of the plant  over another but instead will be                                                               
"a  very  well-rounded  industry."    He  added,  "We  have  such                                                               
geographical  spread,  I believe  that  we're  going to  get  ...                                                               
vastly  different production,  methodologies, and  final products                                                               
from industrial hemp being grown around the state."                                                                             
                                                                                                                                
CO-CHAIR HANNAN explained  that she had just  been reasoning that                                                               
seeds could, in and of themselves, be turned into products.                                                                     
                                                                                                                                
MR. CARTER  answered that is  correct:  a product  and byproduct.                                                               
He gave further examples.                                                                                                       
                                                                                                                                
9:17:24 AM                                                                                                                    
                                                                                                                                
KERBY  COMAN, Co-owner,  Hempire Co.;  Owner, Green  Degree, said                                                               
Hempire  Co.   is  a  statewide  manufacturer   and  producer  of                                                               
industrial  hemp products  and [Green  Degree] is  a retailer  of                                                               
recreational  marijuana.    He  expressed  appreciation  for  the                                                               
efforts  of the  legislature  to make  industrial  hemp a  viable                                                               
industry in Alaska.   He shared his experience  in the industrial                                                               
hemp industry.   He mentioned AMCO [Manufacturing,  Inc.] and law                                                               
enforcement, and  emphasized the  importance of cooperation.   He                                                               
said industrial hemp produced in Alaska  would be a boost for the                                                               
economic  growth of  the  state; it  has proven  itself  to be  a                                                               
viable crop  in states  that are being  proactive in  their pilot                                                               
programs.   Mr. Coman opined that  now is the time  for Alaska to                                                               
"follow suit."   He said it has been over  two years since Senate                                                               
Bill 6 was  introduced and over a  year since it was  passed.  He                                                               
advised that legislation  had "some great language"  and "most of                                                               
the foundational  work needed" for the  promotion and development                                                               
of the industrial hemp industry.                                                                                                
                                                                                                                                
MR.  COMAN referred  to Section  10.114  of the  2018 farm  bill,                                                               
regarding  interstate commerce.    He  offered his  understanding                                                               
that  interstate commerce  is legal  irrespective of  whether the                                                               
FDA or USDA have come up with  regulations.  He said he has heard                                                               
that  manufacturing  or transportation  or  anything  to do  with                                                               
industrial hemp  products within  Alaska is illegal;  however, he                                                               
said  "it  says  here"  that  "no state  or  Indian  tribe  shall                                                               
prohibit the transportation or shipment  of hemp or hemp products                                                               
produced in  accordance with  ... the  Martin Act  of 1946."   He                                                               
said "we" see  hemp as "a limitless product."   He predicted that                                                               
hemp would replace  "over 80 percent of  the pharmaceuticals that                                                               
are on the market today killing  people."  He emphasized the need                                                               
to work  together to figure out  the steps that need  to be taken                                                               
moving  forward.   He opined  that if  "we" have  the ability  to                                                               
operate under "the 2014 pilot  program," then the state should be                                                               
proactive in laying the foundation  to grow the hemp industry and                                                               
align the  state's standards with  federal regulation  once those                                                               
regulations  are made.   He  advised against  "playing a  waiting                                                               
game"  when other  states "are  being proactive  and having  huge                                                               
success with  this product."   He  opined that  it does  not make                                                               
sense to wait when Alaska could  be operating under the 2014 farm                                                               
bill and Senate Bill 6.                                                                                                         
                                                                                                                                
9:22:31 AM                                                                                                                    
                                                                                                                                
MR.  COMAN stated,  "It's kind  of misconceived  that there's  no                                                               
effective date  on the 2018 farm  bill."  He said  the website of                                                               
Congress  states that  it  was  put into  law.   Regarding  prior                                                               
testimony  related to  the difference  between a  hemp plant  and                                                               
marijuana  plant,  he  proffered  that they  are  both  from  the                                                               
Cannabis family;  the only difference  is how much THC  there is.                                                               
He stated that ignorance and  misunderstanding have attributed to                                                               
"where we  are at."   He  offered to do  anything to  help "bring                                                               
this  to  fruition"  and  "make  this a  viable  source  here  in                                                               
Alaska."  He recapped his key points.                                                                                           
                                                                                                                                
9:24:40 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND   thanked  the  presenters.     She  said  the                                                               
committee  would  see what  could  be  done  to get  the  receipt                                                               
authority underway.                                                                                                             
                                                                                                                                
9:25:17 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:25 a.m.                                                                                                          

Document Name Date/Time Subjects
Supporting Document - Hemp Industry Daily Farm Bill Report 2019.pdf HCRA 4/18/2019 8:00:00 AM
Industrial Hemp
Supporting Document - Enrolled SB 6.PDF HCRA 4/18/2019 8:00:00 AM
Supporting Document - SB 6 Fiscal Note DNR.PDF HCRA 4/18/2019 8:00:00 AM
Supporting Document - SB 6 Fiscal Note DCCED.PDF HCRA 4/18/2019 8:00:00 AM
Supporting Document - SB 6 Fiscal Note DPS Crime Lab.PDF HCRA 4/18/2019 8:00:00 AM
Supporting Document - SB 6 Fiscal Note DPS.PDF HCRA 4/18/2019 8:00:00 AM
Supporting Document - AlaskaIndustrialHempFAQs-DNR.pdf HCRA 4/18/2019 8:00:00 AM
Industrial Hemp
Industrial Hemp Presentation - DNR .pdf HCRA 4/18/2019 8:00:00 AM
Industrial Hemp