Legislature(2021 - 2022)ADAMS 519
04/30/2021 09:00 AM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB156 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 156 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 30, 2021
9:04 a.m.
9:04:40 AM
CALL TO ORDER
Co-Chair Merrick called the House Finance Committee meeting
to order at 9:04 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
Representative DeLena Johnson
ALSO PRESENT
Representative Grier Hopkins, Sponsor; Joe Hardenbrook,
Staff, Representative Hopkins.
PRESENT VIA TELECONFERENCE
David Schade, Director, Division of Agriculture, Department
of Natural Resources; Rob Carter, Agronomist, Division of
Agriculture, Department of Natural Resources.
SUMMARY
HB 156 INDUSTRIAL HEMP PROGRAM; MANUFACTURING
HB 156 was HEARD and HELD in committee for
further consideration.
Co-Chair Merrick reviewed the agenda for the morning.
HOUSE BILL NO. 156
"An Act relating to industrial hemp; and providing for
an effective date."
9:05:18 AM
REPRESENTATIVE GRIER HOPKINS, SPONSOR, read a prepared
statement:
"Co-Chairs Merrick and Foster, members of the
committee, thank you for the opportunity to present HB
156 to the Finance Committee today. For the record,
Representative Grier Hopkins, House District 4.
I'm proud to be working with my colleague from the
other body to advance this important and pressing
legislation. As my staff will elaborate later, there
are federal timelines which require action by the
Alaska legislature THIS YEAR in order to keep our
fledgling industrial hemp industry alive and in
compliance with federal law.
Today, Alaska farmers are growing industrial hemp for
animal feed, nutraceuticals, manufacturing, and other
uses. I would note for the committee that Industrial
Hemp as governed by federal law is a different
industry than Alaska's state-licensed recreational
marijuana program.
In 2018, the 30th Alaska Legislature saw the unanimous
passage of Senate Bill 6, which established a pilot
Industrial Hemp Program in Alaska. With the passage of
the 2018 Farm Bill, the United States Congress changed
federal requirements for state industrial hemp
programs.
HB 156 will empower the Alaska Division of Agriculture
to work constructively with Alaskan farmers and the
federal government to create a new Industrial Hemp
program compliant with federal guidelines. I'm happy
to report that the Division of Agriculture is
assembling a qualified and enthusiastic team of
specialists to cultivate this growing industry.
This bill continues the model of requiring the hemp
industry to pay its own way fees and taxes on
growers, processors and retailers must be sufficient
to cover the program's costs. Co-Chair Merrick,
members of the committee, the administration feels
that this industry when fully operational will
cover its own costs AND result in an increase in UGF
to the tune of over three quarters of a million
dollars annually.
It is my hope that this bill will result in the
continued development of a new, thriving industry for
Alaska farmers and manufacturers, diversity in our
economy and increased state revenues.
Co-Chair Merrick, with the committee's permission, I'd
ask Joe Hardenbrook from my staff to walk the
committee through the bill."
Co-Chair Merrick invited Mr. Hardenbrook to proceed.
9:07:46 AM
JOE HARDENBROOK, STAFF, REPRESENTATIVE HOPKINS, read a
prepared statement:
"Co-Chairs Merrick and Foster, Members of the
Committee, for the record, Joe Hardenbrook staff to
Representative Hopkins.
Thank you for the opportunity to present HB 156 to the
Finance Committee today. With us online today for
questions are Dave Schade and Robert Carter from the
Division of Agriculture.
Industrial Hemp is a variety of the cannabis sativa
plant grown specifically for industrial use. While
both marijuana and industrial hemp are derived from
the same species, they are distinct strains with
different and unique chemical compositions and uses.
Hemp has been grown as a crop for millennia and was
one of the first agricultural crops to be spun into
fiber for making rope and textiles. Along with bamboo,
hemp is one of the fastest growing plants on earth,
making it of particular interest to northern farmers
dealing with long growing days and short growing
seasons.
Hemp can be processed into a variety of commercial
items, including paper, rope, biomass, nutritional
supplements, clothing, plastics, paint, insulation,
concrete, biofuel, animal feed and medications
including Epidiolex, the first FDA approved
prescription drug derived from hemp, which is for the
treatment of seizures and epilepsy. Increasingly, hemp
is made into food for human consumption, including
dairy substitutes, oils, granolas, and snack bars.
Hemp seeds are high in iron and protein and can be
ground into meal or pressed for oil.
The US Agricultural Act of 2014 allowed states to
create Hemp Farming Pilot Programs overseen by state
agencies and institutions of higher learning. To date,
47 states have enacted legislation allowing hemp
cultivation.
In 2018, Senate Bill 6 passed the legislature
unanimously, establishing an Industrial Hemp pilot
program for Alaska. Later than year, the US Congress
passed the 2018 Farm Bill, which removed hemp from the
Schedule 1 list of drugs and made it an agricultural
commodity, enabling hemp farmers to get licenses,
loans, and federal crop insurance.
The terms of the 2018 Farm Bill required state
programs to comply with the new federal guidelines by
the end of October 2020. This deadline was pushed back
to October 2021 due to the pandemic. Co-Chair Merrick,
I would point out that this is why this legislation
has a sense of urgency without passage and approval
of a federally-compliant hemp program this session,
Alaskan farmers who have invested their time,
resources and available land in this new industry face
an unknown and challenging economic future.
This bill would empower the Commissioner of the
Department of Natural Resources to create an
Industrial Hemp program in line with federal
requirements. The commissioner would include
manufacturing and sales of products made from hemp
along with necessary registration and renewal
procedures in the regulations of the program. To
comply with federal requirements, the bill prohibits
those convicted of a felony involving controlled
substances within the last ten years from applying for
a hemp growing license.
Co-Chair Merrick to qualify as industrial hemp, the
THC (or delta-9 tetrahydrocannabinol) level of the
crop must be below .3% of the dried weight of the
plant. Hemp has higher concentrations of cannabidiol
(CBD), which decreases or eliminates its psychoactive
effects.
As we're talking about a plant here, natural
variations in seed stock and growing conditions can
result in a crop with a concentration above legal
limits. Under current law, the commissioner MUST issue
a stop order and report a grower to the Department of
Public Safety and the Marijuana Control board if a
crop tests above the .3% limit.
This legislation would allow the commissioner to work
with a grower to recondition a crop that comes in
above the legal limit for THC, provided the crop is
between the .3% limit and a total 1% THC
concentration. Tested crops which exceed the 1% limit
must still be destroyed. A grower who refuses to
comply with regulations could still be sanctioned by
the commissioner.
There is a bit of a complicated legislative two-step
at the end of this bill. Basically, the final sections
of the bill would strike the existing Industrial Hemp
Pilot Program from state statute upon the approval of
Alaska's new Industrial Hemp Program by the United
States Department of Agriculture.
The bill carries a fiscal note of roughly three
quarters of a million dollars annually. AS 03.05.010
requires that the industrial hemp program be self-
sustaining through fees and revenue from the industry,
so all costs will be covered by program receipts
generated by program participants. Should the program
flourish and grow, all additional costs associated
with the program will continue to be raised through
fees and licenses. As the administration states in
their fiscal note: "The IH Program has the potential
to have participants in nearly every town and village
across Alaska which will be a
significant workload for the division. It is projected
that 2,000 to 3,000 applications to be processed and
monitored on a yearly basis." Director Schade can
speak more to the Fiscal Note if the committee so
desires.
Madame Co-Chair and members of the committee, I would
just echo the words of the bill sponsor there is a
federal deadline in the 2018 Farm Bill which makes the
passage of this legislation during this session
critical. Alaska farmers and their families have
invested their time and resources into this new
industry. HB 156 will bring our laws into alignment
with federal requirements, protect the investments of
our Alaska's hemp farmers and open our economy to new
opportunities."
9:13:39 AM
Mr. Hardenbrook reviewed the sectional analysis:
Section 1: Two subsections added to this section
authorizing the commissioner of the Department of
Natural Resources to include the manufacturing and
retail sales of products made from industrial hemp, as
well as registration and renewal procedures, in the
regulations for the industrial hemp program.
Section 2: Lays out process for DNR Commissioner to
sanction unregistered growers or growers producing
hemp with THC concentrations in violation of legal
limits. Gives the DNR Commissioner the ability to work
constructively with a grower if their crop tests above
.3 percent but below 1.0 percent THC.
Section 3: Adds language that a registrant for the
industrial hemp program is not eligible if they had
been convicted of a felony involving a controlled
substance within the last ten years. This section is
added to comply with provisions of the 2018 Farm Bill.
Section 4: Empowers department to: issue orders and
violations to unregistered growers; adopt regulations
regarding shipping of industrial hemp; conduct random
tests and inspections.
Section 5: Adds that the department may develop an
industrial hemp program that complies with federal
requirements and submit a plan for the program to USDA
for approval.
Section 6: A grower may retain and recondition their
crop if it tests above .3percent but below 1.0percent
THC.
Section 7: A new subsection adds that a person who
retains but fails to recondition is guilty of a
violation.
Section 8: Changes the statutory definition of
industrial hemp to match the federal definition which
was changed in the 2018 Farm Bill.
Section 9: Repeals AS 03.05.077 the Industrial Hemp
Pilot Program
Sections 10 and 11: Conditional effect for Section 9
of the bill, in that the Pilot Program statute is
repealed when the Industrial Hemp Program developed by
the department is approved by the USDA. Effective date
of legislation is the day after DNR Commissioner
notifies the Revisor of Statutes of program approval
by USDA.
9:16:22 AM
Representative Edgmon supported the legislation. He asked
about the fiscal note cost.
Co-Chair Merrick commented that there would be testimony
regarding the details of the fiscal note later in the
meeting.
Representative Carpenter asked how many farmers
participated in the hemp pilot program. Mr. Hardenbrook
estimated the number was in the range of 80 to 90. He
deferred to the Department of Natural Resources (DNR) for a
definitive answer.
9:17:24 AM
DAVID SCHADE, DIRECTOR, DIVISION OF AGRICULTURE, DEPARTMENT
OF NATURAL RESOURCES (via teleconference), answered that
the growth of the program was significant. The number of
applicants rose from 6 to more than 100 retail registrants
and 2 manufacturing registrants. He reported that 10
growers, 2 more manufacturers, and 100 retails stores were
presently in application status. He furthered that retail
stores selling hemp products were located throughout the
state and growers were located on the Kenai Peninsula,
South Central Alaska to Delta Junction, and mainly in the
Matanuska-Susitna (Mat-Su) Valley.
9:18:47 AM
Representative Carpenter asked what retail products were
currently being produced. Mr. Schade replied that there
were several products on the market made of hemp and
cannabidiol (CBD) including tinctures, oils, and clothing.
He relayed that interested people were experimenting with
biomass and one grower was growing hemp for seed.
9:19:46 AM
Representative Carpenter asked how a farmer would know
their plants would not exceed the one percent limit of THC.
Mr. Schade answered that there were indoor plants and
outdoor plants, and various varieties were sold for
specific qualities like seed or CBD. The division warned
people to be cautious when purchasing the legal varieties
for Alaska because they were untested. He reported that all
the varieties grown at DNRs plant material center and by
the pilot farmers produced hemp within the legal limit. He
cautioned farmers not to grow large quantities of untested
seed in case the crop exceeded the THC limit and had to be
destroyed.
9:21:19 AM
Representative Carpenter asked how long it took to grow a
plant to maturity. He deferred the answer.
9:21:31 AM
ROB CARTER, AGRONOMIST, DIVISION OF AGRICULTURE, DEPARTMENT
OF NATURAL RESOURCES (via teleconference), replied that it
took between 85 to 110 days from seed to harvest for an
outdoor crop. He added that under a controlled environment
like a greenhouse, high tunnel, or Conex it took 72 to 100
days.
9:22:13 AM
Representative Wool assumed that many of the hemp products
contained CBD and most of the manufacturing was for CBD
oil. He asked if the state revenues were from licensures
and if CBD oil sales was taxed. Representative Hopkins
deferred to Mr. Schade.
Mr. Schade replied that there were no additional taxes. He
delineated that hemp was an agricultural crop and licensure
was a fee based program. He maintained that the fees were
low but would cover the cost of the program. A challenge
for the department was the program had no carry-forward and
fees were based on a calendar year and not a fiscal year.
He pointed out that even though the fiscal note showed
program receipts, Undesignated General Funds (UGF) were
necessary because fees were lost mid-year. He wanted to see
the fee structure match the fiscal year.
9:23:57 AM
Representative Wool asked if licensure was required for
growers, manufacturers, and retailers. Mr. Schade responded
that the division designed a three phase registration. He
explained that there were growing, manufacturing, and
retail registrations. Therefore, the division could track
the product from growth to retail sales. A licensee could
be integrated and maintain all three registrations. He
furthered that a lot of products were brought in from out
of state and an endorsement was necessary. The endorsement
required a fee and had to show the product was free of
pesticides and other toxins that was dangerous to human
health. He detailed that the largest problem with
cannabidiol had been the dangerous synthetics on the market
that was due to a lack of testing and oversight. Alaska was
in the forefront of public safety regarding the use of
cannabidiol. The fees to grow a crop cost $350 per year,
which he considered reasonable. Alaska was in the lead for
hemp crop growth. Representative Wool asked whether selling
anything made with CBD oil required a license that was
registered with the state. Mr. Schade responded in the
affirmative. He offered that without adequate funding and a
permanent program, it had been challenging to enforce
retail sales. He noted that 200 retail stores were
registered but guessed that two thousand sold industrial
hemp products. He informed the committee that it was a
requirement to be properly registered and he was currently
sending out inspectors to retail establishments. The
division was publicly noticing that a civil penalty of
$500.00 was levied against retailers not properly
registered. He elaborated that an industrial hemp sticker
should be located near the products and if lacking, the
retailer was likely not following the regulations.
Participants in the industry had asked the department to
enforce the registration requirements. Representative Wool
deduced that there were many retailers without a license.
He asked what duties the inspectors performed. He wondered
if the inspectors went to retail stores. Mr. Schade
responded that the inspectors performed all parts of the
inspection from growers to retailers. He expounded that the
division did the THC content testing themselves. The
agriculture inspectors did in-person inspections and would
be traveling around the state. He deemed that the biggest
workload for inspectors would be in retail.
9:28:37 AM
Representative Carpenter spoke of the growth in the
industry and marketing. He wondered if Alaska's products
would be confined to the state or whether sales would
expand to the national and international markets. Mr.
Schade replied that the market was domestic and
international. He shared that the manufacturers were
anticipating selling CBD products internationally because
the reputation of Alaska Grown was very good for sales.
Alaskas program ensured the product was legal for national
and international markets. Representative Carpenter was
aware of the hard work of farmers. He wondered if an
agricultural economist had looked at any analysis regarding
the market. He noted the huge growth in the state. Mr.
Schade had not seen an exponential growth in growing or
retail of industrial hemp in the state. He observed that
Alaskan manufacturers were unable to obtain enough Alaska
grown product to satisfy demand. He shared that he was an
agricultural economist and did review the data. He reported
that the United States Department of Agriculture (USDA)
data indicated that the growth of the market was huge. He
believed that Alaska was a niche market and there was room
for a lot of growth.
9:31:41 AM
Representative Carpenter asked if testing was done in-state
or out of state at a laboratory. Mr. Schade replied that
some of the testing had to be done in the Lower 48 for
solvents and pesticides. He communicated that THC content
testing could be performed in-state. He furthered that one
of the provisions in the federal farm bill was the lab must
be Drug Enforcement Administration (DEA) certified. The
provision went into effect in two years and currently there
were no DEA certified labs in the state. In addition, the
division used multiple laboratories to eliminate testing
bias. He emphasized that it was critical to perform
proper testing.
9:32:53 AM
Representative LeBon ascertained that there was a large gap
between retail outlets that were licensed and those that
were not. He wondered if there was a public list of
licensed retail outlets. He pondered whether the public was
encouraged to report suspected unlicensed retailers.
Mr. Hardenbrook stated that there was a list of entities
that had applied for licensure. He indicated the list could
be found on the DNR website under the Division of
Agriculture on the Industrial Hemp Program page. He
deferred to Mr. Schade for further answer.
Mr. Schade responded that the division received reports
daily. He encouraged the public to look at the division's
website database and to look for the sticker. He reported
that he had done public service announcements and had been
on news programs. The division had been proactive over the
past year in alerting the public about compliance. He felt
that it was time for citations if someone was found out of
compliance with the regulations.
Co-Chair Merrick indicated the committee would take up the
bill again and would review the fiscal note in greater
detail.
HB 156 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
9:35:48 AM
The meeting was adjourned at 9:36 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 156 - Sectional Analysis version B 4.14.2021.pdf |
HFIN 4/30/2021 9:00:00 AM |
HB 156 |
| HB 156 - Sponsor Statement 4.14.2021.pdf |
HFIN 4/30/2021 9:00:00 AM |
HB 156 |