Legislature(2019 - 2020)BUTROVICH 205
02/10/2020 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB171 | |
| SB161 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 171 | TELECONFERENCED | |
| *+ | SB 161 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 171-INDUSTRIAL HEMP PROGRAM; MANUFACTURING
3:31:25 PM
CHAIR MICCICHE announced that the first order of business would
be SENATE BILL NO. 171, "An Act relating to industrial hemp."
3:31:49 PM
BUDDY WHITT, Staff, Senator Shelley Hughes, Alaska State
Legislature, Juneau, Alaska, explained that Representative
Shelley Hughes worked with Senator Johnny Ellis in the 29th
Alaska State Legislature to create an industrial hemp program in
the state, but the legislation did not cross the finish line. In
2016, Senator Hughes took the lead on legislation to create an
industrial hemp pilot program.. She was able to establish a
feasible way for industrial hemp through Section 7606 of the
2014 Farm Bill, which allowed states to establish an industrial
pilot hemp program. The U.S. Department of Agriculture (USDA)
gave statements of principles on industrial hemp in August 2016
that outlined a path forward for the pilot hemp program and
Senate Bill 6 was signed into law in April 2018. However, when
taking direction from the federal government, things quickly
changed.
3:33:47 PM
MR. WHITT explained that with the passage of the 2018 Farm Bill,
the new legislation removed industrial hemp from the Schedule I
Controlled Substances [U.S. Department of Drug Enforcement
Administration (DEA) classification]. The USDA released its
final rule of regulations on the 2018 Farm Bill in October 2019
which provided additional information on the needed changes to
the state's statutes to meet federal compliance.
MR. WITT said the passage of the 2018 Farm Bill requires the
state to make a few changes, which SB 171 does. The bill removes
the industrial hemp pilot program statute and adds the authority
to permit the manufacturing of hemp-related products and
registration, and the renewal process for participation in the
industrial hemp program. This authority resides within the
Alaska Department of Natural Resources (DNR).
He noted that the bill adds that a registrant could not have
been convicted of a drug-related felony within the last 10
years. Further, the department must develop a program that is
compliant with federal law and submit those regulations to the
USDA for approval in order to have an industrial hemp program.
The bill also fixes some incongruent language in the statutes.
CHAIR MICCICHE asked Mr. Whitt to proceed with the sectional
analysis for SB 171.
3:35:37 PM
MR. WHITT paraphrased the following sectional analysis for SB
171:
Section 1 AS 03.05.010(a) Page 1, Line 3 through
Page 3, Line 8
Two subsections added to this section authorizing the
commissioner of the Department of Natural Resources to
include the manufacturing of products made from
industrial hemp, as well as registration and renewal
procedures, in the regulations for the industrial hemp
program.
He explained that the two subsections were added because the
pilot program is being eliminated.
Section 2 AS 03.05.076(a) Page 2, Lines through 24
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 in order to comply with the
2018 Farm Bill.
MR. WITT noted that there is a grandfather provision, which was
not in the 2018 Farm Bill, but is in the federal regulations, 7
CFR 990.6(e)(1).
Section 3 AS 03.05.076(d) Page 2, Line 25 through
Page 4, Line 11
Adds that the department shall develop an industrial
hemp pilot program that complies with federal
requirements and submit a plan for the program to USDA
for approval.
Section 4 Page 4, Line 12
Repeals AS 03.05.077, the establishment of the
industrial hemp pilot program, and AS 03.05.079, which
was the violation section for industrial hemp
containing 0.3 and 1.0 percent THC.
3:37:33 PM
MR. WHITT explained that AS 03.05.077 established the industrial
hemp pilot program which is being replaced with a permanent
program that resides within and is regulated by the Department
of Natural Resources. The repeal of AS 03.05.079 eliminates the
incongruency between that statute and AS 03.05.076(b)(4) and
(d)(4). The department can use the latter provisions to regulate
and manage hemp growers who are acting in good faith to keep THC
levels in their product at or below the statutory limits.
MR. WHITT said Senator Hughes requests the committee consider a
friendly amendment to change the "shall" in AS 03.03.010(c) to
"may" to align with other provisions in the bill that allow a
bit of leniency for good actors. Subsection (c) currently reads:
The Commissioner of Natural Resources shall issue a
stop order to any person who is found to be producing
a plant product with THC over 0.3 percent, regardless
of whether the person is registered.
SENATOR COGHILL noted that the proposed amendment would fall
under section 1. He mentioned the stop order requirement and
asked for help understanding the difference between the stop for
the product transaction versus the producer transaction.
MR. WHITT deferred to Rob Carter with the Division of
Agriculture to explain what a stop order entails.
3:43:14 PM
SENATOR KIEHL referenced the criminal conviction barrier to
participating in the industrial hemp industry and asked who
would be subject to the background check if the applicant is a
limited liability company or corporation. He also inquired what
the public safety need is for a 10-year lookback for some people
and a 2-year lookback for others.
3:45:01 PM
JOAN WILSON, Assistant Attorney General, Civil Division,
Commercial, Fair Business & Child Support Section, Alaska
Department of Law, Anchorage, Alaska, explained that 7 U.S.C.
1639p sets out the minimum requirements that a state plan must
have to be acceptable by the federal government. In its
language, the section says the following:
In general, except as provided in clause (ii), any
person convicted of a felony relating to a controlled
substance under State or Federal law before, on, or
after December 20, 2018, shall be ineligible during
the 10-year period following the date of the
conviction.
MS. WILSON specified that in the case of cooperative
associations, each person with the ability to benefit from the
association would be subject to that bar.
SENATOR KIEHL commented that hemp is not marijuana so the fewer
barriers the better.
CHAIR MICCICHE asked if the federal code would include employees
or just members of the association who have ownership.
MS. WILSON answered that her reading is the code includes people
who benefit financially from the association in an ownership
status. She said to include an employee would be quite a
stretch.
3:47:28 PM
DAVE SCHADE, Director, Division of Agriculture, Alaska
Department of Natural Resources, Palmer, Alaska, testified that
the division and department support SB 171. He said the division
is trying to take a pilot program and make it a permanent
program.
He stated that the division analyzed the bill and recommended
changes to give the department more leeway to allow conditioning
from 1.0 percent THC to 0.3 percent thereby protecting the
farmer from changes due to genetics or the environment.
3:49:02 PM
CHAIR MICCICHE said he assumed the division will follow up with
a letter on the suggested changes.
MR. SCHADE answered yes.
SENATOR BISHOP asked for a brief explanation of hemp farming,
including the types of seeds the producers use, how the seeds
are planted, and how the hemp is harvested. He remarked that
neighboring hemp crops with higher THC levels could impact
neighboring hemp crops.
MR. SCHADE answered that there are hundreds of different
varieties of industrial hemp that have a variety of uses. The
product can be traditionally farming or grown in greenhouses.
The department has set up the program in response to industrial
hemp's many uses and has put in isolation distances and other
factors to try to manage the crop differences. For example,
growing for fiber is a variety that grows tall with a lot of
mass and growing for buds might mean growing in a greenhouse.
The department has developed a program that morphs depending on
the different varieties and uses.
3:51:38 PM
SENATOR KIEHL noted that the fiscal note showed $750,000
collected in year one. He asked how much the department is
currently collecting in fees, how likely it is that fees will
increase with passage of the bill, the number of current hemp
farmers, and the expected increase in farmers.
MR. SCHADE replied the division has not collected any fees
because it is just finalizing the regulations for the handful of
farmers in the pilot program. The division has identified
approximately 20 manufacturers along with 700 to 1,000 retailers
that are working in the industry. The industrial hemp program is
designed to have regulations for registered growers,
manufacturers, or retailers. A registrant can have multiple
registration designations. Fees for the grower are fairly low
but testing fees are expected to amount to several hundred
thousand dollars. The division expects to register 600 to 1,000
entities that will require departmental resources in the $0.5
million range for the first months. Should the program grow, the
division will have the leeway to hire more people because
funding is receipt based.
3:53:54 PM
SENATOR KIEHL commented that the cash seems to be in the
manufacturing permit language in section 1.
MR. SCHADE answered yes. He said the farming is relatively easy
from a fee and supervision standpoint, but manufacturing is more
intense where each manufacturer is going to have to get their
product manufacturing system approved as well as working with
the Alaska Department of Environmental Conservation (DEC) if the
product is food related. The final stage is the retail market.
He noted that the system is designed to track the product from
the grower, to the manufactures, to the retail sales. Part of
the concern is a lot of the cannabinoid products can have things
in them that the department does not want. The concern is about
heavy metals, pesticides, and to make sure zero THC is zero. The
division will have a lot of focus on manufacturing. However, the
state has a serious amount of product that is already there that
the department must make sure is not synthetic. The product
startup is going to be challenging.
3:55:39 PM
SENATOR KIEHL stated his intention to review the retail piece in
the bill.
SENATOR COGHILL asked how the state is going to manage
flexibility with the modified language in section 3 while still
fitting within the U.S. code on USDA penalties.
MR. SCHADE replied that is the dilemma. He explained that the
USDA provided an interim final rule that set a one-year
expiration for pilot programs. None of the states are happy with
the rule but there is no workaround for parts of it such as the
10-year lookback for felony convictions relating to controlled
substances. He said all states are probably looking for
flexibility on the THC levels and testing time and Alaska will
argue for rule exceptions due to its logistical issues. However,
if the statute says that the division absolutely must follow the
federal guidelines, then negotiating and working through the
issues will be more difficult.
3:57:58 PM
CHAIR MICCICHE asked how the department will pay for the program
until there is sufficient participation from growers,
manufacturers, and retailers.
MR. SCHADE answered that the division has two general-funded
positions in the current budget to standup the receipt -funded
program. He assured the committee that he will not hire people
until there is industry support to build the program over time.
He said he has always been concerned when running a program on
receipts to make sure there are receipts. The dilemma is
stepping up a program with out the receipts in the first place.
3:59:23 PM
SENATOR COGHILL noted that the requirement under [AS
03.05.010(c)] to put a stop order on product that exceeds the
THC levels is not part of the bill. He asked how the department
will deal with the product and the producer if the stop order
statute uses the word "may."
MR. SCHADE emphasized that producers are prohibited from taking
a crop out of the field unless the division tests and approves
the crop below 0.3 percent, or the division provides written
approval to take the crop out of the field. Even without the
stop order there is no sale because the division is in control
all along. The stop order is more for a marijuana-considered
crop that tests 1.0 percent THC, which is outside the bounds of
the industrial hemp program. The shall-to-may revision changes
the requirement for the division to issue a notice of violation
and a $500 fine even if there was an unintended error and an
intent to fix. He explained that the division did not want to
completely delete a notice of violation because of the
possibility of a bad actor.
SENATOR BISHOP asked if producers would grow most of their
industrial hemp in hoop houses rather than on thousand-acre
fields that use combines for harvesting. He said he is trying to
imagine how the division applies a stop order after testing for
a 100 or 200-acre field. He emphasized that he is not trying to
inhibit the process but rather is looking for a better
understanding of where the state thinks the market is headed.
4:02:35 PM
ROB CARTER, Agronomist, Division of Agriculture, Alaska
Department of Natural Resources, Palmer, Alaska, replied there
will be individuals producing on large acreage if they choose to
participate in the program. The division has seen exponential
growth in industrial hemp fields across the nation for biomass,
fiber, or green manure. They expect applicants to grow on large
scale, traditional agriculture using traditional farming
methods, depending on the hemp variety grown and intended use.
He explained that an offered notice of violation or stop sale
occurs if the division's sample shows the raw industrial hemp
tested above 0.3 percent and below 1.0 percent THC. The proposed
regulations would have an option to recondition the lot by
blending with another lot. However, the farmer cannot process or
move the lot from the farm or the farm's drying facility.
4:04:53 PM
CHAIR MICCICHE opened public testimony. Seeing none, he said
public testimony will remain open for future meetings.
4:05:18 PM
CHAIR MICCICHE held SB 171 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 171 ver. A.PDF |
SRES 2/10/2020 3:30:00 PM |
SB 171 |
| SB 171 Sponsor Statement 2.6.2020.pdf |
SRES 2/10/2020 3:30:00 PM |
SB 171 |
| SB 171 Sectional Analysis 2.6.2020.pdf |
SRES 2/10/2020 3:30:00 PM |
SB 171 |
| SB 161 ver. A.pdf |
SRES 2/10/2020 3:30:00 PM SRES 3/11/2020 3:30:00 PM |
SB 161 |
| SB 161 Sponsor Statement 2.4.2020.pdf |
SRES 2/10/2020 3:30:00 PM SRES 3/11/2020 3:30:00 PM |
SB 161 |