HOUSE BILL NO. 156 "An Act relating to industrial hemp; and providing for an effective date." 9:05:40 AM Co-Chair Merrick reported that the committee last heard the bill on April 30, 2021. 9:06:03 AM Co-Chair Merrick OPENED Public Testimony. 9:06:24 AM ED MARTIN, SELF, STERLING (via teleconference), was in support of HB 156. He believed that the legislation would benefit the state. He voiced that the legislation would benefit Alaskan farming families and he felt that much state and municipal land was available to enhance the program. He thought the bill would directly and indirectly benefit the states revenues. He urged for passage of the bill. 9:08:32 AM Co-Chair Merrick CLOSED public testimony. Co-Chair Merrick requested a review of the new fiscal note for the Department of Natural Resources, Division of Agriculture. DAVE SCHADE, DIRECTOR, DIVISION OF AGRICULTURE, DEPARTMENT OF NATURAL RESOURCES (via teleconference), reported that the new industry was expected to pay for the program and the fiscal note reflected the cost of the program in program receipts. Representative Thompson recalled a state or federal regulation mandating the distance between a licensed marijuana grow and an industrial hemp crop to avoid cross pollination. He wondered what the distance was. 9:10:54 AM JOE HARDENBROOK, STAFF, REPRESENTATIVE GRIER HOPKINS, responded that the distance was maintained in the regulations. He deferred to Mr. Schade to speak to the specifics. 9:11:19 AM Mr. Schade responded that the separation distance was 1000 meters for cannabis to avoid cross pollination and would continue to be in regulation. He delineated that it was a state rather than a federal regulation since the federal government did not recognize recreational marijuana use. He furthered that the distance would be maintained even under a USDA industrial hemp program so the state could internally ensure it avoided problems between both industries. Representative Thompson asked who would be monitoring compliance and what it would cost. Mr. Schade replied that the Division of Agriculture would be responsible for making sure farmers complied with statute. The division had access to the Alcohol and Marijuana Control Office (AMCO) database. He stated that the enforcement cost would be minimal because maintaining the distance was a provision in the application. Representative Thompson thanked Mr. Schade for the clarification. 9:13:44 AM Representative Wool thought that the taxing structures were different for marijuana versus hemp growing. He did not think there was a production tax for hemp. He wondered about the licensures and whether they were different from each other and if someone could cultivate both varieties. Mr. Schade replied that there were no restrictions for growing both varieties. He expected entrepreneurs would grow both and that typically cannabis was grown indoors. He deduced that because industrial hemp was an agricultural crop, farmers could right off expenses therefore, growing both could become complicated. He restated that the division did not restrict someone from registering to grow both crops. Representative Wool asked if families could work on an industrial hemp farm. He was aware that there were age restrictions for family members to be around marijuana grow facilities. He assumed the restriction did not apply for industrial hemp. Mr. Schade answered in the affirmative that the restrictions did not apply to industrial hemp. He added that the bill increased the felony provision. Representative Wool asked for clarifications regarding felonies. Mr. Hardenbrook replied that the Federal Farm Act of 2018 mandated that state licensed industrial hemp programs prohibited the participation of an individual found guilty of a felony of a controlled substance in the last 10 years. Representative Wool viewed the provision as a federal mandate and felt the federal government was treating it as a drug related crop. Mr. Hardenbrook responded that the 2018 farm bill transitioned industrial hemp away from a Schedule 1 narcotic to an agricultural commodity. The inclusion of the felony provision was a result of negotiations to pass the bill in Congress. 9:18:59 AM Representative Johnson asked if the bill added two positions. Mr. Hardenbrook deferred to Mr. Schade for the answer. Mr. Schade responded in the affirmative and furthered that as the program grew it would require additional staffing. He noted that he initially requested up to four additional inspectors. 9:19:49 AM Mr. Hardenbrook interjected that AS 03.05.010 mandated that the industrial hemp program be self-sustaining through fees charged to program participants. In the future if additional staff was required the division would adjust their scheduled fees. 9:20:21 AM Representative Johnson asked how many people were currently employed to oversee the industrial hemp program. Mr. Schade replied that one person had been hired and another position was authorized but not yet hired due to funding. He needed additional inspectors and would hire up to three more as money became available. Representative Johnson asked about the funding for the current position. Mr. Schade replied that the current position was funded from industrial hemp. He qualified that due to timing of the inception of the program, he had to use general funds (GF) to implement the program. He detailed that because the fees were December and January based there was a period in July when the position had to be covered by GF until the division collected enough revenue from the industrial hemp program to cover the costs. 9:22:00 AM Representative Johnson asked for a fiscal note that reflected the amount of GF spend. Mr. Hardenbrook explained that the industrial hemp pilot program's fees were assessed on the calendar year, rather than a fiscal year that ended on June 30 of each year when all the program receipts were swept into the general fund. Beginning on July 1, until the division had enough fees, it relied on GF to pay the salary and operating costs. Representative Johnson guessed that the GF would be replaced by program receipts. Mr. Hardenbrook answered in the affirmative. He emphasized that the statute clearly stated that the program had to be fully supported through participants fees. Representative Johnson asked if the second position was authorized because there were additional fees collected through the program. Mr. Schade relayed that as part of the pilot program the legislature authorized two positions. He indicated that he assured the legislature that he would not hire staff until there were sufficient registration fees. He did not hire the second position because he was unsure there was enough carryover money cover the cost. He deduced that he would ultimately, need 6 positions to run the program but wanted the program to build up enough funding in a set aside account without worrying about the sweep. 9:25:35 AM Representative Thompson cited the amount of $106.9 thousand in the fiscal note for travel per year. He asked for more detail. Mr. Schade replied that the department had to inspect product in retail stores located in almost every village and town in the state. He elaborated that as part of tracking and registration the division carried out inspections. He declared that in order to run a good, solid program, significant travel was necessary, which was costly. 9:26:54 AM Representative Thompson assumed that the inspectors also inspected other areas of agriculture aside from industrial hemp. Mr. Schade answered in the affirmative. He offered that over time the division's industrial hemp inspectors would be trained to do other program inspections as well. The cost effective approach would lead to different programs sharing travel expenses. 9:29:26 AM Vice-Chair Ortiz MOVED to report CSHB 156 (RES) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 156(RES) was REPORTED out of committee with four "do pass" recommendations and five "no recommendation" recommendations and with one new fiscal impact note by the Department of Natural Resources. 9:29:53 AM AT EASE 9:31:15 AM RECONVENNED