SB 27-INDUSTRIAL HEMP PROGRAM; MANUFACTURING  1:46:55 PM CHAIR COSTELLO reconvened the meeting and announced the consideration of SENATE BILL NO. 27, "An Act relating to industrial hemp; and providing for an effective date." She noted that this was the first hearing, and the intention was to hear invited testimony and hold the bill for further consideration. She noted the friendly amendment and asked for a motion. 1:47:24 PM SENATOR HOLLAND moved Amendment 1, work order 32-LS0249\A.1, to SB 27. 32-LS0249\A.1 Dunmire 3/4/21 AMENDMENT 1 OFFERED IN THE SENATE TO: SB 27 Page 3, following line 8: Insert a new bill section to read:  "* Sec. 2. AS 03.05.010(c) is amended to read: (c) The commissioner of natural resources may [SHALL] issue a stop order to any person who is found to be producing a plant product with delta-9-tetrahydrocannabinol over 0.3 percent, regardless of whether the person is registered under AS 03.05.076. The commissioner of natural resources shall notify the Marijuana Control Board and the Department of Public Safety when the commissioner issues a stop order." Renumber the following bill sections accordingly. Page 4, line 19: Delete "Section 7" Insert "Section 8" Page 4, line 25: Delete "sec. 8" Insert "sec. 9" Delete "sec. 7" Insert "sec. 8" Page 4, line 27: Delete "sec. 8" Insert "sec. 9" CHAIR COSTELLO objected for discussion purposes. SENATOR HOLLAND explained that the US Department of Agriculture allows a 0.5 percent to 1.0 percent standard of negligence for the levels of delta-9-tetrahydrocannabinol in plant products. This amendment changes the term "shall" to "may" issue a stop order to provide the commissioner of the Department of Natural Resources (DNR) latitude in the seed stock that hemp growers are allowed to purchase. 1:48:57 PM CHAIR COSTELLO removed her objection to Amendment 1 to SB 27. 1:49:18 PM SENATOR STEVENS objected to say he thought there was no connection between marijuana and hemp, yet the amendment talks about notifying the Marijuana Control Board. 1:49:29 PM BUDDY WHITT, Staff, Senator Shelley Hughes, sponsor, Alaska State Legislature, Juneau, Alaska, explained that hemp and marijuana are both the same species but the small amount of THC in hemp is not an intoxicant. The amendment gives the Division of Agriculture the latitude to allow a hemp grower who is acting in good faith the opportunity to recondition their crop if the THC level tests above the allowed limit. MR. WHITT advised that the existing language, which was added to Senate Bill 6, is prohibitive. The department must issue a stop order if the crop tests above the allowed limit and send their name to the Marijuana Control Board and the Department of Public Safety. The amendment allows the division more latitude in managing the program. He said the sponsor believes this is a middle ground on the path towards a long-lasting program. He deferred further explanation to Rob Carter. SENATOR STEVENS remarked that one would have to smoke a lot of industrial hemp to have any affect. SENATOR HOLLAND advised that hemp is used to make products such as hemp-concrete and animal food stock. It has just a fraction of the active ingredient found in marijuana. 1:52:14 PM SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau, Alaska, sponsor of SB 27, added that reconditioning a crop by mixing seed with a level of THC that is above the limit with a crop that has a lower level of THC allows a grower who is not a bad actor the opportunity to remedy the situation. 1:52:54 PM SENATOR STEVENS removed his objection. CHAIR COSTELLO found no further objection and Amendment 1 to SB 27 was adopted. She asked the sponsor and staff to walk through the amended bill. 1:53:18 PM SENATOR HUGHES recounted the history of the bill. A federal farm bill passed in 2014 that allowed states to start an industrial hemp pilot program. Former Senator Johnny Ellis subsequently introduced legislation to remove hemp from the criminal statutes and identify it as a crop. She related that late in the 2016 session one of her most conservative constituents said he wanted to try industrial hemp as food stock for his cattle. She committed to carry the bill after Senator Ellis retired and the US Department of Agriculture (USDA) established a path for states to have an industrial hemp program that would comply with the law. In 2017, she filed Senate Bill 6 and it passed in April 2018. In December 2018, Congress passed the Hemp Farming Act as part of the 2018 Farm Act, which removed industrial hemp from the Schedule I Controlled Substance list. In 2019, the USDA released new regulations that allowed states to continue their pilot programs until October 2020. The USDA subsequently extended the date to October 2021. SENATOR HUGHES said that because of the federal changes since 2018, Alaska has to change its statutes. SB 27 is the response, and it primarily removes the industrial hemp pilot program and directs the Department of Natural Resources (DNR) to develop a compliant program and submit it to the USDA for approval. The bill also gives DNR the authority to permit the manufacture of hemp products and to set up a registration and renewal process to participate in the program. It also says that registrants cannot have a controlled substance felony conviction in the last 10 years. She shared that her preference would have been that growing industrial hemp required no bureaucracy, but the extra framework is necessary because of concerns at the federal level that the plant looks like marijuana. Nevertheless, she said it is still worth doing because hemp is a multibillion-dollar industry. Canada is the second largest hemp producer in the world and Alaska's climate is similar so this could help Alaska businesses and the economy. She advocated for updating the statute and opening the door for this opportunity. 1:59:06 PM SENATOR GRAY-JACKSON asked if a hemp plant is the same as a marijuana plant. SENATOR HUGHES said Rob Carter can explain in detail, but hemp has less THC and is not psychoactive. SENATOR GRAY-JACKSON questioned whether they were the same species. SENATOR HUGHES suggested that Rob Carter could provide the botanist's explanation. CHAIR COSTELLO solicited the will of the committee to hear the sectional analysis of SB 27 or a botanical analysis of the difference between industrial hemp and recreational cannabis. SENATOR STEVENS asked to hear from Rob Carter. 2:00:53 PM ROB CARTER, Chief Agronomist, Division of Agriculture, Department of Natural Resources (DNR) Palmer, Alaska, explained that industrial hemp is Cannabis sativa, which is the same genus and species as recreational cannabis/marijuana. The two plants can look similar but industrial hemp traditionally grows in a solid stand like a barley or wheat. Industrial hemp that is grown for cannabinoid production may look more similar to marijuana, whereas it will look more like an extremely tall stand of corn, barley, or wheat when grown for fiber, grain or biomass for feed or fuel. The leaves look the same but there is significantly more fibrous material inside the hemp plant. The methodology to produce the hemp plant creates an upright leaner look than in the typical marijuana plant that is grown indoors. Marijuana plants are grown specifically for the floral material whereas plants grown for fiber or biomass production are harvested before the flower appears. SENATOR STEVENS asked if it is legal to grow marijuana in Alaska. MR. CARTER replied that the Alcohol & Marijuana Control Board regulates all aspects of the growth and production of recreational marijuana. The 2014 Farm Bill identified industrial hemp or cannabis that tests below 0.3 percent delta-9-THC as an industrial agriculture crop. He said the Division of Agriculture treats these crops much like regulated potato or barley crops, which are called certified non-grass grain seeds. SENATOR STEVENS summarized his understanding that industrial hemp and marijuana are not the same thing and not controlled in the same way. CHAIR COSTELLO asked Mr. Whitt to go through the sectional analysis for SB 27. She also listed the individuals available to answer questions. 2:05:22 PM MR. WHITT presented the following sectional analysis for SB 27: 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 and retail sales of products made from industrial hemp, as well as registration and renewal procedures, in the regulations for the industrial hemp program. 2:06:02 PM Section 2 AS 03.05.076(a) Page 3, Lines 9 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. This section is added to comply with provisions of the 2018 Farm Bill. MR. WHITT noted that the 2018 Farm Bill and subsequent regulations gave grandfather rights to those growing industrial hemp before the federal requirement. He offered to provide the code of federal regulations (CFR) reference. Section 3 AS 03.05.076(i) Page 3, Lines 25 through  28  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. MR. WHITT added that the state is able to continue running the pilot program until the permanent hemp production program is in place. Section 4 AS 03.05.079 Page 3, Line 29 through  Page 4, Line 4  A grower may retain and recondition their crop if it tests above .3% but below 1.0% THC. MR. WHITT explained that Sections 4 and 5 work in conjunction with Amendment 1. Section 4 removes the automatic violation and allows a grower who tests above 0.3 percent THC but below 1.0 percent THC the opportunity to recondition their crop. Section 5 authorizes the Division of Agriculture to issue a violation if a bad faith grower fails to recondition their crop that tests above the 0.3 percent threshold for THC. 2:09:14 PM SENATOR STEVENS asked what it means to recondition a crop. MR. WHITT deferred the question to Mr. Carter. MR. CARTER explained that reconditioning is a commonly used process in agriculture to allow a farmer to blend crops when the seed or, in this case, the industrial hemp tests as borderline in violation of a regulation. Reconditioning prevents a farmer from having to destroy their crop when it tests too high. 2:10:52 PM SENATOR REVAK joined the meeting. SENATOR STEVENS observed that farmers who grow industrial hemp are subject to many more requirements than a farmer who grows crops such as wheat or corn. "Aren't we asking a lot more of the farmers than we would if they were just doing wheat," he asked. MR. CARTER answered yes; the 2014 and 2018 farm bills have specific federal requirements that provide a sense of security to those who do not understand the botanical difference between industrial hemp and recreational cannabis because they are the same genus and species. He advised that farmers who produce certified potatoes or grow certified wheat crops also are required to meet specific requirements and are subject to similarly rigorous testing. He added that industrial hemp was produced in the state last year and the division is committed to providing a legal avenue for this new industry. SENATOR STEVENS expressed appreciation for the explanation. CHAIR COSTELLO asked if the bill has a mechanism to handle repeat violations or if the assumption is that there are no intentional violators. MR. WHITT said the division can speak in detail, but the testing so far has been positive and there is no evidence to indicate that bad actors will be a problem. He added that he believes it is a big help for the state to have the USDA stamp of approval on the industrial hemp program and it comes at the cost of specific statutory guidelines. Responding to Senator Stevens, he agreed that the regulatory and statutory requirements are greater for a hemp producer than many other crops, but those do not have the potential for high THC. He characterized the additional guidelines as appropriate. 2:15:31 PM CHAIR COSTELLO asked Mr. Carter what industrial hemp products have been produced and if some of the products will be exported. MR. CARTER replied that farmers produced 70 acres of industrial hemp in 2020, 9,000 square feet of which was indoors. To ensure compliance and safety, the division physically samples each field lot and all the tests returned values of less than half the federal legal limit for THC, which was better than any other state in the country. MR. CARTER said Alaska is renowned for its clean water and soil and the expectation is that these products will be exported worldwide for industrial hemp derivatives. In the trial year the division has seen interest in grain for human and animal consumption; fiber for biomass for experimental fuel sources, hempcrete, insulation, fiber bond, and bioplastics; as well as extraction for non-psychoactive cannabinoid uses for things like shampoos, salves, and lotions. In 2020, the industrial hemp industry totaled about $20 billion. He described industrial hemp as a unique crop that has generated massive interest for an endless number of uses. 2:19:35 PM MR. WHITT continued the sectional analysis for SB 27. Section 5 AS 03.05.079(b) Page 4, Lines 5 through  7  A new subsection adds that a person who retains but fails to recondition is guilty of a violation. Section 6 AS 03.05.100(5) Page 4, Lines 8 through  14  Changes the statutory definition of industrial hemp to match the federal definition which was changed in the 2018 Farm Bill. Section 7 Page 4, Line 15  Repeals AS 03.05.077 the Industrial Hemp Pilot Program Section 8 Page 4, Lines 16 through 21  Conditional effect for Section 7 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. Section 9 Page 4, Lines 25 through 27  Effective date language stating that if section 7 is repealed under the conditions of section 8, the effective date of section 7 is the day after notice is received by the revisor of statutes by the Commissioner of Natural Resources. MR. WHITT summarized that Sections 7-9 allow the Division of Agriculture to continue the Industrial Hemp Pilot Program until the USDA approves DNR's permanent Industrial Hemp Program. CHAIR COSTELLO asked Ms. Williams to provide her testimony. 2:22:42 PM SARA WILLIAMS, Founder, Hemp for Healthcare, Wasilla, Alaska, stated support for 99 percent of SB 27. She did not support the new language in Section 2 that prohibits individuals who have a controlled substance felony conviction within the preceding 10 years from contributing to the economy of Alaska by participating in the industrial hemp program. She advised that she submitted language that creates a compromise to this prohibitive language. MS. WILLIAMS described her vision for an Alaskan hemp industry that fuels the economy. This includes taxing the hemp biomass sales and selling the hemp products statewide. The proceeds will go into a healthcare fund that creates a single payer healthcare system for all Alaska residents. She also spoke of new partnerships and anticipated projects that she believes will bring from 20 to 350 new jobs to Alaska that is in addition to the boost to transportation, farmers, and laborers that will grow hemp for processing. 2:30:37 PM SENATOR STEVENS asked Mr. Whitt if the provision in Section 2 that excludes applicants with a controlled substance felony conviction within the past 10 years is a federal requirement. MR. WHITT confirmed that it is a federal requirement in 7 CFR Sec. 990.6(e)(1). The USDA will not approve an industrial hemp program in states that do not have that law on the books. SENATOR STEVENS summarized that while it may be offensive to some people, removing the provision would result in the USDA withholding approval for a program to grow hemp in Alaska. MR. WHITT replied that was his understanding, but he would get that in writing and present it to the committee. SENATOR STEVENS replied that would be valuable. SENATOR HUGHES requested the committee hear from David Schade. 2:32:45 PM DAVID SCHADE, Director, Division of Agriculture, expressed appreciation for the work that the sponsor and Mr. Whitt had done to facilitate an industrial hemp program in Alaska. He said he had worked on this since becoming the director two years ago. He related that the pilot program has 117 retail registrations, and it continues to move forward. Supplementing earlier discussion, he explained that the division has worked hard to stay within the federal guidelines, so they are able to operate their hemp program on a national and international basis. Because the 2018 Farm Bill stipulates that someone with a controlled substance felony in the last 10 years cannot participate in the program, the division requested a one- year delay in the sunset of the pilot program awaiting this change in state law. In response to the question about what happens if there is a bad actor, he explained that because industrial hemp is a regulated crop, applicants must register under the USDA program or the state program. Someone who fails to follow the guidelines will lose their registration and be out of business. SENATOR STEVENS asked if he agreed that removing Section 2 would put the state out of compliance with the federal government and it would not qualify for a hemp program. MR. SHADE replied that is correct. 2:35:57 PM CHAIR COSTELLO held SB 27 in committee for future consideration.