SB 6-INDUSTRIAL HEMP PRODUCTION  3:30:42 PM CHAIR GIESSEL announced consideration of SB 6, sponsored by Senator Hughes. In the last meeting the sponsor and her staff pointed out that the bill would need some changes in order to more formally comply with recent changes in federal law. 3:31:27 PM SENATOR COGHILL moved to adopt CSSB 6, labeled 30\LS0173\U, as the working document. CHAIR GIESSEL objected for purposes of explanation and discussion. 3:31:54 PM AKIS GIALOPSOS, staff to Senator Giessel and the Senate Resources Committee, Alaska State Legislature, Juneau, Alaska, said he would review the explanation of changes in Committee Substitute (CS) for SB 6 from version A to version U. 3:32:34 PM The first change is in the title on page 1, lines 1-4: The bill title is revised to more clearly define the intent and the subject matter addressed in the previous hearing that includes adding in the titles for the appropriate sections that are discussed by Mr. Whitt, particularly those related to the establishment of pilot programs, separating the definition and change in statutes for industrial hemp from marijuana, and also clarifying that adding industrial hemp to food does not adulterate that food. The second change is still on page 1, lines 6-14, and all of page 2: Adds industrial hemp as an agricultural product to Title 3. It further establishes the Division of Agriculture within the DNR as the regulatory authority for industrial hemp, lays out minimum registration guidelines, and establishes guidelines for seed, plant and record retention by registered growers. 3:33:43 PM The third change is found on page 3, lines 1-8: Adds language establishing industrial hemp growth as a pilot program that only those who have registered at an institution of higher learning may participate in (federal statutes Mr. Whitt referenced in the February 8th hearing). This additional language is added in order to be in line with Section 7606 of the Agricultural Act of 2014. 3:34:13 PM The next change on version U is found on page 3, lines 9-11: Places the definition of industrial hemp under Title 3 instead of under Title 11 as it was in the original bill (version A). The definition itself is unchanged and matches the definition in Section 7606 of the Agricultural Act of 2014. Page 3, lines 12-21: Language added to the bill specifies that under AS 11.71.900, industrial hemp is not marijuana, thereby removing industrial hemp from the list of controlled substances. The next change is also on page 3, lines 22-24: Adds language to exclude food containing industrial hemp from adulterated foods under Title 17. 3:34:54 PM The final explanation for the changes can be found on page 3, lines 25-31, and on page 4, lines 1-2: At an earlier explanation of changes he forgot a line: language is added to further to exclude industrial hemp from marijuana definitions under Title 17. 3:35:57 PM BUDDY WHITT, Staff to Senator Hughes, Alaska State Legislature, Juneau, Alaska, recapped that in an earlier hearing the first version of the bill needed to be changed in order to comply with federal law and that has been done with the CS. SENATOR WIELECHOWSKI said this is a "pretty dramatic change" from the first version and that Alaska doesn't comply with federal law on marijuana now, and asked why we are worried about doing it with hemp. MR. WHITT answered that there is a federal law and it is pretty clear what actually has to be in statute in order to comply with it. That is the blueprint he followed in order to develop this piece of legislation. The sponsor tried to draft legislation that will be successful while complying with federal law. SENATOR WIELECHOWSKI said it is pretty onerous to have to register, list global positioning coordinates, and pay fees every year to cover the regulatory costs. This entire industry could be killed by setting the costs so high that it would drive these small businesses out of business. It requires them to keep records of hemp transfers for three years, which sounds like big government to him. He asked what it will cost the Division of Agriculture to administer it. 3:38:45 PM MR. WHITT answered that a lot of the information that is within this CS and the reason it was put together has to do with Federal Register, Volume 81, 156, which was produced on August 12, 2016 by the U.S. Department of Agriculture, which specifically laid out the items that any state would have to do in order to comply with federal law. It's not for him to judge how onerous the legislation is, but it is very clear that the Division of Agriculture would have to be the regulatory authority and have the powers to set those regulations in order to keep tabs on this new growth industry. He deferred the second part of Senator Wielechowski's question to Mr. Carter. 3:40:00 PM ROB CARTER, Manager, Alaska Plant Material Center, Division of Agriculture, Anchorage, Alaska, supported SB 6. Even though there may be fees and the bill may be onerous, he really supports it professionally, because sticking to federal guidelines provides longevity and sustainability to the industrial hemp in Alaska. The fees are $25-50/annually across the country and there is no intent to hurt industry in terms of fees. The division plans on making this registration a simple process, an application that is designed by the industry so a database can be maintained that is more or less for consumer protection and protection of the farmers, so that when someone drives by and sees an industrial hemp field, claims it is a recreational or medical marijuana grow, and calls law enforcement, the department has registered industrial hemp locations. He believes that the division can take this workload on and maintain it without any additional money at this time. They really can't say what the fee will be without knowing how many individuals are actually going to partake, but probably it will be somewhere between $25-50, just like grass and grain fees, and have a certification process very similar to the one for potatoes. Their goal is to educate before they regulate these folks and make sure the state can have a sustainable industrial hemp industry. SENATOR WIELECHOWSKI asked if he anticipates any new hires as a result of this legislation. MR. CARTER answered no; they plan to take this additional workload on with current staff. They will build an online application as well as a printable one that can be sent in with the payment. A database will be built in the first year and be evaluated on a year by year basis. They want this industry to be able to take off in the state with a potential for export. A few things in federal regulation allow hemp products to be exported to other states and worldwide. SENATOR WIELECHOWSKI asked the penalty for non-compliance if a person doesn't register, pay the fee, or keep appropriate records. MR. CARTER answered at this time Section 1 (f) says the department may issue a stop-sell order or a violation notice to a person who is producing industrial hemp without a current registration. This is how the division currently responds to certification issues with potato, grass and grains. They can issue a stop sell order that has no penalty, because it is a direct order. If someone does not comply, it is a civil Class 3 misdemeanor and a $500 fine. 3:44:28 PM SENATOR WIELECHOWSKI asked what if a person growing industrial hemp keeps records of who he sells it to, then that person transfers it or sells it, are they allow to do that or do they have to keep records as well? MR. CARTER answered at this time they are just looking for the initial transaction. Normally, agricultural products have one buyer and after that it is considered a post-harvest, processed product. SENATOR WIELECHOWSKI asked how these requirements compare to the requirements for people who grow marijuana. Are they required to register and have a GPS and keep track of all the transfers of their marijuana products? MR. CARTER answered that industrial hemp regulations are very burdensome from an agricultural production standpoint; the fees are high and borough or municipal approval is needed, but this process is simplified and is pretty standardized for industrial hemp nationwide. 3:46:23 PM SENATOR WIELECHOWSKI asked if someone would be able to grow industrial hemp in their backyard under this legislation. MR. CARTER answered yes. SENATOR MEYER agreed with Senator Wielechowski that this industry has potential and has a lot of good uses, but he wonders if a pilot program can be done with a zero fiscal note. It seems that it would cost something. He asked what a fee structure would look like and if it would be by application or based on the quantity produced. MR. WHITT answered the Division of Agriculture can decide how many registrants it can handle with a zero fiscal note, if they choose to go that way. In the future, language says they "shall be able to charge a registration fee." If this becomes a growth industry, managing it might incur more costs than can be handled internally. 3:48:54 PM MR. CARTER said he knows it is very unique for a state agency to say it can do something without a fiscal note, but the Plant Material Center works with agricultural industries of all types and its mission is to support and encourage agricultural development in Alaska. They could take on a registration process with current staffing, but if the industry becomes the next biggest thing out of Alaska years from now that won't be true. "Hobbling the industry with high fees and lots of regulation is definitely not the way to get something up and growing." SENATOR MEYER said Mr. Carter commented that this product could be exported and asked if federal regulations allow export currently. MR. CARTER answered the 2014 Farm Bill, Section 7606, allows the production and the trial by state agricultural agencies and universities. It legalized the production but the biggest difficulty is what to do with the product, and the Farm Bill didn't authorize the interstate travel of industrial hemp products. But then there is a little known "slip-through" within the Omnibus Appropriations Act of 2016, Section 736, that states: No federal funds made available by that act or any other act may be used to prohibit or transfer processing sales of industrial hemp that is grown or cultivated in accordance with 7606 of the Agricultural Act of 2014 within or outside the state in which the industrial hemp is grown. So, without the federal government really stepping in and saying industrial hemp can be grown; it can be used and processed and it can be shipped interstate, this really provides legal protections by proxy for allowing Alaska (and not allowing the feds to prosecute or use any funds to prosecute) to produce, process or sell industrial hemp products. That is how the other states - Kentucky, Colorado, Maine, Vermont, and Idaho - are using interstate commerce for their industrial hemp products. 3:52:36 PM SENATOR MEYER said that the industrial hemp producers are required to have their hemp tested for THC content and asked where that is to be done. Alaska has only two testing centers. MR. CARTER answered that is correct and one of the good things about legalizing recreational marijuana is that that industry paved the way for testing. So, for a nominal fee through one of these private agencies any individual that is growing a cannabis sativa plant can have it tested for multiple cannabinoids including THC, CVA, CVD, and CVNs. SENATOR MEYER asked if the state crime lab could be used for testing, as well, if these other two are busy with the recreational hemp. MR. CARTER answered to his knowledge they have the equipment - a mass spectrometer and a gas chromatographer - that could do the work, but he didn't know about their workload and the availability of employees. SENATOR MEYER asked if the University of Alaska is or could they be involved. MR. CARTER replied that he couldn't speak to the University's motives and practices and didn't have any contact about industrial hemp, but the 2014 Farm Bill allows them to take part. However, in the past, some universities have steered clear of anything with cannabis not wanting to jeopardize the amount of federal funding that they do get just to help one industry. 3:55:12 PM SENATOR WIELECHOWSKI said his concern is that the industry would be so successful in the future that more employees would be needed and asked if he would be willing to cap fees at $500 to protect against over-charges and growing government. MR. WHITT said that the Judiciary Committee would be a great place for that discussion. 3:56:37 PM SENATOR COGHILL asked in following federal rules, if people would be eligible for the federal or state revolving loan funds. 3:57:20 PM MR. WHITT said he would look into that for him. MR. CARTER added that the agricultural revolving loan fund that is administered through the Division of Agriculture has no limitations at this time. It is administered by the Board of Agriculture and Conservation, but a cannabis application has not been submitted. CHAIR GIESSEL asked Mr. Keyes if he had any comments. 3:58:05 PM ARTHUR KEYES, Director, Division of Agriculture, Department of Natural Resources (DNR), Anchorage, Alaska, replied Mr. Carter has said what needs to be said. SENATOR HUGHES said the state is required to have a database and she tried to keep it as simple as possible and pointed out that charging fees says "may" and she was open to putting in a limit. She just wants to give farmers one more economic opportunity. 4:00:53 PM CHAIR GIESSEL removed her objection and CSSB 6 was adopted. She said she would hold SB 6 in committee with public testimony open to allow time for the fiscal notes to be updated.