SB 171-INDUSTRIAL HEMP PROGRAM; MANUFACTURING  3:31:52 PM CHAIR MICCICHE announced that the first order of business would be SENATE BILL NO. 171, "An Act relating to industrial hemp." 3:32:14 PM SENATOR COGHILL moved to adopt the committee substitute (CS) for SB 171, work order 31-LS1431\M, as the working document. CHAIR MICCICHE objected for purposes of discussion. 3:33:03 PM SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau, Alaska, sponsor of SB 171, stated that the CS makes necessary changes to keep an opportunity alive for Alaskans based on the 2018 U. S. Farm Bill. The bill will continue the program beyond October 2020. She added that the Division of Agriculture supports the bill moving forward. She said industrial hemp has generated great interest due to the multitude of hemp-made products that can be produced. She noted that Lower 48 farmers are experiencing high yields from growing hemp for oil or fiber use. She said Canada is the world's second largest producer of hemp with a climate like Alaska's. She summarized that everyone wants to diversify the state's economy and SB 171 will pave a way for the industrial hemp opportunity. 3:35:07 PM SENATOR BISHOP said he supports the bill, especially after speaking with Alaska Farm Bureau members regarding the use of hemp fiber in concrete due to its resiliency to earthquakes. SENATOR HUGHES said she concurs, especially having experienced the recent earthquake. She added that oil spill cleanup is another use for hemp that is particularly relevant to Alaska. SENATOR GIESSEL said she did not want to throw cold water on hemp uses, but a civil engineer told her that it is not possible to make flexible concrete. She added that hemp is an organic product that would rot. She suggested that the use of hemp in concrete should not be a selling point. SENATOR KIEHL noted that the fiscal note strictly reflects fee registration for every retailer of hemp, cannabidiol (CBD), and non-marijuana products even though registration is not in the text of the bill. He asked Senator Hughes if she is comfortable with the notion of registering, with a fee, every retailer, whether it be the farm supply store or the people selling hand cream. SENATOR HUGHES explained that the Division of Agriculture brought the registration requirement to her office. She said Buddy Whitt, her staff member, will address the registration question. She surmised that retailer registration may be part of the 2018 Farm Bill. 3:38:16 PM BUDDY WHITT, Staff, Senator Hughes, Alaska State Legislature, Juneau, Alaska, explained that the committee and the Division of Agriculture brought up two major areas of concern during the first hearing for SB 171. First, how to balance the regulation requirements in the 2018 Farm Bill, specifically the thresholds of tetrahydrocannabinol (THC) for hemp. The U.S Department of Agriculture (USDA) does not allow THC above 0.3 percent. However, Senate Bill 6 from the 30th Alaska State Legislature gave growers some grace to correct crops tested above 0.3 percent. The intent of the CS is to find a balance for the state's industrial hemp program regulations and the USDA regulations. He explained that Senator Coghill brought up the second area of concern of someone having a crop over a certain THC threshold. He said his CS overview will address Senator Coghill's threshold concern in finding the right balance working with the division. He explained the changes in the CS for SB 171 from version A to version M, "An Act relating to Industrial Hemp,as follows: • Page 2, lines 30 through 31: o Goes directly to the retail question. He said the added language allows the department to establish regulations to permit manufacturing and retail sales of hemp and products made from industrial hemp. • Page 3, lines 25 through 28: o A new subsection has been added to the bill that the department "may" develop an industrial hemp program that complies with federal requirements. MR. WHITT said the previous version of the bill stated that the department "shall" develop that program, the CS added the "may" language for a specific purpose. • Page 3, line 29 through page 4, line 4 o The CS removes the repeal of AS 03.05.079, and instead revises this subsection so that if someone produces industrial hemp with THC between .3 percent and 1.0 percent, they may retain and recondition it. • Page 4, lines 5 through 7 o A new subsection stating that if a person retains and fails to recondition, they are guilty of a violation. MR. WITT explained that the CS adds a new subsection to provide a little bit of grace. Someone in good faith can try to correct their crop. However, if a producer retains the crop and makes no reconditioning attempt, the producer is in violation of the statute. • Page 4, lines 8 through 14 o Revised the definition of Industrial Hemp to coincide with the federal definition change in the 2018 Farm Bill. He said the definition revision matches the 2018 Farm Bill definition. 3:42:33 PM • Page 4, Lines 16 through 24 o Conditional language for the effective date of the repeal of AS 03.05.077. o The repeal of the pilot program will take effect once the Industrial Hemp Program, developed by the department, is approved by the USDA. MR. WHITT said the division and the bill sponsor believe in keeping the pilot program because the only thing USDA program approval addresses is interstate commerce. The conditional effective language allows the pilot program to continue until the USDA responds to the many states, including Alaska, which are pushing back to allow farmers a grace period for THC correction. CHAIR MICCICHE asked Mr. Carter from the Division of Agriculture if he is comfortable with the definition change and the pilot project continuing unless the USDA approves the program. 3:45:14 PM ROB CARTER, Agronomist, Division of Agriculture, Alaska Department of Natural Resources, Palmer, Alaska, replied that he is very comfortable with the proposed process. He said he sees the USDA evolving in regulating the industrial hemp market. The bill allows Alaska to continue its pilot program during the interim testing rule process. CHAIR MICCICHE asked if reconditioning is simply the blending of a lower proportion of THC from another crop. MR. CARTER answered yes. He noted that reconditioning is very standard in other agricultural industries. He detailed that if an industrial hemp lot tests above 0.3 percent THC and below 1.0 percent THC, the producer can recondition and certify for commerce with division approval. 3:48:51 PM SENATOR KIEHL said he did not recall retail registration language in SB 6. Industrial hemp regulations are different from other agricultural products, particularly in registering everybody that sells hemp products. 3:50:31 PM At ease. 3:50:52 PM CHAIR MICCICHE called the committee back to order. 3:51:05 PM JOAN WILSON, Assistant Attorney General, Civil Division, Commercial, Fair Business, and Child Support Section, Alaska Department of Law, Anchorage, Alaska, disclosed that she was involved with SB 6. She said one of the major changes in the bill happened when the Marijuana Control Board (MCB) decided that it no longer wanted jurisdiction over CBD and products from marijuana plants that have 0.3 percent THC or less. The amended marijuana definition that reflected the MCB decision left the marketing, retail, and public safety oversite of hemp unaddressed. The intent of SB 6 was to have the Division of Agriculture take jurisdiction over the retail sale of hemp and hemp parts, including such things as the oil. SENATOR KIEHL asked if the definition of production includes retail of the finished product. He remarked that requiring retail registration sounds like funny definition writing when the state does not require retailers to register for most finished products. He said his question goes to the sponsor's intent and desire for the bill, and the industry in Alaska. He inquired whether the right move is to register and regulate the ultimate retailer or if the state will be satisfied once a product is determined to be safe and not psychoactive. 3:53:20 PM SENATOR HUGHES replied the hemp industry is a new area and she does not have a problem with including retail registration. She said she felt comfortable with the Division of Agriculture having a sense of what is happening regarding retail sales for consumer safety purposes. She said she is open to the committee's discussion on concerns. MS. WILSON pointed out that a number of the entities that will be producing CBD oil have had absolutely no objection to registration because they understand that absent MCB jurisdiction that someone needs to be guaranteeing the safety of the product. She noted that selling industrial hemp is currently against the law. 3:55:07 PM DAVID SCHADE, Director, Division of Agriculture, Alaska Department of Natural Resources, Homer, Alaska, clarified that the retail registration allows the division to go in and test the products. The division has oversite during growing and processing to make sure the hemp is a good product. However, the retail provision provides traceability to deal with manufacturing problems and products not kept in a safe manner. He said of concern are THC content, pesticides, and heavy metals. He pointed out that retail registration is a simple process. MR. SCHADE said the other key issue is while the federal government has said that the cannabinoids in industrial hemp are legal, the product is still a controlled substance and requires registration. No one can go out and grow industrial hemp and sell it. Hemp production must be in a program and part of the division's process. The division has worked hard in carefully finding the balance with the federal government, he said. 3:57:22 PM CHAIR MICCICHE asked where the break occurs between industrial hemp and current hemp sales. MR. SCHADE answered that except for a few states with permanent programs, industrial hemp procured outside of the pilot program is in the black market. He admitted that there are millions of dollars in product out on the market. He said Alaska has the unique ability to say if a product derived from industrial hemp with THC below 1.0 percent and conditioned below 0.3 percent is legal; part of that product on a federal level must stay and remain under 0.3 percent. MR. SCHADE noted that the registration the division designed for the growing of non-consumption products is very simple. Registration allows the division to know who has the product and to make sure that federal and state police agencies do not consider it to be marijuana. Manufacturing is a little more of a process to assure product safety, including following Alaska Department of Environmental Conservation (DEC) food laws. 3:59:20 PM CHAIR MICCICHE asked if it's correct that many of the gift shops around the state that are selling black market hemp products that the state chooses not to enforce. MR. SCHADE replied there is currently no legal hemp product on the market. 4:00:29 PM CHAIR MICCICHE removed his objection to the CS. 4:00:38 PM He announced that seeing no objection, the CS for SB 171, version M, is before the committee as the working document. He noted that public testimony occurred in a previous meeting and remains open. He asked Mr. Schade if he had further comments. MR. SCHADE said he appreciates the committee working with the division to get clarification on industrial hemp. He stated that SB 171 is a great compromise bill and is very supportive of Alaska's hemp industry. CHAIR MICCICHE asked if anyone wanted to testify on SB 171. He inquired if Senator Hughes had any final comments on the bill. SENATOR HUGHES said her hope is the bill will pass so that the industrial hemp program can move forward into the coming years. 4:01:53 PM CHAIR MICCICHE closed public testimony. 4:02:14 PM SENATOR COGHILL moved to report CSSB 171 (RES) committee with individual recommendations and attached fiscal note. 4:02:22 PM CHAIR MICCICHE said there being no objection, CSSB 171(RES) moved from the Senate Resources Standing Committee. 4:02:33 PM At ease.