BILL ANALYSIS SENATE AGRICULTURE & WATER RESOURCES COMMITTEE Senator Jim Costa, Chairman BILL NO: AB 388 HEARING: 5/7/02 AUTHOR: Strom-Martin FISCAL: Yes VERSION: 2/27/02 CONSULTANT: Emily Fraciskovich/ Dennis Albiani Specialty or Alternative Fiber Crops. BACKGROUND AND EXISTING LAW Since its founding, America has been a leading producer of fiber crops. Industrial hemp, now considered a specialty fiber crop, was grown domestically for hundreds of years prior to it's prohibition. Other specialty fiber crops produced in the United States include kenaf and flax. Flax, from the Linaceae family, is a dicotyledonous shrubby plant whose stem can be spun into linen thread. The stalk of Hibiscus cannabinus, or the kenaf plant, is also harvested to produce fiber. In 1970, the United States placed a prohibition on the harvest industrial hemp. Although industrial hemp could not be harvested, the national prohibition still allowed industrial hemp to be processed and sold. On October 9, 2001 the Drug Enforcement Administration (DEA) published an interpretive rule banning hemp seed and oil food products that contain any amount of trace tetrahydroconnabinol (THC). THC is the psychoactive organic compound found in the Cannabis Sativa L. species. Although industrial hemp contains less than 0.3% THC, it was still subject to the DEA's ban. The courts eventually ruled to stay DEA's ban on hemp seed and oil food products. On March 7, 2002, a 9th Circuit Court Order ruled to extend the stay. In recent years, Hawaii, North Dakota, Minnesota, Arkansas, Kentucky, Illinois, Maryland, New Mexico, and Montana have passed legislation legalizing the cultivation of industrial hemp. Today, imported industrial hemp products are being sold legally in the United States, creating an estimated $50 million market. Industrial hemp has a multitude of commercial applications, and demand for those products has resulted in the U.S. becoming the largest importer of foreign-grown hemp-based materials in the world. Federal and state laws have prevented American farmers from producing for this market. Although the industrial hemp processing industry has prospered in recent years, domestic industrial hemp production is still in its infancy. Economic uncertainties still surround the country's industrial hemp producing potential. AB 388 -- 2/27/02 -- Page 2 PROPOSED LAW This bill would request that the University of California study the economic potential for growing specialty or alternative fiber crops including industrial hemp, kenaf, and flax. This bill would request the University of California to assess issues pertaining to production, processing, marketing, and potential barriers to profitability. This measure also request that the findings of the report be delivered to the Assembly Committee on Agriculture and the Senate Committee on Agriculture and Water Resources. COMMENTS 1.By increasing domestic alternative fiber crop production such as industrial hemp, American producers could potentially tap into a $50 million market. Proponents of specialty fiber crops state that industrial hemp is one of the strongest natural fibers available. For example, industrial hemp can be processed into various products from rope and twine to high-end fabrics for clothes. Additionally, industrial hemp food products are a small but fast-growing sector of the natural foods industry, with annual sales of approximately $5 million. Products include pretzels, chips, energy bars, bread, salad dressing, cereal, cooking oil and ice cream. These products and many others are examples of the potential markets that domestic industrial hemp producers could fill. 2.Since the legal proceedings regarding a ban on industrial hemp products is not yet settled, California may be acting prematurely by requesting a study of the economic viability of industrial hemp production. The DEA may choose to pursue a nationwide ban on industrial hemp products. If the DEA chooses to ban industrial hemp products the study's findings related to industrial hemp would have little or no use. 3.Proponents of the measure state that alternative fiber crops such as industrial hemp have the potential to become effective rotational crops. Industrial hemp is a hardy plant that grows in most climates up to 16 feet in 70 days, shading out weeds, thereby, reducing the need for agricultural chemical inputs. After harvest, industrial hemp leaves a field with fewer weeds to eliminate for the next crop. AB 388 -- 2/27/02 -- Page 3 4.States rights advocates have been urging the U.S. Department of Agriculture (USDA), Drug Enforcement Agency (DEA) and Congress to revise policies regarding industrial hemp to be less restrictive and to allow states to establish regulatory programs, thereby fostering the development of domestic hemp production by American farmers and manufacturers. 5.In addition to studying issues pertaining to potential barriers to profitability for specialty or alternative fiber crops, the committee may wish to consider having the University of California assess the legal barriers associated with growing and harvesting crops such as industrial hemp. In addition to reporting its finds to the Assembly Committee on Agriculture and the Senate Committee on Agriculture and Water Resources, the committee may wish to have the University of California report its findings to the Department of Food and Agriculture as well. PRIOR ACTIONS Previous actions not relevant to this version of the bill. SUPPORT OPPOSITION San Francisco Board of Supervisors None received. 16 Individuals