BILL ANALYSIS                                                                                                                                                                                                    



                           SENATE COMMITTEE on AGRICULTURE
                          Senator Cathleen Galgiani, Chair

          BILL NO:    SB 566                    HEARING:  04/02/13
          AUTHOR:   Leno                        FISCAL:  Yes
          VERSION:  04/01/13                    CONSULTANT:  Anne Megaro
          
                                   Industrial hemp

           SUMMARY  :

          This bill would allow hemp to be grown in California, upon  
          federal approval, by defining "industrial hemp" to be excluded  
          from the definition of "marijuana," a schedule I controlled  
          substance.  This bill provides for hemp cultivation practices,  
          laboratory testing, reporting requirements, and regulatory  
          authority.


           BACKGROUND AND EXISTING LAW  :

          Industrial hemp is a variety of the plant Cannabis sativa L. and  
          has been grown as a fiber and seed crop for centuries.  It is  
          currently grown in 30 countries including Canada, China, Great  
          Britain, and several other countries throughout Europe.  Hemp  
          products are available in the U.S. marketplace as components of  
          goods such as textiles, paper, and body care products.  However,  
          it is illegal to grow hemp in the United States due to its  
          similar characteristics to marijuana (also a variety of Cannabis  
          sativa L.) and presence of tetrahydrocannabinol (THC), a  
          schedule I controlled substance.  Therefore, all hemp materials  
          are grown outside the United States and imported for domestic  
          use. 

           Existing state and federal law  defines marijuana as all parts of  
          the plant Cannabis sativa L., whether growing or not; the seeds  
          thereof; the resin extracted from any part of such plant; and  
          every compound, manufacture, salt, derivative, mixture, or  
          preparation of such plant, its seeds or resin. Such term does  
          not include the mature stalks of such plant, fiber produced from  
          such stalks, oil or cake made from the seeds of such plant, any  
          other compound, manufacture, salt, derivative, mixture, or  
          preparation of such mature stalks (except the resin extracted  
          therefrom), fiber, oil, or cake, or the sterilized seed of such  
          plant which is incapable of germination [21 U.S.C. Section  
          802(16); Health and Safety Code  11018].
           
           Existing state and federal law  lists both marijuana and the  
          hallucinogenic substance found in this plant,  




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          tetrahydrocannabinol (THC), as schedule I controlled substances  
          (21 U.S.C. Section 812; Health and Safety Code  11054). 

           Existing federal Drug Enforcement Administration regulations:  In  
          2001, the Drug Enforcement Administration (DEA) issued an  
          interim rule (and final rule in 2003) in regards to hemp  
          products and stated that any product containing THC is a  
          schedule I controlled substance, unless the product is  
          formulated such that THC cannot be used for human consumption.   
          In addition, no person may cultivate hemp for any purpose (66 FR  
          51539, Oct. 9, 2001; 68 FR 14119, Mar. 21, 2003; 21 CFA Part  
          1308).  

          However, in 2003, the Ninth Circuit Court of Appeals ruled that  
          the DEA "cannot regulate naturally-occurring THC not contained  
          within or derived from marijuana - i.e., non-psychoactive hemp  
          products - because non-psychoactive hemp is not included in  
          Schedule I" (Hemp Industries Association v. DEA (2004) 357 F.3d  
          1012).

           Congressional Research Service (CRS) Report:   In 2012, CRS  
          issued a report titled "Hemp as an Agricultural Commodity."   
          This report describes the current state of hemp in the United  
          States, including production and use, legal status, and  
          legislative activity.  CRS reports that "although marijuana is  
          also a variety of cannabis, it is genetically distinct from  
          industrial hemp and is further distinguished by its use and  
          chemical makeup."  The report continues that "nine states have  
          legalized the cultivation and research of industrial hemp,  
          including Hawaii, Kentucky, Maine, Maryland, Montana, North  
          Dakota, Oregon, Vermont, and West Virginia.  However, because  
          federal law still prohibits cultivation, a grower still must get  
          permission from the DEA in order to grow hemp or face the  
          possibility of federal charges or property confiscation, despite  
          having a state-issued permit."  Several federal legislative  
          bills have also been introduced, although none have been signed  
          into law. (CRS Report RL32725).
           
          PROPOSED LAW  :

           This bill:
                
             1.   Redefines "marijuana" to exclude industrial hemp when  
               cultivated or processed for defined purposes.

             2.   Defines "industrial hemp" to mean a nonpsychoactive type  
               of the plant Cannabis sativa L. that contains no more than  





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               0.3% THC contained in the flowering tops, and cultivated  
               and processed exclusively for the purpose of producing the  
               mature stalks of the plant, fiber produced from the stalks,  
               oil or cake made from the seeds of the plant, or for other  
               defined purposes.

             3.   States findings, declarations, and intent of the  
               Legislature in regards to industrial hemp and this act.

             4.   Creates a new division under the Food and Agriculture  
               Code to specifically address industrial hemp.  

                  a.        Provides for cultivation requirements, minimum  
                    acreage, signage, and various plant cultivation  
                    prohibitions to allow visual differentiation between  
                    hemp and marijuana fields, with exceptions for  
                    established agricultural research institutions or seed  
                    breeders.

                  b.        Includes industrial hemp, hemp seed, oil,  
                    yarn, and woven fabrics as products imported under the  
                    Harmonized Tariff Schedule of the United States of the  
                    United States International Trade Commission.

                  c.        Provides that a person who grows industrial  
                    hemp and is not an established agricultural research  
                    institution or seed breeder shall abide by specified  
                    sampling and laboratory testing procedures.  

                  d.        Requires that laboratory test reports be  
                    issued by a laboratory registered with the federal DEA  
                    and such reports shall state the percentage content of  
                    THC, the date and location of samples taken, the  
                    Global Positioning System coordinates, and total crop  
                    acreage.

                  e.        Requires that laboratory test reports be  
                    marked with the appropriate test result of "PASSED AS  
                    CALIFORNIA INDUSTRIAL HEMP" or "FAILED AS CALIFORNIA  
                    INDUSTRIAL HEMP" at or near the top of the report.  A  
                    "passed" result is a THC level at or below 0.3%  
                    content in a random sample of dried flowering tops of  
                    the industrial hemp grown.  

                  f.        Requires the laboratory to provide not less  
                    than 10 original signed copies of the report for the  
                    farmer to 1) retain at least one copy of this report  





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                    for a minimum of two years, and 2) make available  
                    these copies to law enforcement officials and to each  
                    person purchasing, transporting, or otherwise  
                    obtaining from the grower hemp plant materials.

                  g.        Provides that industrial hemp be destroyed if  
                    laboratory testing indicates THC content greater than  
                    0.3%.  

                  h.        Provides that a person who grows hemp with THC  
                    content greater than 0.3% not be prosecuted for  
                    cultivation or possession of marijuana.

                  i.        Authorizes the California Department of Food  
                    and Agriculture (CDFA) to regulate the development,  
                    growth, harvesting, and sale of industrial hemp seeds.

                  j.        Authorizes CDFA to promulgate additional  
                    regulations to ensure compliance with this division or  
                    federal law.

                  aa.       Defines "established agricultural research  
                    institution" and "seed breeder."

                  bb.       Prohibits the possession of hemp resin,  
                    flowering tops, or leaves, except as it is necessary  
                    to conduct laboratory testing.

                  cc.       Requires that within a specified timeframe the  
                    Attorney General report to the legislature any  
                    reported incident where marijuana is falsely claimed  
                    to be hemp, or where hemp cultivation is used to  
                    disguise marijuana cultivation. Hemp Industries  
                    Association shall also provide a report on the  
                    economic impacts of industrial hemp cultivation.

                  dd.       Provides that this act not be operative unless  
                    authorized under federal law.

           
          COMMENTS  :

           Need for this bill:   According to the author, this bill "is  
          necessary to prepare California farmers to grow industrial hemp  
          immediately following federal approval. The bill will allow  
          California farmers to take advantage of this economic  
          opportunity and more quickly meet the demands of California  





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          businesses and manufacturers for a local source for raw hemp  
          material."  

           Market demands:  According to the author and sponsors, "the  
          annual United States retail market for hemp products has grown  
          steadily since 1990 to approximately $500 million in 2012,  
          increasing at a rate of about $26 million annually."  However,  
          according to those opposed, "Dr. Vantreese-Askren, who is  
          recognized as the nation's leading authority on the economics of  
          hemp cultivation, is dubious about the viability of a hemp  
          cultivation industry in the United States because American hemp  
          farmers would be unable to compete with the heavily subsidized  
          Chinese and European cultivation industries."

           Agricultural Benefits  :  The author states that hemp has strong  
          agricultural benefits in that "hemp requires little or no  
          pesticides and herbicides and improves soil conditions making it  
          an excellent rotational crop which is of particular interest to  
          organic farmers.  Hemp also reduces nematode populations in  
          rotation with soy crops and is an excellent smother crop leaving  
          the field virtually free of weeds for the next crop. The  
          positive role hemp plays in sustainable crop rotations reduces  
          chemical use and saves farmers money."

           Industrial use:  According to the author, "the fast maturation  
          and projection of hemp may help meet the growing demand for wood  
          products.  An acre of hemp produces two to four times more fiber  
          than an acre of timber and it grows from seeding to maturity in  
          just 90 days? Additionally, hemp is an alternative to petroleum  
          to manufacturer platics and may be used as a raw material for  
          ethanol fuel."

           Enforcement concerns:   According to those in opposition, "this  
          bill will undermine law enforcement efforts to curtail marijuana  
          cultivation and will result in significantly increased costs in  
          connection with the prosecution of marijuana trafficking cases."  
          Additionally, "The impact of legalizing hemp will be that  
          marijuana cultivators will be able to camouflage their illegal  
          grows with a perimeter of same sex hemp plants.  Effectively,  
          this will require law enforcement to test plants for THC content  
          before taking any action."  

           Laboratory costs:   According to those in opposition, "Since the  
          state crime labs currently are not equipped to test for THC  
          content, they will either have to incur the costs of gearing up  
          for this function, or local agencies will have to incur the  
          additional costs of finding a private lab to conduct testing?  





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          The increased costs for marijuana trafficking prosecutions are  
          incalculable."  
           
          Breeder exceptions  :  The committee may wish to consider that  
          given the exceptions provided to "established agricultural  
          research institutions" and "seed breeders" in this bill, there  
          may be value in specifically stating that any seed purchased or  
          acquired from such persons be accompanied by a "PASSED" THC  
          laboratory analysis.  

           Double referral:  The Senate Rules Committee has doubled referred  
          this bill to the Senate Committee on Public Safety.  Therefore,  
          if this measure is approved by this committee, the motion should  
          include an action to re-refer the bill to the Senate Committee  
          on Public Safety.


           AUTHOR AMENDMENTS:
           
          The following amendments were inadvertently left out of the  
          author's 4/1/13 bill amendment.  Therefore, the author will  
          offer the following amendments in committee:

          Amendment 1:  On Page 7, in line 32, after "institutions"  
          insert: or seed breeders
          Amendment 2:  On page 8, in line 22, after "institution" insert:  
          or seed breeder
           

          RELATED LEGISLATION  :

          AB 388 (Strom-Martin) of 2002, Vetoed.  Would have requested the  
          University of California to assess the economic opportunities of  
          specialty or alternative fiber crops, including industrial hemp,  
          and report to the legislature by January 1, 2004.  

          AB 448 (Strom-Martin) of 2001, failed passage in committee.   
          Would have authorized the secretary of CDFA to issue licenses to  
          cultivate hemp for commercial purposes.

          AB 1147 (Leno) of 2006, Vetoed. Would have permitted the  
          cultivation of industrial hemp in California. In his veto  
          message, the governor stated that hemp is still considered a  
          cannabis plant regardless of its THC content and, therefore,  
          illegal under federal law. 

          AB 684 (Leno) of 2007, Vetoed.  Would have permitted the  





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          cultivation of industrial hemp in California under a pilot  
          program in four counties.  In his veto message, the governor  
          stated that hemp is still considered a cannabis plant regardless  
          of its THC content and, therefore, illegal under federal law.   
          In addition, "law enforcement has expressed concerns that  
          implementation of this measure could place a drain on their  
          resources and cause significant problems with drug enforcement  
          activities."

          SB 676 (Leno) of 2011, Vetoed.  Would have permitted the  
          cultivation of industrial hemp in California under a pilot  
          program in four counties.  In his veto message, the governor  
          stated that hemp is still a federally regulated controlled  
          substance, although "it is absurd that hemp is being imported  
          into the state, but our farmers cannot grow it."
           

          SUPPORT  :
          
          Hemp Industries Association (Sponsor)
          Vote Hemp (Sponsor)
          American Civil Liberties Union of California
          Business Alliance for Commerce in Hemp
          California Certified Organic Farmers
          California State Grange
          California State Sheriffs' Association
          California Teamsters Public Affairs Council
          Colorganics Inc.
          Dash Hemp
          Datsusara
          Dr. Bronner's Magic Soaps
          Drug Policy Alliance
          Ecological Farming Association
          Hempsteads
          Hempy's Inc.
          Humboldt Traders
          Instituto Laboral de la Raza
          Jungmaven Ltd.
          Kings County Sheriff David S. Robinson
          Knoll Farms
          Lafe's Natural BodyCare
          The Living Temple
          Nutiva, Inc.
          Planning and Conservation League
          Santa Barbara Hemp Company
          United Food & Commercial Workers 8 - Golden State
          United Food & Commercial Workers, Western States Council





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          US Hemp Oil Inc.


           OPPOSITION  :
          
          California Narcotic Officers' Association
          California Police Chiefs Association