BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 566 (Leno) - Industrial Hemp
          
          Amended: April 11, 2013         Policy Vote: Ag 5-0, Public  
          Safety 7-0
          Urgency: No                     Mandate: No
          Hearing Date: May 13, 2013      Consultant: Robert Ingenito
          
          This bill meets the criteria for referral to the Suspense File.


          Bill Summary: SB 566 would permit hemp to be grown in the State,  
          upon federal approval, by defining "industrial hemp" to be  
          excluded from the definition of "marijuana." Additionally, the  
          bill would provide for cultivation practices, laboratory  
          testing, reporting requirements, and regulation. 

          Fiscal Impact: The Department of Food and Agriculture (CDFA)  
          estimates that it would require the following with respect to  
          new costs related to the regulation of the development, growth,  
          harvesting, and sale of industrial hemp seeds.

                 $1.7 million for personal services (20.0 PYs, including  
               a manager, 18 scientists, and an analyst).
                 $1.4 million for operating expenses, which includes a  
               one-time database development cost of $200,000.   

          Additionally, the Department of Justice (DOJ) would incur a  
          one-time, potentially significant General Fund cost to meet the  
          bill's reporting requirements. 
          
          Background: Hemp is a commonly used term for varieties of the  
          Cannabis plant and its products, which include fiber, oil, and  
          seed. Hemp can be refined into products like hemp seed foods,  
          hemp oil, wax, resin, rope, cloth, pulp, and fuel. Industrial  
          hemp is currently legal to grow in over two dozen countries. 

          Proposed Law: This bill would, among other things, do the  
          following:

                 Include in the definition of industrial help that it  
               shall have no more than 0.3 percent tetrahydrocannabinol  
               (THC) contained in the dry flowering tops.








          SB 566 (Leno)
          Page 1



                 Redefine "marijuana" to exclude industrial hemp when  
               cultivated or processed for defined purposes.

                 Create a new division for hemp under the Food and  
               Agriculture Code. 

                 Authorize CDFA to regulate the development, growth,  
               harvesting, and sale of industrial hemp seeds.

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

                 Require the Attorney General to report to the  
               Legislature by January 1 2019, or within five years after  
               hemp agriculture is approved under federal law, any  
               incident where marijuana is falsely claimed to be hemp, or  
               where hemp cultivation is used to disguise marijuana  
               cultivation.


          Related Legislation: In 2011, SB 676 (Leno) would have created a  
          limited pilot program for the cultivation of help in California.  
          The measure was vetoed by the Governor.
          
          Staff Comments: CDFA's Seed Services Program is funded by an  
          assessment on the reported sales of agricultural and vegetable  
          seeds, which are deposited into the Food and Agriculture Fund.  
          The Program does not expect a significant financial impact to  
          regulate the "labeling" of hemp seeds. The current version of SB  
          566 however, requires CDFA to regulate the development, growth,  
          harvesting, and sale of industrial hemp seeds. These activities  
          are outside the scope of activities currently performed by the  
          Seed Services Program.

          The current level of compliance monitoring and enforcements  
          performed by the Seed Services Program are not adequate to  
          provide statewide regulation of the potential industrial hemp  
          industry in California. Consequently, a new program will need to  
          be developed to cover these activities.  However, this bill does  
          not specify which entity will pay for the services as well as  
          the fund source needed for the program.  If fees are not created  
          via legislation, then this program will become a general fund  
          obligation.








          SB 566 (Leno)
          Page 2