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 23, 2013 Consultant: Robert Ingenito SUSPENSE FILE. AS PROPOSED TO BE AMENDED. 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 likely minor costs. The Seed Services Program is funded on a fee-for-service basis; thus, hemp seeds would be treated as another kind of seed that has to be labeled in accordance to the seed law. The planting of marijuana amongst hemp could lead to more allegations of bad seed and hence seed complaints that are costly for CDFA to investigate and administer. However, this likelihood is unknown. 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 Author's Amendments eliminate the department's enforcement authority.