BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 566
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          Date of Hearing:   August 14, 2013

                          ASSEMBLY COMMITTEE ON AGRICULTURE
                           Susan Talamantes Eggman, Chair
                     SB 566 (Leno) - As Amended:  August 7, 2013

           SENATE VOTE  :   39-0

           PUBLIC SAFETY       7-0         
           
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          |Ayes:|Ammiano, Melendez,        |     |                          |
          |     |Jones-Sawyer, Mitchell,   |     |                          |
          |     |Quirk, Skinner, Waldron   |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUBJECT  :   Industrial hemp.  

           SUMMARY  :  Allows the regulated cultivation and processing of  
          industrial hemp and its seed, upon federal approval, as  
          specified.  Specifically,  this bill  :

          1)Establishes the California Industrial Hemp Farming Act (Act)  
            and provides Legislative findings and declarations.

          2)Creates the following definitions for this Act:

             a)   Defines "board" as the Industrial Hemp Advisory Board;

             b)   Defines "commissioner" as the county agricultural  
               commissioner;

             c)   Defines an "established agricultural research  
               institution" as a public or private institution or  
               organization that maintains land for agricultural research,  
               including colleges, universities, agricultural research  
               centers, and conservation research centers; and,

             d)   Defines "industrial hemp" as a fiber or oilseed crop, or  
               both, that is limited to nonpsychoactive types of the plant  
               Cannabis sativa L. and the seed produced therefrom, having  
               no more than three-tenths of 1% tetrahydrocannabinol (THC)  
               contained in the dried flowering tops, and that is  
               cultivated and processed exclusively for the purpose of  








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               producing the mature stalks of the plant, fiber produced  
               from the stalks, oil or cake made from the seeds of the  
               plant, or any other compound, manufacture, salt,  
               derivative, mixture, or preparation of the mature stalks,  
               except the resin or flowering tops extracted therefrom,  
               fiber, oil, or cake, or the sterilized seed of the plant  
               that is incapable of germination.

          3)Revises the definition of "marijuana" to clarify that it does  
            not include industrial hemp, as defined in this bill, except  
            where the plant is cultivated or processed for purposes not  
            expressly allowed.

          4)Defines the "secretary" as the Secretary (secretary) of  
            [California Department of] Food and Agriculture (CDFA).

          5)Defines a "seed breeder" as an individual or public or private  
            institution or organization that is registered with the  
            commissioner to develop seed cultivars intended for sale or  
            research.

          6)Defines a "seed cultivar" as a variety of industrial hemp.

          7)Establishes within CDFA an Industrial Hemp Advisory Board  
            (board) consisting of 11 members, appointed by the secretary  
            as follows:

             a)   Three of the board members shall be growers of  
               industrial hemp that are registered pursuant to the  
               provisions of this bill.  A member of the board who is a  
               grower of industrial hemp shall be a representative of at  
               least one of the following functions:

               i)     Seed production;

               ii)    Seed condition;

               iii)   Marketing; or,

               iv)    Seed utilization.

             b)   Two of the board members shall be members of an  
               established agricultural research institution;

             c)   One member of the board shall be a representative of the  








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               California State Sheriff's Association or other law  
               enforcement association who has experience or a background  
               in agricultural issues;

             d)   One member or the board shall be a county agricultural  
               commissioner;

             e)   One member of the board shall be a representative of the  
               Hemp Industries Association or its successor industry  
               association;

             f)   One member of the board shall be a representative of  
               industrial hemp product manufacturers;

             g)   One member of the board shall be a representative of  
               businesses that sell industrial hemp products; and,

             h)   One member shall be a member of the public.

          8)States that the members of the board shall be subject to  
            conflict-of-interest provisions related to financial interest.

          9)Limits the term for a board member to three years and if a  
            vacancy occurs, requires the secretary to appoint a  
            replacement member in accordance to member representative  
            requirements.  Provides that member shall not receive a salary  
            but may be reimbursed for attendance of board activities.

          10)Provides that the board shall advise the secretary and may  
            make recommendations on all matters pertaining to this bill,  
            including, but not limited to, industrial hemp seeds laws and  
            regulations, enforcement, annual budgets required to  
            accomplish the purposes of this bill, and the setting of an  
            appropriate assessment rate necessary for the administration  
            of the provisions in this bill.

          11)Requires the board to elect a chair, meet at the call of the  
            chair or secretary, or the request of four board members, but  
            must meet at least once a year to review budget proposals and  
            fiscal matters related to the proposals.

          12)Restricts the growing of industrial hemp to the list of  
            approved seed cultivars, except when grown by an established  
            agricultural research institution or a registered seed breeder  
            developing a California cultivar, pursuant to this division.








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          13)Establishes the list of approved seed cultivars to include  
            those certified by member organizations of the Association of  
            Official Seed Certifying Agencies, including but not limited  
            to, the Canadian Seed Growers Association and the Organization  
            of Economic Cooperation and Development.  It shall also  
            include California varieties certified pursuant to state  
            requirements.

          14)Permits the Secretary to update the list of approved seed  
            cultivars, upon the recommendation by the board or department.

          15)Requires before cultivation, a grower of industrial hemp for  
            commercial purposes shall register with the commissioner of  
            the county in which the grower intends to engage in industrial  
            hemp cultivation, except for an established agricultural  
            research institution.  Specifies requirements of registration  
            including establishment of a fee.

          16)Requires before cultivation, a seed breeder shall register  
            with the commissioner of the county in which the seed breeder  
            intends to engage in industrial hemp cultivation, except for  
            an established agricultural research institution.  Specifies  
            requirements of registration including establishment of a fee  
            and requires the reporting of the information to CDFA.

          17)Requires CDFA to establish, and each commissioner to collect,  
            an assessment rate to be paid by growers of industrial hemp  
            for commercial purposes and seed breeders, not including an  
            established agricultural research institution, to defray the  
            reasonable costs of each commissioner in implementing and  
            enforcing these provisions.

          18)Requires the commissioner of each county to process  
            registrations and renewals within his or her county as  
            economically as possible and each commissioner is to establish  
            registration and renewal fees, and restricts the renewal fee  
            to not more than one-half of the registration fee. 

          19)Requires that, except when grown by an established  
            agricultural research institution or registered seed breeder  
            developing a California cultivar, industrial hemp shall be  
            grown only as a densely planted fiber or oilseed crop, or  
            both, in acreages of not less than five acres at the same  
            time, and no portion of the acreage of industrial hemp shall  








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            include plots of less than one contiguous acre. 

          20)Requires a registered seed breeder to grow industrial hemp  
            for purposes of seed production, only as a densely planted  
            crop in acreages of not less than two acres at the same time,  
            and no portion of the acreage of industrial hemp shall include  
            plots of less than one contiguous acre. 

          21)Prohibits ornamental and clandestine cultivation, as well as  
            the pruning, culling, and tending of individual plants, of  
            industrial hemp and requires all plots to have adequate  
            signage indicating they are industrial hemp.

          22)Provides that industrial hemp shall include products imported  
            under the Harmonized Tariff Schedule of the United States  
            (2013) of the United States International Trade Commission.

          23)Requires, except when industrial hemp is grown by an  
            established agricultural research institution, a registrant  
            who grows industrial hemp under this section to obtain a  
            laboratory test report indicating the THC levels of a random  
            sampling of the dried flowering tops of the industrial hemp  
            grown before the harvest of each crop and as provided below:

             a)   Sampling shall occur as soon as practicable when the THC  
               content of the leaves surrounding the seeds is at its peak  
               and shall commence as the seeds begin to mature, when the  
               first seeds of approximately 50% of the plants are  
               resistant to compression;

             b)   The entire fruit-bearing part of the plant including the  
               seeds shall be used as a sample. The sample cut shall be  
               made directly underneath the inflorescence found in the top  
               one-third of the plant;

             c)   The laboratory test report shall be issued by a  
               laboratory registered with the federal Drug Enforcement  
               Administration, shall state the percentage content of THC,  
               shall indicate the date and location of samples taken, and  
               shall state the Global Positioning System coordinates and  
               total acreage of the crop.  If the laboratory test report  
               indicates a percentage content of THC that is equal to or  
               less than three-tenths of 1%, the words "PASSED AS  
               CALIFORNIA INDUSTRIAL HEMP" shall appear at or near the top  
               of the laboratory test report.  If the laboratory test  








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               report indicates a percentage content of THC that is  
               greater than three-tenths of 1%, the words "FAILED AS  
               CALIFORNIA INDUSTRIAL HEMP" shall appear at or near the top  
               of the laboratory test report;

             d)   If the laboratory test report indicates a percentage  
               content of THC that is equal to or less than three-tenths  
               of 1%, the laboratory shall provide the person who  
               requested the testing not less than 10 original copies  
               signed by an employee authorized by the laboratory and  
               shall retain one or more original copies of the laboratory  
               test report for a minimum of two years from its date of  
               sampling;

             e)   If the laboratory test report indicates a percentage  
               content of THC that is greater than three-tenths of 1% and  
               does not exceed 1%, the registrant that grows industrial  
               hemp shall submit additional samples for testing of the  
               industrial hemp grown;

             f)   A registrant that grows industrial hemp shall destroy  
               the industrial hemp grown upon receipt of a first  
               laboratory test report indicating a percentage content of  
               THC that exceeds 1% or a second laboratory test report  
               indicating a percentage content of THC that exceeds  
               three-tenths of 1% but is less than 1%.  If the percentage  
               content of THC exceeds 1%, the destruction shall take place  
               within 48 hours after receipt of the laboratory test  
               report.  If the percentage content of THC in the second  
               laboratory test report exceeds three-tenths of 1% but is  
               less than 1%, the destruction shall take place as soon as  
               practicable, but no later than 45 days after receipt of the  
               second test report;

             g)   The above paragraph does not apply to industrial hemp  
               grown by an established agricultural research institution  
               if the destruction of the industrial hemp grown will impede  
               the development of types of industrial hemp that will  
               comply with the three-tenths of 1% THC limit established in  
               this section;

             h)   A registrant that intends to grow industrial hemp and  
               who complies with this section shall not be prosecuted for  
               the cultivation or possession of marijuana as a result of a  
               laboratory test report that indicates a percentage content  








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               of THC that is greater than three-tenths of 1% but does not  
               exceed 1%;

             i)   The above paragraph does not apply to industrial hemp  
               grown by an established agricultural research institution.   
               Established agricultural research institutions shall be  
               permitted to cultivate or possess industrial hemp with a  
               laboratory test report that indicates a percentage content  
               of THC that is greater than three-tenths of 1% if that  
               cultivation or possession contributes to the development of  
               types of industrial hemp that will comply with the  
               three-tenths of 1% THC limit established in this section;  
               and,

             j)   Except for an established agricultural research  
               institution, a registrant that grows industrial hemp shall  
               retain an original signed copy of the laboratory test  
               report for two years from its date of sampling, make an  
               original signed copy of the laboratory test report  
               available to the department, the commissioner, or law  
               enforcement officials or their designees upon request, and  
               shall provide an original copy of the laboratory test  
               report to each person purchasing, transporting, or  
               otherwise obtaining from the registrant that grows  
               industrial hemp the fiber, oil, cake, or seed of the plant.

          24)Provides that all of the following are prohibited:

             a)   The possession, outside of a field of lawful  
               cultivation, of resin, flowering tops, or leaves that have  
               been removed from the hemp plant, except as is necessary to  
               perform testing as previously specified;

             b)   Any ornamental or clandestine cultivation of the  
               industrial hemp plant; 

             c)   Any pruning, culling, or tending of individual  
               industrial hemp plants, except when the action is necessary  
               to perform the THC testing as specified; and, 

             d)   Any cultivation of industrial hemp in acreages of less  
               than five acres, or any acreage comprised of plots of less  
               than one contiguous acre, except when the industrial hemp  
               is grown by an established agricultural research  
               institution or seed breeder.








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          25)Mandates, not later than January 1, 2019, or five years after  
            the provisions of this bill are authorized under federal law,  
            whichever is later, the Attorney General to report to the  
            Assembly and Senate Committees on Agriculture and the Assembly  
            and Senate Committees on Public Safety the reported incidents,  
            if any, of the following:

             a)   A field of industrial hemp being used to disguise  
               marijuana cultivation; or,

             b)   Claims in a court hearing by persons other than those  
               specifically exempted that marijuana is industrial hemp.

          26)States pursuant to existing law, this section related to the  
            Attorney Generals' report is repealed on January 1, 2023, or  
            four years after the date that the report is due, whichever is  
            later.

          27)Requires, not later than January 1, 2019, or five years after  
            the provisions of this bill are authorized under federal law,  
            whichever is later, the board, in consultation with the Hemp  
            Industries Association, to report the following to the  
            Assembly and Senate Committees on Agriculture and the Assembly  
            and Senate Committees on Public Safety:

             a)   The economic impacts of industrial hemp cultivation,  
               processing, and product manufacturing in California; and,

             b)   The economic impacts of industrial hemp cultivation,  
               processing, and product manufacturing in other states that  
               may have permitted industrial hemp cultivation.

          28)States that these provisions shall not become operative  
            unless authorized under federal law.

          29) Requires, if these provisions become operative, the Attorney  
            General to issue an opinion on the extent of authorization  
            under federal law and California law, the operative date of  
            those provisions, and whether federal law imposes any  
            limitations that are inconsistent with these provisions and  
            shall post the opinion on its Internet Web site.

           EXISTING LAW  defines "marijuana" as "all parts of the plant  
          Cannabis sativa L., whether growing or not; the seeds thereof;  








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          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."  

          Federal law places controlled substances into five schedules  
          ranked by medical benefit and potential for abuse.  Schedule I  
          controlled substances are deemed to have no medical benefits and  
          high potential for abuse.  Marijuana is listed as a schedule I  
          controlled substance.  THC is listed as a separate schedule I  
          substance.  As clarified by case law, THC in Schedule I applies  
          only to synthetic THC, because "if naturally-occurring THC were  
          covered under THC, there would be no need to have a separate  
          category for marijuana, ? which contains naturally-occurring  
          THC."  [Hemp Industries v. Drug Enforcement Administration (9th  
          Cir. 2004) 357 F.3d 1012, 1015.]

           FISCAL EFFECT  :   According to the Senate Appropriations  
          Committee, 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 would incur a one-time,  
          potentially significant General Fund cost to meet the bill's  
          reporting requirements.

           COMMENTS  :  According to the author, SB 566 seeks to create an  
          exemption for the cultivation of, and a separate legal  
          definition for, industrial hemp, and places regulatory  
          provisions for the production of hemp into statute.  These  
          provisions of the bill become operative only upon federal  
          approval.

          Industrial Hemp is an agricultural crop that is grown and  
          processed in over 30 countries for paper, clothing, canvas,  








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          rope, food, personal care products, automotive parts, building  
          materials, and many other commercial uses.  It has no  
          psychoactive properties in any part of the plant, and is  
          cultivated as an agricultural field crop.  Industrial hemp is  
          not planted in the same fashion as marijuana; typically hemp is  
          planted in close spacing and narrow rows, while marijuana is  
          larger spacing and much wider separation of the rows.  The  
          exception would be when hemp is grown for the development of a  
          new cultivar or variety, and then plantings may be similar to  
          marijuana plantings.

          According to estimates by the Hemp Industries Association, the  
          market for industrial hemp products in the United States was  
          $500 million in 2012 and has been growing at a rate of $26  
          million a year. A large portion of those sales are by California  
          manufacturers of food and personal care products made from hemp  
          seed and oil.  .  

          Although both, marijuana and hemp are members of the Cannabis  
          sativa L. species, hemp and marijuana are distinct physically  
          and chemically.  Marijuana is a tropical variety of cannabis  
          that grows to a height of six feet.  It has been cultivated to  
          grow as a bush with many branches and leaves to maximize the  
          number of flowers where tetrahydrocannabinol (THC) potency is  
          the strongest.  Hemp has an appearance similar to bamboo and has  
          few branches and leaves. Unlike marijuana, hemp leaves tend to  
          cluster at the crown of the plant.  The most important  
          distinction between hemp and marijuana is that hemp has less  
          than three tenths of one percent THC while marijuana contains  
          three to 25 percent THC.

          The federal Drug Enforcement Administration has classified  
          industrial hemp as a controlled substance.  However, in 2004 the  
          U.S. 9th Circuit Court of Appeals ruled that the Drug  
          Enforcement Authority (DEA) did not have the authority to  
          regulate hemp under the Controlled Substances Act of 1970.  In  
          addition, the court clarified that the products produced from  
          industrial hemp are legal for possession, sale, and consumption  
          in all parts of the United States. This includes the stalk,  
          fiber, seed, and oil from the plant.  The DEA dropped its appeal  
          for that decision and the 9th Circuit Court ruling now stands as  
          U.S. law.  

          SB 566 is structured to relieve law enforcement of the burden of  
                                              having to discern hemp from marijuana in clandestine groves and  








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          removes any potential federal preemption issues by requiring  
          federal approval for the provisions of the bill to be operative  
          and for hemp cultivation to proceed.  

          Opponents state that industrial hemp cultivation would undermine  
          law enforcements' efforts to curtail illegal marijuana groves  
          and would significantly increase cost of such prosecutions.   
          They state that hemp crops could camouflage illegal plants and  
          cause law enforcement to test all plants for THC before taking  
          action, potentially enabling criminals to escape.  Additionally,  
          no state crime lab are equipped to test for THC, and they would  
          need to incur the cost of gearing up for such testing, or have  
          the additional cost of using private labs to conduct the  
          testing.

          Further, they cite a non-reviewed January 2001 University of  
          Kentucky, Department of Agricultural Economics staff paper  
          titled Industrial Hemp: Legislative Briefing that answers the  
          question 'is hemp profitable for US farmers?' with "the bottom  
          line is we don't know for sure.  But, in examining other  
          countries experiences, it looks doubtful.  The US has no hemp  
          manufacturing industry to speak of, and demand is small and of  
          questionable durability."

          Contrarily, a Congressional Research Service paper titled Hemp  
          as an Agricultural Commodity  dated March 21, 2013, has  
          concluding remarks stating: "..., the U.S. market for hemp-based  
          products has a highly dedicated and growing demand base, as  
          indicated by recent U.S. market and import data for hemp  
          products and ingredients, as well as market trends for some  
          natural foods and body care products. Given the existence of  
          these small-scale, but profitable, niche markets for a wide  
          array of industrial and consumer products, commercial hemp  
          industry in the United States could provide opportunities as an  
          economically viable alternative crop for some U.S. growers."

          Two bills have been introduced in Congress, H.R. 525 and S. 359,  
          titled The Industrial Hemp Farming Act of 2013, providing a new  
          definition for industrial hemp and deferring to the states the  
          regulation of hemp.

          The author continues to work to better define the funding  
          structure with the agricultural commissioners and CDFA.  The  
          committee may wish to ask the author his intentions regarding  
          resolving the funding and fee structure.








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          The committee may wish to consider if the wording in Section  
          81008(d), page 13, line 20, after the word "or" needs to be  
          amended to read "registered seed breeder in accordance to  
          section 81004."  (Any amendments agreed to in this committee  
          would be adopted in the Assembly Committee on Appropriations.)   
          This would make the language consistent with other sections of  
          the bill.

           Prior Legislation  :  SB 676 (Leno), of the 2011-12 Legislative  
          Session, would have authorized an eight-year, five-county pilot  
          project with respect to the cultivation and processing of  
          industrial hemp.  SB 676 was vetoed.  The Governor's veto  
          message stated:

               "Federal law clearly establishes that all cannabis plants,  
               including industrial hemp, are marijuana, which is a  
               federally regulated controlled substance. Failure to obtain  
               a permit from the U.S. Drug Enforcement Administration  
               prior to growing such plants will subject a California  
               farmer to federal prosecution. 

               Although I am not signing this measure, I do support a  
               change in federal law. Products made from hemp - clothes,  
               food, and bath products - are legally sold in California  
               every day. It is absurd that hemp is being imported into  
               the state, but our farmers cannot grow it."

          AB 684 (Leno), of the 2007-08 Legislative Session, would have  
          permitted the cultivation of industrial hemp in California under  
          a pilot program in five counties.  AB 684 was vetoed.  

          AB 1147 (Leno), of the 2005-06 Legislative Session, would have  
          permitted the cultivation of industrial hemp in California.  AB  
          1147 was vetoed.

          AB 388 (Strom-Martin), of the 2001-02 Legislative Session,  
          requested the University of California to conduct a study of the  
          economic opportunities associated with the production of  
          alternative fiber crops, including industrial hemp.  AB 388 was  
          vetoed.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 








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          Hemp Industries Association (Co-Sponsor)
          Vote Hemp (Co-Sponsor)
          American Civil Liberties Union
          California Alliance with Family Farmers
          California Certified Organic Farmers
          California State Grange
          California State Sheriffs' Association
          Colorganics, Inc.
          County of Lake
          Dash Hemp Santa Cruz
          Datsusara
          Dr. Bronner's Magic Soaps
          Drug Policy Alliance
          Ecological Farming Association
          HempAware
          Hempteads
          Hemptopia Inc.
          Hempy's Inc.
          Humboldt Traders
          Instituto Laboral de la Raza
          Jungmaven Ltd.
          Kern County Sheriff
          Kings County Sheriff
          Knoll Farms LLC
          Lafe's Natural Body Care
          Nutiva Inc.
          Planning and Conservation League
          Santa Barbara Hemp Company
          The Hemp Road
          The Living Temple
          U.S. Hemp Oil
          United Food & Commercial Workers 8/Golden State
          United Food & Commercial Workers Union Local 5
          United Food & Commercial Workers Western States Council

           Opposition 
           
          California Narcotic Officers' Association
          California Police Chiefs Association
          San Diego County Sheriff's Department


           Analysis Prepared by  :    Jim Collin / AGRI. / (916) 319-2084 








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