BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 566
                                                                  Page  1

          Date of Hearing:   August 21, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                     SB 566 (Leno) - As Amended:  August 7, 2013 

          Policy Committee:                             Public  
          SafetyVote:7-0
                       Agriculture                           

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill provides for regulated cultivation and processing of  
          industrial hemp upon federal approval, as specified.  
          Specifically, this bill:

          1)Defines industrial hemp as a crop limited to nonpsychoactive  
            types of the plant Cannabis sativa L., having no more than  
            three-tenths of 1% tetrahydrocannabinol (THC) contained in the  
            dried flowering tops, that is cultivated and processed  
            exclusively for 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 derivative of the plant -  
            except the resin or flowering tops - that is incapable of  
            germination.

          2)Revises the definition of marijuana to clarify it does not  
            include industrial hemp as defined by this bill. 

          3)Creates an 11-member Industrial Hemp Advisory Board within the  
            CA Department of Food and Agriculture (CDFA) to advise the  
            secretary.   

          4)Allows industrial hemp to be grown only if it is on a list of  
            approved seed cultivars, as approved by specified entities. 

          5)Requires industrial hemp growers and seed breeders to register  
            with the agricultural commissioner of the county in which the  
            grower intends to grow industrial hemp. (Established  
            agricultural research institutions are exempted.) 









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          6)Requires CDFA to establish, and each county agricultural  
            commissioner to collect, an assessment rate to be paid by  
            commercial industrial hemp growers and seed breeders  
            sufficient to cover county administrative and enforcement  
            costs.  

          7)Requires county commissioners to establish registration and  
            renewal fees to cover registration costs.  

          8)Specifies that industrial hemp must be grown in acreages of  
            not less than five acres, with no plots of less than one  
            contiguous acre. 

          9)Requires a registrant who grows industrial hemp to obtain a  
            laboratory test report to determine the THC levels of a random  
            sampling of the dried flowering tops of the hemp before the  
            harvest of each crop, as specified, with the goal of no more  
            than three-tenths of 1% THC contained in the flowering tops. 

            If the test report indicates a percentage content of THC equal  
            to or less than three-tenths of 1%, the hemp qualifies as  
            California Industrial hemp. If the laboratory test report  
            indicates a THC content between three-tenths of 1% and 1%, the  
            registrant must submit additional samples for testing.   

            A registrant must destroy the hemp upon receipt of an initial  
            test report indicating more than 1% THC, or a second report  
            indicating THC content between three-tenths of 1% and 1%.  

            A registrant who intends to grow industrial hemp and who  
            complies with this section shall not be prosecuted for  
            cultivation or possession of marijuana as a result of a test  
            report.

          10)Requires, by 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  
            Legislature any reported incidents of using an industrial hemp  
            field to disguise marijuana cultivation, and/or any claims in  
            a court hearing that marijuana is industrial hemp.

          11)Requires, by 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 to the Legislature regarding  








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            the economic impacts of industrial hemp in California and the  
            economic impacts of industrial hemp in other states that may  
            have permitted industrial hemp cultivation.

          12)Specifies this act shall not become operative unless  
            authorized under federal law. If these provisions become  
            operative, the Attorney General is required 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 inconsistent with  
            these provisions.  

           FISCAL EFFECT  

          1)Minor, likely absorbable, costs to CDFA to support the  
            Industrial Hemp Advisory Board. 

          2)Minor, likely absorbable, costs to CDFA to establish and  
            maintain a list of approved seed varietals. 

          3)Unknown administrative costs, fully covered by fee revenue, to  
            county agricultural commissions to operate a registration  
            program and to implement and enforce the act.

          4)Costs of laboratory reports would be borne by registrants.

          5)Minor absorbable reporting costs to the Department of Justice.  


           COMMENTS

          1)Rationale.  According to the author, "This bill creates jobs.  
            California companies account for over 50% of the revenues of  
            the U.S. retail market for hemp products, which is  
            approximately $500 million and growing. California hemp  
            cultivation will create the need for hemp seed and fiber  
            processing facilities. With so many California-based hemp  
            industry companies, investors will take the opportunity to  
            support the development of hemp processing operations that  
            would employ numerous Californians.  

          "Hemp is an extremely beneficial crop for farmers. Because it  
            grows in dense groves, hemp is a smother crop that requires  
            little or no pesticides or herbicides. Hemp is also a great  
            rotation crop as it leaves nutrients in the soil for the next  








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            crop?.

            "Because this bill is operative only upon federal approval,  
            there are no conflicts with federal law.  Federal approval may  
            take several different forms including a federal  
            administrative waiver or a change in federal law.  The  
            Industrial Hemp Farming Act of 2013 (H.R. 525 and S. 359) has  
            been introduced in both houses of Congress with bipartisan  
            support including strong support from Senate Majority Leader  
            Mitch McConnell and Senator Rand Paul.  If the current federal  
            legislation passes, the federal government will defer to  
            states to regulate hemp cultivation.  

            "SB 566 provides the necessary framework, provisions and  
            regulations for California hemp cultivation.  Once federal  
            permission for cultivation is given, the Attorney General will  
            issue an opinion on the extent of federal approval and will  
            note whether federal law imposes any limitations that are  
            inconsistent with the provisions of this bill?.

            "SB 566 ensures law enforcement will not be negatively  
            impacted. Under the terms of this bill, all flowering tops of  
            the industrial hemp plant, which have no legal commercial  
            application, are not permitted if removed from the field of  
            cultivation. Although hemp flowers have no psychoactive  
            effect, this relieves law enforcement of any need to  
            distinguish hemp from marijuana. For these reasons, the bill  
            enjoys the support of the California State Sheriffs'  
            Association.

           2)Support  includes the CA State Sheriffs Association, the ACLU,  
            the Planning and Conservation League, and a list of  
            hemp-related commercial entities that use hemp. Vote Hemp, a  
            sponsor of this bill, states, "Markets for hemp products in  
            the United States are growing rapidly including foods,  
            bodycare, textiles and composites. According to SPINS [an  
            information and service provider for the Natural and Specialty  
            Products Industry] retail sales of hemp food and body care  
            products in the stores they track grew by more than 16.5% to  
            $52 million in 2012. Mainstream companies like Ford, Daimler  
            Chrysler, Calvin Klein and Adidas use hemp in their products.  
            A Zogby poll conducted in 2007 shows 71% of likely voters in  
            California support changing state law to allow California  
            farmers to grow industrial hemp. A number of California  
            companies like Dr. Bronner's, Nutiva and Alterna use imported  








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            hemp in their products and want a cheaper domestics source.  
            The Hemp Industries Association estimates that total U.S.  
            retail sales of hemp products in 2012 were in excess of $500  
            million.

          "Currently one of the largest markets for hemp is in  
            bio-composites. Ford, GM, Daimler Chrysler, Saturn, and BMW  
            are currently using hemp based composites for their door  
            panels, trunks, head liners and other interior parts. Hemp,  
            with its superior tensile strength and light weight, is an  
            outstanding raw material for this potentially huge market.  
            Replacing fiberglass with bio-composite materials is also  
            better for the environment because hemp bio-composites are  
            recyclable."

           3)Opposition  includes the CA Police Chiefs Association. The  
            California Narcotic Officers' Association states, "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.

          "Grown in the wild, hemp and marijuana are visually  
            indistinguishable.  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 - and beguiling hemp  
            camouflage can enable the cultivator to potentially escape  
            accountability altogether. 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."

           4)Pending amendment  . The author is continuing discussions with  
            CDFA on language for one registration fee set and collected by  
            CDFA to cover the department's costs. 

           5)Prior Legislation  . 

             a)   SB 676 (Leno), 2011, authorized a five-county pilot  
               project with respect to the cultivation and processing of  
               industrial hemp. SB 676 was vetoed. In his veto message,  
               Gov. Brown stated:








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             "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."

             This bill addresses the governor's concerns by making this  
               bill contingent on federal authorization.

             b)   AB 684 (Leno), 2007, was similar to SB 676 and was  
               vetoed.  

             c)   AB 1147 (Leno), 2006, authorized cultivation of  
               industrial hemp and was vetoed.


           Analysis Prepared by  :    Geoff Long / APPR. / (916) 319-2081