BILL ANALYSIS Ó 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.) SB 566 Page 2 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 SB 566 Page 3 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 SB 566 Page 4 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 SB 566 Page 5 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: SB 566 Page 6 "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