State SealARIZONA HOUSE OF REPRESENTATIVES


 

SB 1098: industrial hemp; licensing

PRIME SPONSOR: Senator Borrelli, LD 5

BILL STATUS: Land, Agriculture & Rural Affairs

 

Legend:
AZDA – Arizona Department of Agriculture 
ADPS – Arizona Department of Public Safety 
ALJ – Administrative Law Judge
DEA – U.S. Drug Enforcement Agency 
FDA – U.S. Food and Drug Administration 
Program – Agricultural Pilot Program
THC – tetrahydrocannabinol 
Trust Fund – Industrial Hemp Trust Fund 
Amendments – BOLD and Stricken (Committee)

Abstract

☐ Prop 105 (45 votes)	     ☐ Prop 108 (40 votes)      ☐ Emergency (40 votes)	☐ Fiscal NoteRelating to regulation of industrial hemp.

Provisions

Industrial Hemp Legalization

1.       Declares industrial hemp is an agricultural product subject to regulation by the AZDA. (Sec. 1)

2.       Authorizes industrial hemp propagation, processing, manufacturing, distribution and market research under a preapproved Program.

a.       Allows the commercial production, processing, manufacturing, distribution and commerce of industrial hemp outside the Program if authorized under federal law. (Sec. 1)

3.       Requires the AZDA to certify hemp seed derived from previously authorized hemp seed. (Sec. 1)

4.       Prohibits the planting of unauthorized hemp seed. (Sec. 1)

5.       Requires the AZDA Director to:

a.       adopt rules to oversee the licensing, production and management of industrial hemp and hemp seed, including rules to address, correct and remediate violations;

b.       adopt fees by rule; and

c.        authorize qualified applicants to propagate, harvest, transport or process, or any combination thereof, industrial hemp according to adopted rules. (Sec. 1)

                           i.      Declares that the Legislature intends the fees adopted be used to fund AZDA's activities in licensing, testing, inspecting and supervising industrial hemp production. (Sec. 1)

Licensure

6.       Requires a grower, harvester, transporter or processor to obtain a license from the AZDA. (Sec. 1)

7.       Specifies an application for an original and renewal industrial hemp license must:

a.       be on a form provided by AZDA;

b.       include complete and accurate information; and

c.        be accompanied by the licensing fee.

                              i.      Requires the AZDA Director to deposit these fees into the Trust Fund. (Sec. 1)

8.       Requires an applicant to provide proof of having a valid Fingerprint Clearance Card to validate eligibility.

a.       Directs ADPS to conduct fingerprint background checks on license applicants. (Sec. 1, 5)

9.       Allows a member of an Indian Tribe to apply for a license, subject to the prescribed requirements. (Sec. 1)

10.   Provides that the license is valid for one year, unless revoked, and may be renewed. (Sec. 1)

11.   Permits a licensee to pay twice the amount prescribed for biennial renewal but maintains annual reporting requirements. (Sec. 1)

12.   Permits AZDA to revoke or refuse to issue or renew a license for a violation of any state or federal law, rule or order. (Sec. 1)

Recordkeeping, Inspection, Transportation and Distribution

13.   Instructs a licensed grower, harvester, transporter or processor to keep and maintain records as required by rule or order. (Sec. 1)

14.   Allows the AZDA Director or their designee to do the following to ensure compliance:

a.       inspect or audit records during normal business hours; and

b.       physically inspect an industrial hemp site and take a representative sample for analysis by the State agricultural laboratory or a state-certified laboratory. (Sec. 1)

15.   Specifies only a licensee, the AZDA Director or the AZDA Director's designee may transport industrial hemp off the industrial hemp site. (Sec. 1)

16.   Directs the licensee to carry the licensing documents as evidence that the industrial hemp was grown by a licensed grower when transporting industrial hemp.

a.       Excludes the transportation of hemp products. (Sec. 1)

17.   Requires a licensed grower to notify the AZDA Director of:

a.       the sale or distribution of any industrial hemp grown under their license;

b.       the name and address of the person or entity receiving the industrial hemp; and

c.        amount sold or distributed. (Sec. 1)

Corrective Actions, Violations and Civil Penalties

18.   Permits the AZDA take corrective action if a crop contains an average delta-9 THC concentrate exceeding 0.3% on a dry weight basis or violates any other pesticide law. (Sec. 1)

19.   Grants the AZDA Director the ability to:

a.       issue and enforce a written cease and desist order;

b.       issue a stop sale;

c.        size and destroy any crop, harvested crop or hemp seed not in compliance;

d.       take any other action to enforce compliance. (Sec. 1)

20.   Requires the order to prohibit the further sale, processing or transportation of the industrial hemp except on approval of the AZDA Director. (Sec. 1)

21.   Allows a person in violation to request a hearing before an ALJ. 

a.       Specifies the ALJ decision is subject to review by the AZDA Director. (Sec. 1)

22.   Asserts that a request for a hearing before an ALJ does not stay a cease and desist order. (Sec. 1)

23.   Permits the AZDA Director to impose a civil penalty of not more than $5,000 for each violation of:

a.       a licensing requirement;

b.       a license term or condition; or

c.        a rule or order. (Sec. 1)

24.   Prescribes a class 1 misdemeanor (6 months jail/up to $2,500 fines plus surcharges) to any person who intentionally violates any statute, rule or order. (Sec. 1)

25.   Prohibits a person who does not hold a license or who is not a designee or agent of a licensee from propagating, harvesting, transporting or processing industrial hemp and prescribes the penalties associated with the possession, use, production, sale or transport of marijuana. (Sec. 1)

26.   Provides an affirmative defense to any prosecution for the possession or cultivation of marijuana to a licensee or their designee or agent who is in compliance. (Sec. 1)

27.   Exempts:

a.       a licensee who possesses, uses, sells, produces, manufactures or transports industrial hemp from the statutes criminalizing the possession, use, production, sale or transport of marijuana; and

b.       a person who engages in the commercial production, processing, manufacturing, distribution or commerce of industrial hemp outside of the Program is authorized by federal law. (Sec. 2)

Trust Fund

28.   Establishes the Trust Fund for the exclusive purpose of implementing, continuing and supporting industrial hemp licensing.

a.       Specifies the Trust Fund consists of appropriations, licensing fees and other sources. (Sec. 1)

29.   Declares the beneficiary of the Trust is the Industrial Hemp Program.

a.       Includes salaries, fees and office, administrative, bonding and travel expenses. (Sec. 1)

30.   Requires the AZDA Director to administer the Trust Fund as Trustee. (Sec. 1)

31.   Permits the AZDA Director to accept and spend federal monies and private grants, gifts, contributions and devises. (Sec. 1)

32.   Exempts Trust Fund monies remaining unexpended at the end of the FY from reversion to the GF. (Sec. 1)

Miscellaneous

33.   Appropriates:

a.       $250,000 and 3 FTE positions from the GF to the AZDA Plant Services Division in FY 2020; and

b.       $500,000 from the GF to the AZDA in FY 2020. (Sec. 8)

34.   Requires the AZDA Director to establish an Industrial Hemp Advisory Council to:

a.       advise the AZDA Director regarding expenditures from the Trust Fund; and

b.       provide additional assistance as deemed necessary. (Sec. 1)

                        i.      Specifies the Council consists of five members, including one public member appointed by the AZDA Director.

35.   Allows AZDA to adopt rules and provides a one-year rulemaking exemption. (Sec. 7)

36.   Defines terms. (Sec. 1)

37.   Contains a legislative findings clause and purpose statement. (Sec. 1)

38.   Becomes effective one year after the General Effective date of the Fifty-third Legislature, Second Regular Session. (Sec. 9)

39.   Makes technical and conforming changes. (Sec. 3-6).

Current Law

The Agricultural Act of 2014 (2014 Farm Bill) allows universities and state departments of agriculture to begin cultivating industrial hemp for purposes of research conducted under a Program or other agricultural and academic research if allowed under state law. Grow sites must be certified and registered by the state.

The USDA, in consultation with the DEA and FDA, released a Statement of Principles on Industrial Hemp to inform the public on the applicable activities associated with industrial hemp grown in accordance with the 2014 Farm Bill. 

At least 30 states have passed legislation related to industrial hemp, and in general, have taken three approaches: 1) establishing research and/or pilot programs; 2) authorizing studies; or 3) establishing commercial programs. State statutes, except for West Virginia, define industrial hemp as a variety of cannabis with a THC concentration of not more than .3%. Many states specify that the THC concentration is based on a dry weight basis and can be measured from any part of the plant. Additionally, some states also require the plant to be processed by a licensed grower for it to be considered industrial hemp. Most requirements for licensing, registration and permitting include: 1) criminal background checks; 2) periodic renewals, usually one to three years; 3) registration of the grow sites; 3) record keeping and reporting of sales or distribution, including to whom it was sold or distributed; and 4) documentation from the state agency or institution of higher education proving the grower is participating in an approved program. Some states have also removed hemp from the controlled substances list and exempted industrial hemp from the statutory definition on marijuana if it is grown within specific regulations. To protect growers from criminal prosecution some states provide an affirmative defense for cannabis possession and cultivation charges for licensed individuals. Some state laws establishing commercial programs require a change in federal law or waivers from the DEA before implementation by the state (NCSL).

 

 

 

---------- DOCUMENT FOOTER ---------

Fifty-third Legislature                  SB 1098

Second Regular Session                               Version 1: Land, Agriculture & Rural Affairs

 

---------- DOCUMENT FOOTER ---------