California Hemp Cultivation: It’s Complicated

Our California hemp lawyers regularly get asked about the laws and regulations about growing hemp in California, manufacturing hemp products, and shipping those products around the country. I’ve written about the various hemp laws in California and how confusing they are previously (see here and here). Those posts, however, were more geared towards the manufacture and sale of hemp-derived cannabidiol (“Hemp CBD”) products than the actual cultivation of hemp, which is becoming an increasingly important topic in the hemp industry in the wake of the federal Agricultural Improvement Act of 2018 (or “2018 Farm Bill”).

The reality is that California is far behind many other states when it comes to hemp. There are very few laws or regulations here on hemp and Hemp CBD, and most of them take a very restrictive view towards what kinds of products are allowed to be sold. There is actual law on the books for cultivation, but it mostly sat there for a few years and is only now coming to light.

To understand the current state of hemp cultivation in California, we need to look back a few years. In 2013, California passed Senate Bill 566, the California Industrial Hemp Farming Act (or “CIHFA”). The CIHFA amended the Health and Safety Code to redefine “marijuana” to exclude industrial hemp, and to statutorily define industrial hemp. It also added a section to the Food and Agriculture Code that would regulate the production of hemp by established agricultural research institutions and commercial cultivators. This latter section was not immediately effective and was subject to federal law authorizing it.

The next year, the federal Agricultural Act of 2014 (or “2014 Farm Bill”) was passed. As readers of this blog probably know by now, section 7606 of the 2014 Farm Bill allowed the cultivation of hemp for research purposes conducted under an agricultural pilot program or by a research institution, in states where hemp cultivation was legal.

After the 2014 Farm Bill was passed, on June 6, 2014, then-California Attorney General Kamala Harris issued opinion 13-1102, which stated “Federal law authorized, and rendered operative, the relevant portions of the California Industrial Hemp Farming Act on February 7, 2014.” The opinion, however, noted that provisions of the CIHFA were “inoperative to the extent that they apply or pertain to any form of industrial hemp cultivation not authorized by federal law.” In other words, commercial cultivation was still not allowed. In 2016, the Control Regulate and Tax Adult Use Of Marijuana Act (or “Prop. 64”) was passed. Prop. 64 formally amended the above California Food & Agriculture Code sections to make the hemp provisions become effective on January 1, 2017.

In 2018, commercial cultivation began to become a reality with Senate Bill 1409. SB-1409 (which we have written about here, here, and here) allowed for the commercial cultivation of hemp upon registration with the state Department of Food and Agriculture (“CDFA”) and county commissioners, effective January 1, 2019. SB-1409 provides relatively sparse testing and other rules (at least in comparison to the highly regulated cannabis industry). After SB-1409 was passed, the CDFA issued proposed regulations in November 2018 for registering commercial cultivators, which appear to be under review with the California Office of Administrative Law (“OAL”) through April 3, 2019.

Part of the reason for the stalling out of the proposed regulations seems to be the 2018 Farm Bill, which was signed on December 20, 2018. The 2018 Farm Bill completely removed hemp from the Controlled Substances Act and require states to submit “hemp production plans” to the United States Department of Food and Agriculture for its approval. But notably, section 7605(b) of the 2018 Farm Bill extends the 2014 Farm Bill through one year after the USDA’s establishment of certain plans (which will be a while from now).

This is a lot to unpack, but the gist is that hemp cultivated pursuant to state law and provisions of the 2014 Farm Bill (i.e., not purely commercial hemp) will be permitted for now, but purely commercial hemp production may not be permitted until the establishment of USDA-approved plans. It will be interesting to see what happens come April 4 if the OAL approves the regulations that allow for commercial hemp cultivation even in spite of no plan being submitted to the USDA. As of now, it’s pure speculation, and I am not aware of any plan submitted by California to the USDA.

This brings us to today. Currently, California law allows for established research institutions to cultivate hemp if they provide certain information to county agricultural commissioners (subject to any state or local prohibitions, of course). The commercial hemp cultivation regulations haven’t been fully implemented as noted above. There are a few big outstanding questions today.

First, what happens if California allows commercial cultivation before or without submitting a plan to the USDA? We might then be in a world similar to cannabis, where the state has adopted laws and regulations that conflict with federal law. If cannabis is any sign, it may be that the federal government does not prioritize enforcement because California would have its own regulations. But there’s no guarantee as to how the federal government would react and in light of the FDA’s December 20, 2018 statement that hemp-derived CBD isn’t allowed in many commercial products, there may be more aggressive federal enforcement.

Problematically, even if California did allow commercial hemp cultivation, that hemp may get siloed in California or just in the nearby states that don’t block shipments. The 2018 Farm Bill does prevent states from interfering interstate shipment, but its terms seem pretty clear that this only applies to hemp produced pursuant to USDA-approved hemp production plans. Some arguments can be made that 2014 Farm Bill-produced hemp can be transported interstate pursuant to this provision, but the 2014 Farm Bill did not allow commercially grown hemp sales.

Another big question is whether hemp grown by an established agricultural research institute in California could be re-sold commercially. The current hemp law as amended by SB-1409 doesn’t speak to this issue, but these institutions may be concerned about selling hemp and may refuse to do it.

Like I have said many times before, the state of hemp law in California is perplexing. That rule is no different for cultivation than it is for the sale of hemp products. It’s always a good idea to consult with experienced California hemp lawyers when considering hemp cultivation or any other sort of hemp sales. As always, stay tuned to the Canna Law Blog for more California hemp updates.