Oregon Hemp: Another Round of ODA Rules

Hemp production is incredibly hot right now in Oregon. Since 2015 the number of licensed hemp growers has climbed from 13 to 584 (with much of that in the past two years) and hemp acreage has rapidly expanded to 11,000 acres. In 2019, we expect to see this dramatic escalation continue for several reasons, including: 1) recent changes ushered in by the 2018 Farm Bill, legalizing industrial hemp, 2) intense nationwide demand for CBD and hemp-based products, and 3) migration from the Oregon Liquor Control Commission (“OLCC”) marijuana program, where oversupply has made life hard for growers.

Fortunately, the Oregon state legislature and Department of Agriculture (“ODA”) have been working hard to keep up with these developments. Last week, ODA issued its second notice of proposed rulemaking of the year. If you recall, on March 1, the agency filed temporary hemp rules, which brought the ODA’s testing rules for hemp and hemp products intended for human consumption in compliance with those used in the testing of marijuana. The new notice proposes to adopt these temporary rules permanently. In addition, the ODA introduced new proposed rules to help address changes to the hemp program, pursuant to HB 4089, as well as to clarify existing rules that were not adopted in the OLCC’s December 2018 filing.

Here is a brief summary of the most significant rule changes:

1. Restructure registration fees. In lieu of a $1,300 hemp grower application fee, the new rules provide for two separate fees and applications: 1) a fee of $250 for a grower registration application, and 2) a fee of $500 for each grow site registration application. Under this new structure, the average grower would pay lower registration fees ($750-1,250) because a majority of registered growers currently farm two or fewer fields. Although the new rules maintain the $1,300 handler registration application fee, they now provide for a $500 application fee—which consists of a $800 fee reduction—for the registration of hemp handlers by reciprocity. This registration is designed for OLCC-licensed processors who are purchasing raw hemp, concentrates and extracts from ODA registrants and introducing these items into the OLCC recreational market. Lastly, the new rules propose to increase the cost for agricultural hemp seed producer application fees by $380 (from $120 to $500).
   
2. Clarify and update recordkeeping and reporting. The proposed rules require a few additional reporting and recordkeeping by registrants. However, these changes do not significantly increase the burden to report and record keep imposed on current registrants.
3. Clarify the option to remediate through resampling if a harvest lot fails pre-harvest testing. Under the new rules, both samples and filed duplicate samples must be reanalyzed if they failed testing. Labs that performed the original test are prohibited from subcontracting retesting. In addition, registrants allowed to remediate failed testing through resampling must provide notice to the ODA of their intent to remediate.
4. Revise sampling procedures for pre-harvest THC testing. As explained above, growers or handlers must have every harvest lot of industrial hemp for human consumption tested as required and in the same manner as marijuana under OAR 333-007-0320 prior to sale or transfer. ODA growers and handlers must also comply with testing requirements for microbiological contaminants in accordance with OAR 333-007-0390, upon the ODA’s request.
5. Establish a fee for submission of change forms. Under the new rules, registrants who wish to update their registration, such as adding a grow site to an existing registration, will be charged a $125 fee.
6. Adopt a fee for department-provided pre-harvest THC testing. The new hemp sampling fees would be increased by approximately 33 percent  to cover the ODA’s cost associated with collecting regulatory samples. The proposed rules includes additional fees, including travel time and overtime charges for services performed by the Department of Administrative Services.
7. Clarify requirements for individuals making retail sales of industrial hemp in Oregon. Those who sell industrial hemp items to consumers will no longer be required to test the item for potency before sale so long as the hemp ingredient used in the product has a compliance test at or below 0.3 percent total THC.

As part of the formal rulemaking process, the ODA scheduled a hearing—on April 23, 2019, at the ODA’s office in Salem—during which stakeholders will have an opportunity to comment on these issues. Written public comments will be accepted until 5pm on May 7, 2019. We will keep you posted on any developments.