California Hemp Cultivation Law is About to Change, Again

A week or so ago, I wrote a post outlining the current state of California hemp laws, and noted that there are two pending pieces of legislation that could change the state of hemp law in California: AB-228 which deals more with adding hemp-derived cannabidiol to foods and other consumer products, and SB-153, which would re-write a significant portion of California’s Food and Agriculture Code that relates to hemp cultivators. Today, I’m going to talk about SB-153, which could have a massive impact on California’s hemp cultivation industry.  Below are some of the highlights of the bill.

A New Definition of “Industrial Hemp”

Currently, the California Health and Safety Code defines “industrial hemp” as follows:

“Industrial hemp” means a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent tetrahydrocannabinol (THC) contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom.

Current provisions of the Food and Ag. code relative to hemp use this definition. But if SB-153 is passed, it’ll add a brand new definition of “industrial hemp” to the Food & Agriculture Code, as follows:

“Industrial hemp” means an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis.

To be clear, this new definition would be in addition to—and not a replacement of—the current state definition. And significantly, the two definitions are different. For example, the general H&S Code definition appears to place caps on the total amount of THC, whereas the Food and Ag code’s definition would place limits on delta-9 THC. This could create confusion or different standards among state agencies. We’ve written about how “total THC” limits have caused a headache in Oregon, and it’s possible that these different definitions could lead to similar issues.

Additionally, the Food and Ag code’s definition only applies to agricultural products, and may not apply to many other derivatives, for example, hemp products imported from other states.

A California Hemp Production Plan

SB-153 would force the state to create and submit to the U.S. Department of Agriculture a hemp production plan. If you haven’t read about the 2018 Farm Bill yet, in short, it allows states to set up their own hemp production programs after approval by the USDA. States aren’t forced to submit plans and have to affirmatively take steps to do it, and SB-153 would put CA on track to do just that.

New Definitions of “Established Agricultural Research Institutions”

Current California law creates a scheme for commercial cultivators to register to cultivate hemp, and then exempts established agricultural research institutions (“EARIs”) from needing to register. EARIs currently can include:

(1) A public or private institution or organization that maintains land or facilities for agricultural research, including colleges, universities, agricultural research centers, and conservation research centers; or

(2) An institution of higher education (as defined in Section 1001 of the Higher Education Act of 1965 (20 U.S.C. 1001)) that grows, cultivates or manufactures industrial hemp for purposes of research conducted under an agricultural pilot program or other agricultural or academic research.

Part (2) of the EARI definition is pretty consistent with the 2014 Farm Bill, which is still in effect, but part (1) is much broader. In the wake of this law, many institutions that may not necessarily qualify for cultivation under federal law would be able to cultivate in CA.

SB-153 would close that gap. The bill would re-define EARIs to only include:

an institution of higher education, as defined in Section 101 of the federal Higher Education Act of 1965 (20 U.S.C. Sec. 1001), that grows, cultivates, or manufactures industrial hemp for purposes of research conducted under an agricultural pilot program or other agricultural or academic research in accordance with Section 7606 of the federal Agricultural Act of 2014 (7 U.S.C. Sec. 5940) or otherwise approved by the secretary.

This new definition of EARIs would be much more in line with the 2014 Farm Bill, and would not allow many different kinds of parties to claim EARI exemptions. But note, this definition change won’t take effect until after the state’s hemp production plan is approved. So it could take a long time.

Expansion of Hemp Registrations

What will all of those companies who used to qualify as EARIs and don’t want to cultivate commercial do if the definition changes? Well, the answer is that SB-153 would expand required registrations from only commercial cultivators to include all cultivators except EARIs. So purely private companies who wanted to do hemp research and could not qualify as EARIs or work with EARIs would probably need to get registered with their county commissioner and follow the Department of Food and Agriculture (and localities’) requirements for registered cultivators.

Penalties for Misbehavior

SB-153 would add some pretty key penalty provisions that are not currently in the Food and Ag code.

First, SB-153 says that “[a]ny person convicted of a felony relating to a controlled substance under state or federal law before, on, or after January 1, 2020, shall be ineligible, during the 10-year period following the date of the conviction, to participate in the industrial hemp program.”

This is exceptionally broad. Anyone who has been convicted, ever, in any state, for any drug, would be barred from participating in the program for 10-years post conviction. We don’t have hemp regs yet or even know what the production plan will look like. But the extent of this could be far-reaching. If “ownership” is anything like in the cannabis rules, this may exclude a wide class of persons from even owning relatively minor stakes in hemp companies.

Second, “A person that materially falsifies any information contained in an application [for commercial or non-commercial registration], or other application to participate in the industrial hemp program, shall be ineligible to participate in the industrial hemp program.”

This is also significant. Companies who are seeking registrations will need to be 100% sure that everything they put into their application is accurate. Even minor slip-ups could lead to ineligibility to participate in the hemp industry.

These are just a few examples of the significant changes that SB-153 might bring about. The bill isn’t guaranteed to pass, and it’s possible that it gets amended again. It’ll be a while before it’s fully implemented, but it’s clear now that the state wants to get up to speed and in compliance with the federal farm bills as fast as possible. We’ll continue to report on SB-153 and its aftermath in the coming months.