Legislature(2017 - 2018)SENATE FINANCE 532

04/04/2017 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 31 NO ST. EMPLOYEE PAY INCREASE FOR 2 YRS TELECONFERENCED
Heard & Held
+= SB 6 INDUSTRIAL HEMP PRODUCTION TELECONFERENCED
Heard & Held
SENATE BILL NO. 6                                                                                                             
                                                                                                                                
     "An Act relating to industrial hemp; and relating to                                                                       
     controlled substances."                                                                                                    
                                                                                                                                
1:50:11 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon wondered  why the  three-year limit  was                                                                    
chosen to maintain records following  the sale of industrial                                                                    
hemp.  She remarked  that the  federal government  typically                                                                    
maintained a five or ten-year record.                                                                                           
                                                                                                                                
1:51:24 PM                                                                                                                    
                                                                                                                                
BUDDY WHITT, STAFF, SENATOR SHELLEY  HUGHES, replied that it                                                                    
was modeled  after other hemp  programs in other  states. He                                                                    
stressed that  it was  important to keep  the records  for a                                                                    
length of time.                                                                                                                 
                                                                                                                                
Co-Chair MacKinnon wondered whether  the GPS location needed                                                                    
to  be  included  in  the bill.  Mr.  Whitt  responded  that                                                                    
Division of  Agriculture would have that  GPS information in                                                                    
their records, so it was not included in the piece.                                                                             
                                                                                                                                
Co-Chair MacKinnon  looked at  page 4, line  29; and  page 5                                                                    
line 1.  These locations  referenced to fees  collected that                                                                    
equaled the  regulatory costs of the  proposed new industry.                                                                    
She wondered why the word  "approximate" was used. She noted                                                                    
that other licensures  were required to pay for  the cost of                                                                    
the  program support,  and the  word  "approximate" was  not                                                                    
used for  those programs. The legislature  normally confines                                                                    
the program  to a  fee that supported  the costs.  Mr. Whitt                                                                    
replied that  "approximate" was used,  because it was  a new                                                                    
industry  for  the  state.  The  fees  associated  with  the                                                                    
registration would  be charged  prior to  the growth  of the                                                                    
prop.  There  was no  way  to  know exactly  the  regulatory                                                                    
costs, because the crop had not yet grown.                                                                                      
                                                                                                                                
1:56:33 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon  wondered  whether the  words  "may"  or                                                                    
"shall"  for  inspections would  cause  an  increase to  the                                                                    
fiscal note. She wondered why  there was no issued violation                                                                    
related  to a  problem in  the industry.  Mr. Whitt  replied                                                                    
that  the  Division of  Agriculture  may  want to  use  some                                                                    
leniency  in  the   beginning  to  review  the   crop  at  a                                                                    
violation.                                                                                                                      
                                                                                                                                
1:57:36 PM                                                                                                                    
                                                                                                                                
ROB   CARTER,   DIVISION   OF   AGRICULTURE,   PALMER   (via                                                                    
teleconference), stated  that the  language was by  the bill                                                                    
sponsor.  The interpretation  by the  division was  that the                                                                    
should the incumbent  of the stop-sell order  not follow the                                                                    
order; the violation would be allocated to that individual.                                                                     
                                                                                                                                
Co-Chair  MacKinnon  looked  at  line 19,  which  said  "may                                                                    
import into  the state, and  resell industrial  hemp seeds."                                                                    
The  guidance said  that the  Drug Enforcement  Agency (DEA)                                                                    
needed  to  be  involved  in that  transaction.  Mr.  Carter                                                                    
replied  that  the DEA  would  need  to  issue a  form  that                                                                    
allowed  the   transfer  of  a  controlled   substance.  The                                                                    
registrant could apply through the  DEA to import seeds, and                                                                    
then recoup the costs to another registrant of the program.                                                                     
                                                                                                                                
Co-Chair MacKinnon queried the  comment on $500, and whether                                                                    
that  was  consistent  with  other  places  in  code  for  a                                                                    
violation.  Mr.  Whitt  replied that  in  AS  03.05.090,  it                                                                    
stated that  the Division of  Agriculture had  the authority                                                                    
to issue  a civil  penalty for  up to  $500 for  farmers who                                                                    
were not  following the guidelines.  He remarked  that there                                                                    
was an additional provision to  increase that fee to a Class                                                                    
A misdemeanor.                                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon wondered  whether  the $500  would be  a                                                                    
deterrent, should the chemical  content be higher. Mr. Whitt                                                                    
replied  the Division  of Agriculture  had the  authority to                                                                    
fine $500 as often as was  needed. He stressed that the crop                                                                    
would  have a  THC  content of  0.3. He  stated  that a  THC                                                                    
content of above 1.0 would be a criminal violation.                                                                             
                                                                                                                                
2:03:13 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Bishop  hoped  to  have  an  expert  to  discuss                                                                    
industrial hemp versus  the "other kind of  pot." Mr. Carter                                                                    
replied that he could answer that question.                                                                                     
                                                                                                                                
Vice-Chair Bishop understood that  hemp would grow an excess                                                                    
of  above four  feet. The  retail marijuana  for consumption                                                                    
did not grow  that tall. He understood that  the leaves were                                                                    
the same, but hemp did not  have any buds; and the stock and                                                                    
fibers were different. Mr. Carter  replied that the planting                                                                    
densities determined  the trait differences. He  stated that                                                                    
industrial hemp  was upright and recreational  marijuana was                                                                    
a larger and  wider plant to create flowers.  He stated that                                                                    
the  largest difference  was that  the recreational  growers                                                                    
were growing cannabis sativa for  the flowers and the female                                                                    
byproducts.  The  industrial  hemp industry  grew  male  and                                                                    
female plants  in one setting, resulting  in pollination and                                                                    
seed development.                                                                                                               
                                                                                                                                
2:05:59 PM                                                                                                                    
                                                                                                                                
Vice-Chair Bishop asked  how the THC content  was lowered in                                                                    
hemp  production.   He  wondered  whether  the   seeds  were                                                                    
modified. Mr.  Carter responded  that industrial  hemp seeds                                                                    
have not been modified in a laboratory.                                                                                         
                                                                                                                                
Co-Chair  MacKinnon queried  the definition  of "cannabidiol                                                                    
(CBD) oil."  Mr. Whitt  responded that  CBD oil  was already                                                                    
available in  stores. He stated  that the CBD  content would                                                                    
be high in a low THC content plant.                                                                                             
                                                                                                                                
Co-Chair MacKinnon wondered  how CBD oil would  be used. Mr.                                                                    
Whitt  responded  that  CBD  oil  was  the  oil  content  of                                                                    
industrial  hemp that  was used  in  products like  lotions,                                                                    
soaps, and candles.                                                                                                             
                                                                                                                                
Co-Chair MacKinnon  looked at page  6, line 8,  and wondered                                                                    
why  "peace officer"  was used  instead of  law enforcement.                                                                    
Mr. Whitt replied that it matched current statute.                                                                              
                                                                                                                                
Mr. Whitt continued to discuss  the Sectional Analysis (copy                                                                    
on file):                                                                                                                       
                                                                                                                                
     AS 03.05.079 Page 6, lines 16-20                                                                                           
     A registered grower of industrial hemp is guilty of a                                                                      
     violation when they produce industrial hemp with a THC                                                                     
     content of between .3 percent and 1 percent.                                                                               
                                                                                                                                
     Sec. 5  AS 03.05.100 Page 6, Lines 21-23                                                                                   
     The  definition of  industrial  hemp,  which meets  the                                                                    
     definition is  federal statute,  is the  plant Cannabis                                                                    
     Sativa  L  containing  less that  0.3  percent  delta-9                                                                    
     tetrahydrocannabinol (THC).                                                                                                
                                                                                                                                
     Sec. 6    AS 11.71.900 Page 6, Lines 24-31  and Page 7,                                                                    
     Lines 1and2                                                                                                                
     Amendment  in  statute  to remove  industrial  hemp  as                                                                    
     defined  in AS  03.05.100 from  the list  of controlled                                                                    
     substances.                                                                                                                
     Sec. 7  AS 17.20.020 Page 7, Line 3-5                                                                                      
     Food  containing  industrial  hemp  as  defined  in  AS                                                                    
     03.05.100 is not considered adulterated.                                                                                   
                                                                                                                                
2:11:39 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon  queried  the  regulation  of  food  and                                                                    
consumption  with  the  product  used  in  food.  Mr.  Whitt                                                                    
replied  that the  Department of  Environmental Conservation                                                                    
(DEC) regulated food.                                                                                                           
                                                                                                                                
Co-Chair MacKinnon looked at Section  7, page 7, and queried                                                                    
the regulation  of industrial hemp  in the food  supply. Mr.                                                                    
Carter that food products were regulated by DEC.                                                                                
                                                                                                                                
Co-Chair  MacKinnon queried  a  fact sheet  about the  foods                                                                    
that contained hemp.                                                                                                            
                                                                                                                                
Mr. Whitt continued to discuss the Sectional Analysis:                                                                          
                                                                                                                                
     Sec. 8  AS 17.38.900 Page 7, Lines 6-14                                                                                    
     Amendment is statute to  further remove industrial hemp                                                                    
     as defined in AS 03.05.100 from marijuana definitions.                                                                     
                                                                                                                                
     Sec. 9, Page 7, Lines 15-30                                                                                                
     By  December   1,  2024   the  Department   of  Natural                                                                    
     Resources  will issue  a report  to the  legislature on                                                                    
     the  regulation  of industrial  hemp  in  the state  of                                                                    
     Alaska.                                                                                                                    
                                                                                                                                
2:17:10 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon remarked  that  currently under  federal                                                                    
law, hemp  was a  controlled substance. She  understood that                                                                    
the  bill   removed  hemp  from  the   controlled  substance                                                                    
schedule. Mr. Whitt deferred to Ms. Schroeder.                                                                                  
                                                                                                                                
2:18:27 PM                                                                                                                    
                                                                                                                                
KACI  SCHROEDER, ASSISTANT  ATTORNEY GENERAL,  DEPARTMENT OF                                                                    
LAW, explained  that marijuana was  a schedule  1 controlled                                                                    
substance under federal  law. She stated that  the farm bill                                                                    
specifically  addressed  hemp  production,  should  the  THC                                                                    
level be below 0.3 percent.                                                                                                     
                                                                                                                                
Co-Chair MacKinnon  believed that it was  still considered a                                                                    
controlled  substance. Ms.  Schroeder  queried the  document                                                                    
referenced.                                                                                                                     
                                                                                                                                
Co-Chair  MacKinnon  stated  that  she was  looking  at  the                                                                    
"Notice of  Guidance" (copy on file).  Ms. Schroeder replied                                                                    
that  following Section  706 would  allow that  conduct with                                                                    
industrial hemp.                                                                                                                
                                                                                                                                
Co-Chair  MacKinnon  queried   comments  on  the  controlled                                                                    
substance issue.  Mr. Carter responded  that Section  706 of                                                                    
the  Farm  Bill did  not  remove  industrial hemp  from  the                                                                    
National  Controlled Substance  Act, but  it did  give legal                                                                    
by-proxy to  the activities authorized under  the Industrial                                                                    
Hemp  Pilot Program.  The language  removing  hemp from  the                                                                    
Alaska  Controlled   Substance  list  was  to   protect  the                                                                    
agricultural industry.                                                                                                          
                                                                                                                                
Co-Chair MacKinnon remarked that  marijuana was still on the                                                                    
controlled  substance list  in  the  state. Therefore,  hemp                                                                    
would now  be seen  differently. Ms. Schroeder  replied that                                                                    
without the  change in the  bill, hemp would fall  under the                                                                    
same definition as marijuana.                                                                                                   
                                                                                                                                
2:22:00 PM                                                                                                                    
                                                                                                                                
Senator   Dunleavy  queried   the   other  restrictions   on                                                                    
marijuana in the state.                                                                                                         
                                                                                                                                
Co-Chair MacKinnon felt that it was a circular argument.                                                                        
                                                                                                                                
Senator Dunleavy  felt that hemp  was getting  more scrutiny                                                                    
than  marijuana. Ms.  Schroeder  replied  that personal  use                                                                    
marijuana allowed for baking into  foods, operating with one                                                                    
ounce or less; or twelve plants within a dwelling.                                                                              
                                                                                                                                
Senator Dunleavy  replied that those were  limited under the                                                                    
state criminal code. Ms. Schroeder agreed.                                                                                      
                                                                                                                                
Mr. Whitt  furthered that  the bill  was under  scrutiny. He                                                                    
stressed that  the bill  sponsor wanted  to ensure  that the                                                                    
public interest was protected.                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon stressed  that the  marijuana discussion                                                                    
over a  previous legislature did  not remove  marijuana from                                                                    
the controlled substance  list. The purpose was  that it was                                                                    
still  listed  as  a controlled  substance  at  the  federal                                                                    
level.                                                                                                                          
                                                                                                                                
Senator Micciche wondered whether  a better analogy might be                                                                    
the  difference  between a  grape  and  wine. Ms.  Schroeder                                                                    
replied that she could not comment on that analogy.                                                                             
                                                                                                                                
Senator Micciche  queried the point  at which hemp  could be                                                                    
transported across  state lines  in the  form of  a product.                                                                    
Ms. Schroeder deferred to Mr. Carter.                                                                                           
                                                                                                                                
Mr. Carter stated  that an inviable hemp seed  could be sold                                                                    
and transported; and any  non-raw agricultural product could                                                                    
be transported worldwide.                                                                                                       
                                                                                                                                
Mr. Whitt  stated that the  Department of Law  (DOL) pointed                                                                    
out one area that he  hoped the committee would consider. He                                                                    
noted that  there were numerous  issues of  confiscating CBD                                                                    
oil across the state. He looked  at page 5, lines 21 through                                                                    
25,  where  the  bill  specifically  addressed  hashish  and                                                                    
hashish oil as  defined in AS 11.71.900; but  not to include                                                                    
CBD  oil. He  stated that  to remove  oil from  the criminal                                                                    
code to avoid  confiscation of CBD oil in  the future, there                                                                    
needed to be an exclusion of CBD oil from AS 11.71.900.                                                                         
                                                                                                                                
Co-Chair MacKinnon asked to review the fiscal notes                                                                             
                                                                                                                                
Vice-Chair Bishop addressed the fiscal notes.                                                                                   
                                                                                                                                
Co-Chair  MacKinnon   announced  that   there  would   be  a                                                                    
discussion  about   the  need  for  $25,000   to  draft  the                                                                    
regulations.                                                                                                                    
                                                                                                                                
SB  6   was  HEARD  and   HELD  in  committee   for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:33:38 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:35:19 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon handed the gavel to Vice-Chair Bishop.                                                                       
                                                                                                                                

Document Name Date/Time Subjects
SB 31 DOA Response 4.4.17.pdf SFIN 4/4/2017 1:30:00 PM
SB 31
SB 31 Q3 Backup.pdf SFIN 4/4/2017 1:30:00 PM
SB 31
SB 31 Q6 Backup.pdf SFIN 4/4/2017 1:30:00 PM
SB 31
SB 31 Q7.1.pdf SFIN 4/4/2017 1:30:00 PM
SB 31
SB 31 Q7.2.pdf SFIN 4/4/2017 1:30:00 PM
SB 31
SB 31 Q8.pdf SFIN 4/4/2017 1:30:00 PM
SB 31