Explanation of Statutory Authority
Wis. Stat. s. 94.55 (2) requires the Department to promulgate administrative rules to regulate hemp activities. Wis. Stat. s. 94.55 (2) (b) 2. requires the Department to regulate hemp activities only to the extent required under federal law and in a manner that allows “…the greatest possible opportunity to engage in those activities.” Pursuant to Wis. Stat. s. 94.55 (3w), the Department may use the emergency rulemaking procedures under Wis. Stat. s. 227.24 to promulgate rules under Wis. Stat. s. 94.55. Related Rules or Statutes
Wis. Stat. s. 961.32 (3) relates to the Hemp Program as it creates authorized possession of hemp within the Wisconsin Controlled Substances Act and details when referrals from the Department are necessary for criminal prosecution in relation to the Hemp Program. Plain Language Analysis
The Department currently operates under the Hemp Program, a hemp research program authorized by the 2014 Farm Bill. The Hemp Program is designed to study the growth, cultivation, and marketing of hemp in Wisconsin. Growers and processors provide information to the Department related to hemp production. This rule implements some of the changes outlined in the Final Rule, and thus provides growers with the greatest opportunity to produce hemp in Wisconsin as pursuant to Wis. Stat. s. 94.55 (2). Adopting these changes from the USDA Final Rule allows growers to operate under a less restrictive framework. The 2018 Farm Bill sunsetted the 2014 Farm Bill’s authorization of states to operate hemp research programs, effective one year after the USDA established an approval process of state and tribal plans to produce hemp. The USDA issued Interim Final Rule (IFR), 7 C.F.R. Part 990, effective October 31, 2019, and thus all state hemp pilot research programs were set to expire pursuant to Section 7605 (b) of the 2018 Farm Bill on October 31, 2020. However, on October 1, 2020, Section 122 of the Continuing Appropriations Act, 2021 and Other Extensions Act extended the authority of states to operate hemp pilot research programs until September 30, 2021. This program extension gave states’ more time to develop a USDA-approved State Plan. States’ authority to operate hemp research programs was extended a second time on December 27, 2020 through Section 782 of the Consolidated Appropriations Act. This Act extends the 2014 Farm Bill expiration date to December 31, 2021, this change allows states to avoid switching program authority during the growing season. To continue primary jurisdiction over hemp programs, states and tribes now must have a plan approved by USDA by December 31, 2021.
The Department retains authority to operate a hemp program under Wis. Stat. s. 94.55 (2). Subsection (2) (am) allows the Department to operate a hemp program if federal law requires hemp licenses, and if USDA approves the state’s program. Section 7606 of the 2014 Farm Bill requires licensed hemp production. Section 782 of the Consolidated Appropriations Act requires the USDA to approve the continuation of state hemp research programs through December 31, 2021. Wis. Stat. s. 94.55 (2) (b) 2. requires the Department to regulate hemp production only to the extent required under federal law and in a manner that allows “…the greatest possible opportunity to engage in those activities.” Continuing to operate under a 2014 Farm Bill research program provides participants the greatest opportunity to produce hemp. USDA published the completed hemp Final Rule on January 19, 2021, with an effective date of March 22, 2021. The Final Rule replaces the IFR effective March 22, 2021 and outlines new flexibilities and program requirements. This emergency rule incorporates parts of the Final Rule to give growers the greatest opportunity to produce hemp. These adapted aspects are outlined below.
The Final Rule, or 7 C.F.R. 990, gives licensed growers the option to remediate, resample, and retest non-compliant hemp. As defined in this rule, remediation is the process of a licensed grower rendering part of the cannabis crop unusable by destroying the flower material. A large portion of the delta-9 THC found in cannabis plants is stored within the plant’s floral material; by allowing growers to destroy this part of the cannabis plant, they are more likely to have a compliant crop. A second permitted form of remediation is for the grower to shred or grind the entire lot into a homogeneous biomass. Growers may only remediate after their hemp has been tested and is found to be non-compliant by the Department. Remediated hemp must be sampled and pass regulatory testing. The option of remediation is a new addition to the hemp program and was incorporated to give growers a greater chance of having a compliant and marketable crop. The emergency rule includes clarifying language on negligent enforcement and violations for licensed participants. This rule outlines when a grower or processor would have a license denied, suspended, or revoked. For example, a licensee may be denied a license if they apply while their current license is suspended, apply in place of another licensee, violate this rule or Wis. Stat. s. 94.55, or doesn’t follow a written order from the Department. This rule also provides more detail on corrective action plans for when a licensee negligently violates this rule. These changes are reflective of current program procedures. This emergency rule was promulgated because the federal Final Rule was published on January 19, 2021, with an effective date of March 22, 2021. The Department will incorporate certain provisions of the Final Rule into their program through this emergency rule while continuing to operate under the 2014 Farm Bill. The updated rule repeals and replaces Emergency Rule 2039 and incorporates minor changes to the program.
Fiscal Impact
This rule continues the regulatory structure related to growing hemp and applies to those who wish to participate in the Hemp Program. Currently, individuals or businesses choosing to grow or process hemp must pay all applicable program fees—one-time grower license and acreage ($150-$1,000), annual grower registration ($350), sampling and testing ($250 per lot), processor license fee ($150), and annual processor registration ($100; waived in the first year the processor obtains a license). These program fees generate the program revenue that supports the program. This rule creates a new $300 fee for the option to sample and test remediated, non-compliant hemp lots, or resample and test remediated, non-compliant hemp lots. This rule also creates a new $200 fee for the option to retest where a resample is not required. Remediating and retesting are voluntary under this rule, and therefore growers are not required to pay these fees unless they choose to remediate or retest.
Hemp Program Participants
This rule will impact persons who wish to grow and process hemp as part of the Hemp Program. Anyone wishing to grow or process hemp must participate in the program unless the participant is operating under a USDA-approved tribal hemp plan. This rule does not change existing fees, recordkeeping, and reporting requirements. With this rule, licensees will now be given the option of remediation, resampling, and retesting if their hemp is non-compliant. For the past two years, approximately 10 percent of samples have tested above 0.3 percent THC. In CY2021, the Department expects to initially test 1,030 samples of hemp, meaning 103 of those samples could fail and have the option to remediate, resample, and retest. The option of remediation is a new addition to the hemp program and was incorporated to give growers a greater chance of having a compliant and marketable crop. All hemp must meet defined analytical standards before the Department will issue a fit for commerce certificate and the hemp can be transported from the growing location. This rule provides criteria for participants to obtain and maintain a license. The rule explains the criteria for suspending, revoking, or denying licensure.
A hemp grower who successfully plants, grows, and plans to harvest hemp must have the hemp sampled by the Department before the hemp can be harvested. A fit for commerce certificate must accompany hemp that is transported from the growing location. The fit for commerce certificate is the documentation required by law that verifies that the hemp it accompanies is legally hemp (i.e. at or below 0.3 percent THC). Sampling and testing must be completed before a fit for commerce certificate can be issued. A fit for commerce certificate will be issued for each lot that tests at or below 0.3 percent THC. A lot is a contiguous area of one variety or strain of hemp growing indoors or outdoors. A grower may have more than one lot and each lot must be sampled separately. The existing fee for sampling and testing of one lot is $250 per sample. The new fee for testing a remediation sample is $300. The new fee for a retest where a new sample is not required is $200.
The sampling and testing fee, or resampling and testing fee, for remediated non-compliant hemp lots will be $300 per sample. This fee is higher than the initial pre-harvest sampling and testing fee. The entire lot must be remediated (shredded or ground into a uniform state, a homogenous biomass). The sampling process is expected to take longer than an initial pre-harvest sample to obtain a representative composite sample of the lot. In addition, lab processing will take longer and require more staff time to grind the remediated sample into a uniform consistency needed for lab testing. Based on a failure rate of approximately 10 percent of samples and an estimated 1,030 samples in CY2021, there could be 103 samples annually which may be eligible to be remediated. The Department does not anticipate all growers with failed samples will seek to remediate but does estimate that approximately 50 percent will do so. In that event, the fiscal impact of the new $300 fee would total $15,600 (52 x $300).
Another new fee will allow for testing where a new sample is not collected. If a sample fails the initial pre-harvest sample testing, a portion of the collected sample may be held at the lab for future testing. The Department estimates there would be approximately 25 samples retested and the fiscal impact of the new $200 fee would be $5,000 (25 x $200). These new fees are not required to participate in the Hemp Program. Remediation, and testing where taking a sample is not required are options for growers whose lots have failed the THC testing and are not required to participate in the program.
The estimated economic impact of compliance with this rule is approximately $20,600 ($15,600 + $5,000) for participants.
Local Governments
This rule will not impact local governments. Local governments will not have any major implementation or compliance costs.
Utility Rate Payers
The rule will have no impact on utility rate payers.
General Public
This rule will have no compliance costs to the public as a whole, although there may be some broad economic impact as new business opportunities emerge.
The Department
This rule will have a continued fiscal impact on the Department’s operations. Department staff must review each application and all supporting information and perform a fingerprint-based background check on each new license applicant. This regulatory program requires a high degree of compliance assistance and education. Department staff are also responsible for inspections, sampling, laboratory analysis, and compliance activities. The changes to this rule will increase workload for Department hemp program operations. The option of remediating non-compliant hemp may increase the amount of resampling, retesting, and laboratory analysis by Department staff.
Analysis of Supporting Documents used to Determine Effect on Small Business
Because this rule continues the existing regulatory framework of the Hemp Program, with minor changes to meet current state and federal law, the impact on small business remains relatively the same, and thus no substantial analysis was required to determine the effect on small business. New fees included in this rule are all optional fees for service and are not required to be paid unless a licensee requests the service. The Department reviewed annual and planting reports filed by licensees with the Department from past growing seasons as well as growers’ test results.
Business Impact
This rule continues the regulatory framework of the Hemp Program as it existed under the previous emergency rules with minor changes to ensure consistency with state law and to clarify rule language to reflect program practice. The rule provides an option for licensed growers to remediate their hemp if it exceeds the regulatory level of 0.3 percent total delta-9 THC. This should benefit small businesses, as it provides an alternative to destroying the crop. Therefore, the rule will not negatively impact small business as this rule does not make significant modifications to the regulation of the hemp industry.
This rule adds a new $300 fee for the option to sample and test remediated, non-compliant hemp lots, or resample and test remediated, non-compliant hemp lots. This rule also adds a new $200 fee for the option to retest where a resample is not required. These are fees for new services and growers are not required to remediate or retest and pay these fees unless they request the additional services. The impacts of this rule to the regulated industry do not include changes to existing license fees to participate in the program.
This rule maintains the existing costs of compliance associated with program participation such as licensing, registration, sampling, testing, and recordkeeping in accordance with the requirements of Wis. Stat. s. 94.55 (2) (b) 4. Federal and Surrounding State Programs
The 2014 Farm Bill authorizes states and institutions of higher education to grow, process, and market hemp for research purposes. States with hemp laws that allow hemp to be grown within their states may operate pilot research programs. Hemp varieties that test above 0.3 percent total delta-9 THC on a dry weight basis are not legally defined as hemp.
The 2018 Farm Bill authorizes the USDA to establish a nation-wide hemp production program. This program requires participating states and tribal nations to submit a state or tribal plan for approval that meets the requirements outlined in the Final Rule, 7 C.F.R. Part 990, published on January 19, 2021 and with an effective date of March 22, 2021. Currently, 41 tribes and 23 states have USDA-approved plans under the IFR. So far, one tribe in Wisconsin, Lac Courte Oreilles, has a USDA-approved plan. The program also establishes a federal plan for producers in states or territories of Indian tribes that choose not to administer a state or tribe-specific plan, provided also that the state or tribe does not ban hemp production. The 2018 Farm Bill also authorizes states to continue to operate a research program established under the 2014 Farm Bill, until the program expires, at which time states must have a USDA-approved state plan in place to continue administering a state-operated hemp program. The USDA-approved state plan must be compliant with the 2018 Farm Bill and the IFR. The 2018 Farm Bill sunsetted the 2014 Farm Bill’s authorization of states to operate hemp research programs, effective one year after the USDA established an approval process of state and tribal plans to produce hemp. USDA issued the IFR, effective October 31, 2019, and thus all hemp research programs were set to expire pursuant to Section 7605 (b) of the 2018 Farm Bill.
Section 122 of the Continuing Appropriations Act, 2021 and Other Extensions Act extended the authority of states to operate hemp research programs under the 2014 Farm Bill until September 30, 2021. Wisconsin, along with 20 other states, notified the USDA that for the 2020 growing season, it would continue to operate a pilot research program under the 2014 Farm Bill.
On December 27, 2020, states’ authority to operate hemp research programs was extended a second time through Section 782 of the Consolidated Appropriations Act. To continue primary jurisdiction over hemp programs, states and tribes now must have a plan approved by USDA by December 31, 2021. With the second extension of the expiration date of the 2014 Farm Bill, Wisconsin will continue to operate a program under the 2014 Farm Bill.
Surrounding State Comparison
Minnesota
Minnesota’s pilot program began in 2016 under the 2014 Farm Bill. The USDA approved Minnesota’s State Hemp Production Plan on July 14, 2020. Minnesota operated a 2014 Farm Bill research program until December 31, 2020, before transitioning to their federally approved state 2018 Farm Bill hemp program. This date was chosen to coincide with the beginning of Minnesota’s licensing period and eliminates the need for a transitional license between the two programs.
Minnesota is in the process of updating their State Plan because they are operating under the 2018 Farm Bill. The updated State Plan adopts all necessary regulatory changes to comply with the federal Final Rule. This includes adopting the new process of remediation and disposal, enforcement procedures, and sampling guidelines. The fee structure includes a grower license fee of $150 with a growing location fee of $250, a processor license fee of $250, a license change fee of $50, an additional inspection fee for sampling of $250, and an additional testing fee of $125.
