Follow up from Gov’s office

Getting closer to the GA session!

We received the following from the Gov’s office this week regarding Virginia Industrial Hemp. Some good insight regarding the progress of Virginia Industrial Hemp.

 

Virginia Industrial Hemp Stakeholder Discussion

PHB  – East Reading Room

November 7, 2014

 

Present:

Carrie Chenery, Assistant Secretary of Agriculture and Forestry

Jay Swanson, Deputy Policy Director

Dietra Trent, Deputy Secretary of Education

Meghan Hobbs, Special Assistant of Agriculture and Forestry

Ed Scott, Virginia House of Delegates, 30th District

Ann Fitzgibbon, Legislative Aide to Delegate Daun Hester, 89th District

Sandy Adams, Commissioner, VDACS

Kevin Schmidt, Director, Office of Policy, Planning and Research, VDACS

Dr. Jewel Hairston, Dean, VSU College of Agriculture

Dr. Wondi Mersie, Director of Research, VSU College of Agriculture

Dr. Alan Grant, Dean, Virginia Tech College of Agriculture and Life Sciences

Dr. Saied Mostahimi, Director, VA Agricultural Experiment Station, Virginia Tech

Spencer Neale, Director of Commodity Marketing Development, VA Farm Bureau Federation

Brad Copenhaver, Director of Government Affairs, Virginia Agribusiness Council

Tim Phfol, Interim Executive Director, Virginia Tobacco Commission

John W. Jones, Executive Director, Virginia Sheriffs’ Association

Chief Howard Hall, Roanoke County Police

Christy Morton, Executive Director, Center for Rural Virginia

Fred (Freddie) Wydner, Director of Agribusiness Development, Pittsylvania County

Leigh Cockram, Director of Business Development, Institute for Advanced Learning & Research

Mark Gignac, CEO, Dan River Plants, LLC

Jim Politis, Virginia Industrial Hemp Coalition

Eric Steenstra, President, Vote Hemp

 

Welcoming Remarks and Introductions (Carrie Chenery and Jay Swanson)

  • Carrie: Thank you everyone for your time and participation in this important stakeholder discussion today.   This meeting and your feedback will be helpful and we look forward to working with all of you and your respective organizations on this issue.

Issue Background (Ed Scott)

  • In the 1990s, the General Assembly looked into industrial hemp as a way to find another commodity for VA, besides tobacco. They had several meetings, but never produced a final document.
  • Also in the 1990s, the Rural Economic Analysis Program (REAP) at Virginia Tech did a good job of laying out the issues of the time. The REAP analysts questioned if there would be a market for industrial hemp in VA.
  • The current House of Delegates Agriculture, Chesapeake and Natural Resources Committee wants agriculture and forestry to grow in the Commonwealth. The Committee is not afraid to take this on and see what can happen as it relates to industrial hemp.  There is a willingness to take a look at another crop to see what the opportunities are.  It may be difficult because of the current budget climate, but they are happy to support research into the issue.

Progress to Date

  • Jay Swanson
    • In March 2014, Congress approved the Agricultural Act of 2014 (Farm Bill), Section 7606, allowing an institute of higher education or a state department of agriculture to grow or cultivate industrial hemp if the following conditions were met:
      • The industrial hemp is grown or cultivated for purposes of research conducted under an agriculture pilot program or other agricultural or academic research; and
      • The growing or cultivating of industrial hemp is allowed under the laws of the State in which such institution of higher education or State department of agriculture is located and such research occurs.
    • Currently, 15 states permit the growing of industrial hemp and 9 of those went all the way and gave a blanket approval.
  • Senator Mitch McConnell (KY) has been a long-time champion of this in Congress.
  • Carrie
    • We are hosting this meeting at the request of the Rural Caucus, who asked the Administration to explore options around industrial hemp after the changes Jay described at the federal level.
    • Discussion on the White Paper
    • Farm Bureau Questions
      • If industrial hemp (IH) seed can be harvested using traditional grain combines and headers, what are the possible negative impacts of IH seed contamination of other grains and oilseeds used for food and feed? Do USDA, FDA, or EPA have tolerances for IH whole intact seed and IH biomass?  Would IH contaminated grains and oilseeds be subject to seizure by law enforcement and lead to criminal prosecution?
      • Similarly, how does one contain IH from escaping to unregistered fields and properties due to incidental seeding offsite by planting, harvest and transport equipment? Would volunteer IH and any other crops it may be growing with be subject to seizure and destruction by law enforcement and lead to criminal prosecution?
      • Who are the major IH processing companies in North America and Europe, and what do they produce? Have they expressed an interest in locating operations in the U.S. and specifically, the Mid-Atlantic or Virginia?
      • Who are the major U.S. companies that use IH products, what are the products and what is the estimated annual demand in terms of raw product?
      • What are the top 5 product uses (by IH volume and by IH value) for IH oil, IH cake and IH fiber? For each of the top 5 IH uses, what are the top 2 alternative raw ingredients and how does IH demand and value compare to each?
      • Based on existing IH crop production averages for inputs and yields and Canadian IH farm prices develop an IH crop enterprise budget for Virginia (eastern, central, valley, and southwest).
      • If IH is grown for seed harvest, is there any value in harvesting the stems/stalks afterwards?
      • What are the major pests and diseases affecting IH and what, if any, pesticides are available to respond? Are these pesticides registered in the U.S. for other crops/uses?
      • What are the optimal climatic and soil conditions for producing IH?
    • The Governor’s office will work with Delegate Yost on the substance of his bill.

Overview of House Bill (Kevin Schmidt)

Virginia Department of Agriculture & Consumer Services (VDACS) responsibilities

  • Provide and accept licensing applications for GROWERS licenses
  • Send applications for background checks by VA State Police
  • Review returned applications and determine if requirements are met
  • Licenses for RESEARCH GROWERS can be approved based on specific criteria of interest to the Commissioner such as soil type, growing conditions, varieties of industrial hemp and their suitability for particular hemp products
  • Establish fees for application and license renewal no more than $100
  • Notify local law enforcement of grow sites
  • Test and monitor hemp for THC levels and appropriate use with at least a 48 hour notice
  • Undertake research of hemp and its implications through public institutions of higher education or research institutions
  • Oversee and analyze hemp growth by researchers

Definitions

  • Industrial hemp – all parts and varieties of the plant cannabis sativa cultivated or possessed by a licensed grower
    • THC content no greater than allowed by federal law (0.3%)
    • Excluded from definition of marijuana

Lawfulness

  • It is lawful for licensed person pursuant to §3.2-4115 to grow hemp in VA for any lawful purpose including manufacture of hemp products or scientific, agricultural, or other research related to lawful applications for hemp
  • No prosecution under criminal law for possession/cultivation, or manufacture of industrial hemp plant material or seed products

Regulations – the VDACS Board shall adopt regulations to:

  • License persons to grow industrial hemp
  • Establish testing criteria and protocols
  • Administer industrial hemp research program

Issuing Licenses

  • Two types
    • Industrial hemp RESEARCH PROGRAM license
    • Industrial hemp GROWER license
      • Allowed only with authorization of legal industrial hemp growth and production in the U.S.
    • Apply to Commissioner for appropriate license on form provided by the Commissioner
    • Background check required by Department of State Police
    • Licenses processed
      • VDACS responsibility to forward copy of application to Department of State Police
      • VDACS shall review returned applications from background check and shall determine if all requirements have been met and approve application for license
    • For the industrial hemp research grower licenses, subsection D of “Issuing Licenses” applies except when:
      • The VDACS Commissioner approves licenses for selected growers whose plots will, under the Commissioner’s discretion, advance the goals of the research program based on soil type, growing conditions, varieties of industrial hemp and their suitability for particular hemp products, and other facts.
    • One acre of land MINIMUM shall be planted for growers under each license and each license is valid for one year from the date of issuance with a renewal fee of no more than $100 established by the Commissioner along with other fees
    • Notify chief law enforcement officer of the locality of grow site
    • Data and records/information of licensure is excluded from FOIA requests
    • VDACS is to be responsible for the testing and monitoring of industrial hemp for THC levels and appropriate use – 48 hours notice must be given by VDACS inspectors or law enforcement. Suitable times should be established for when to properly and adequately test.

License Conditions

  • License prior to planting
  • Growers must maintain and keep records of grow sites, licensure, etc, for three years and allow inspection at the discretion of the Commissioner, State Police, or local law enforcement
  • Growers must file documentation with the Commissioner on type and variety of seed
  • Licensed grower may import and resell seeds to other licensed growers

Forfeiture

  • Violation of any provision of the law results in forfeiture
  • Reasonable notice must be given of informal fact-finding conference to anyone in connection with the forfeited license
  • Appeal is available, conducted before the Board, then to the circuit court if appealed further
  • Felony conviction while holding a license results in forfeiture

Growers are eligible to receive tobacco settlement funds

Virginia Industrial Hemp Program Fund to be established – a non-reverting fund that keeps money remaining in the Fund at the end of each fiscal year and will not revert to the General Fund; money is to be used solely for the purposes in the law.

Promotion

  • The Commissioner shall promote research and development of industrial hemp
  • Funds are available and approved by the Commissioner to carry out promotion

Research Program

  • The Commissioner is to undertake research through a five year industrial hemp research program managed by public institutions of higher education or research institutes
  • The Commissioner shall oversee and analyze hemp growth by licensed growers for agronomy research and analysis of soils, growing conditions, and harvest methods. Commissioner shall also conduct research on seed (VDACS seed lab?) to determine best suited seed to grow in Virginia, seed availability, creation of hybrid types, and in-ground trials to establish a program to recognize certain hemp seeds as Virginia varieties of hemp seed. Also shall study economic feasibility, environmental and value-added benefits, world market of industrial hemp and hemp seed that can be grown in Virginia, and the feasibility of attracting federal and private funding to the program.
  • Commissioner shall also coordinate with public institutions of higher education or research institutes to study industrial hemp uses in energy technologies, hemp growth on reclaimed mine sites, hemp seed oil in the production of fuels, and production costs, environmental issues, and costs/benefits with use of hemp for energy. Also to coordinate with Governor’s Development Opportunity Fund (GOF) to attract businesses and create new jobs and commercial market for industrial hemp.
  • Marijuana as defined shall not include industrial hemp under §3.2-4112

Open Discussion

  • Christy Morton
    • Are there any conflictions with Farm Bill?
      • THC level
      • If you go with a research program, how do you transport the seeds for research purposes?
    • Eric Steenstra
      • Kentucky was successful in importing seeds from Italy. There is an MOU between growers and the State Department of Agriculture as to what they can and can’t do.  The research does include funding for marketing of potential products.
    • Jim Politis
      • Kentucky has done a good job of working with the public farms allowing them to grow and sell the product. The first harvest came from a veteran’s group called Growing Warriors.  The retail store Patagonia is going to buy product from Growing Warriors.  The growers were able to sell the product without batting an eye.
      • Virginia is one of the wealthiest states with one of the highest unemployment rates in the country. In my mind, the goal of this legislation is economic development, specifically for Martinsville and Danville.
      • Currently, states that grow industrial hemp have to import seeds from Canada, China, Italy, etc. I feel that the industry could grow substantially by growing it here, in Virginia.
      • We need good research to learn the proper seeds for the soil conditions here. We won’t know the total economic development impact until we research it.
        • Hemp seed has great health values (oils, etc.)
      • 1% THC level: This part of the bill says we won’t violate federal law. If the Farm Bill doesn’t allow it, we won’t do it.  There’s cannabis used in the medical field that requires the 1% level, which is one of the items we want included in the research at one of the state land-grant universities.
    • John Jones
      • Why do we have a 48 hour inspection rule?
      • Jim Politis: We are eager to work with law enforcement because there’s nothing to hide.
      • Spencer Neale: 48 hours is not necessary, but it may be a labor issue to make sure growers have enough people on hand for the inspection.
      • Kevin Schmidt: Pesticide inspections administered by VDACS typically do not provide notice. The 48 hours could cause an issue with growers trying to hide something.
      • Chief Hall: Forensic Science and VA State Police both had their budgets cut. This legislation would appear to put additional burden on both of these agencies regarding analysis.
        • Kevin: Currently, it is expected that the growers pay for testing up to $100 or test it themselves.
        • Eric Steenstra: Growers are able to send it off to a DEA certified testing facility, which would mitigate the costs to Forensic Science and VSP.
        • Jim Politis: We would like to see small businesses support the costs of the industry.

Possible Opportunities

  • Is there an appetite at our land grant universities for this research? (Jay)
    • Hairston: We have to be very clear on the market opportunities here. There’s a huge education piece to this because people don’t generally understand the difference between hemp and marijuana.
    • Grant: As a land grant university, we have an obligation to engage the industry. The research priorities will be determined by the producers and universities.  There’s a lot of discussion that will take place on how the funding will be utilized and how to fund high priority projects.  They’ve done this for several projects, so I don’t see why this can’t happen for hemp.  All of this can come together, but there are many resources that need to come together for the research and the extension.
  • If you had the resources and legal framework, how would you implement it? (Carrie)
    • Hairston: We would start with some basic research and demonstration sites, and then we can move forward with outreach.
  • What are your funding sources? (Ed Scott)
    • Grant: A fair amount of total funding for any research is coming from industry. About 23% of grant funding is from large and small corporations, companies, and foundations.  About 70% is federal funding and about 7-8% is state funding.  The most important part is to make sure good research is being done and that projects are being selected based on scientific merit.
    • Hairston: Funding at VSU is a dollar-for-dollar match between state and federal funds. About one-third of the money comes from research grants.  Our focus is on niche crops and alternative agriculture.
  • How would you assess the availability of private dollars for research on this project? (Jay)
    • Spencer Neale: Is there industry or private sector interest to put some dollars up for research?
    • Leigh Cockram: Are there pharma companies, retail companies like Patagonia, or any other such companies on a national level that have expressed interest in furthering this research?
    • Chief Hall: The major impediment to growing this is the THC level. Can we take out the THC from the hemp, so you don’t have a federal problem with it?  Can you create a product not regulated by the DEA?  If researchers can figure that out, you’d hit a home run.
      • Eric: So far, there haven’t been any issues with hemp getting into the drug world in any country.
      • Ann Fitzgibbon: Does it look like marijuana? That could be the big issue.
      • Chief: The permit that you’re required to get from DEA has heavy security. Is this the camel’s nose under the tent for marijuana?
    • Jay: From this, we can safely say that there is a growing market for industrial hemp products, but it’s too soon to tell what the impact of that market will be.
    • Leigh Cockram: IALR does a lot of plant science research. This plant research could be an opportunity where they’d want to engage.  IALR would likely want to bring in a commercial partner to research.   They would take it upon themselves to find funding sources for the commercial research.
    • Mark Gignac: Dan River Plants is the 1st commercial spin off of IALR. A client brings us a plant, we have an initiation plant and try to figure out how to duplicate a given plant in large numbers.  In the end, we sell our plants to growers in two versions: root that can be shipped anywhere and small plugs in soil (72 or 142).  These plants will ultimately end up in Lowes, Home Depot, or another commercial seller. We would use hemp tissue culture and clone the same plant.
    • Freddie: Pittsylvania is very rural by nature. Most of the infrastructure in the area is based on cattle operations and tobacco farmers.  I spoke with IALR earlier this week about opportunities they could bring about to support this industry.  The networks are already being established that could potentially support this industry.
    • Leigh: What it’s going to come down to is if farmers can make money off of this crop.  If no one is going to make money off of it, there’s no point.  With a growing cycle of 90-120 days, this has the potential to have a large impact.  Hemp is a more sustainable fiber product than cotton; however, harvesting is significantly different.
    • Eric: There is a composite material that is used as an all natural replacement for fiber glass (*i.e. door panels in BMW 3 and 5 series, briefcases). It is a very profitable business.
    • Mostaghimi: The true determination is going to be how successful we are in growing it. There’s a real need to focus on the production side to show it is an economically viable crop.  There  are a lot of things we do not know about the product.  What type of seeds will work? What is the appropriate climate to grow hemp? Are there going to be any disease or pesticide issues?
    • Brad: Are there any approved pesticides or herbicides that can be used?
      • Eric: In Canada, they treat the fields prior to seeding. There are some reports of complications, but not major ones.
    • Are there any questions or interest from Tobacco Commission Communities or Rural Caucus members? (Carrie)
      • Tim Pfohl: I’m not aware of any concerns right now, but it’s likely.
      • Christy: The Rural Caucus is definitely interested in researching this opportunity. The Center is having a board meeting in two weeks and I’m happy to bring up the issue for discussion.
      • Spencer: Farmers are always looking for another opportunity. This could be a good niche or rotational crop.  We’re good at taking advantage of opportunities.  VAFB is definitely interested in the research side of this initiative.
        • How big is the industry? What is the process? (Tim Pfhol)
          • Eric: There’s a significant contingent in Alberta, Saskatchewan, and Manitoba, Canada. When grown on a small scale for the grain, the plant grows 6 or 7 feet tall.  The fiber crop grows 15 feet, but is difficult to combine. The fiber crop could be used for animal bedding as well.  Finally, there is a hybrid crop that gives your both grain and fiber, that grows about 9 feet.
        • Brad: This is an opportunity for Virginia farmers to grow another value-added crop which is a good thing, as long as there are no legal or federal issues.
        • Freddie: How is it harvested?
          • Jim: Usually it is harvested with a sickle mower, but there are several other specialized pieces of equipment.
        • Spencer: Economic Analysis – Where will the processing facilities be?
        • Jim: The main obstacle we have is funding and for that, we always looked to the Tobacco Commission. Industrial hemp is a true replacement for the rural tobacco areas.
          • Tim Pfohl: TIC has an agribusiness fund where they work with VSU and Virginia Tech on demonstrations. The objective of that program is to move toward opportunities to increase farm income.  The second program, the Commercialization program, is focused on doing research that will lead to commercialization in the tobacco regions.  Contrary to popular belief, the Commission only gets 50% of the tobacco settlement funding; the General Fund gets the other half.

Possible Objections

  • John Jones: The Sheriff’s Association would not oppose the bill. They have a lot more votes for the bill, than against.  One of the main concerns deals with the 48 hour inspection.  I may send out the bill to get additional review as there may be further questions about licensure.
  • Chief Hall: I suspect we would support the research portion of the bill. However, the portion that gives growers the go ahead to start growing if there’s a change in the federal government warrants some concern.  I’d suggest that we work to approve this bill first, and then propose a second bill once the research is complete.  The concern is around the potential for someone to use to production of hemp to mask the production of marijuana, which is $10,000 per plant.
    • Jim/Eric: The growth of marijuana plants in hemp fields is discouraging to marijuana growers because of the cross pollination. Industrial hemp growth could restore strip mining areas and the health of the Chesapeake Bay because of the plants’ deep root system.
    • Chief Hall: For an uneducated marijuana grower, this could be a cover-up opportunity.  This goes back to the regulatory piece to prevent it from happening and the oversight piece at VDACS, VSP, and Forensic Science who all don’t have the funding to pay for it right now.  Based on the significant budget shortfall, it doesn’t seem likely that this will change anytime soon.
  • Freddie: Are there any piggyback bills that could connect this with marijuana legalization?
  • Spencer: How much power does the state have to mandate inspection? This could become a legal question from a federal standpoint.  What if the federal government comes in and nullifies the bill because of stricter federal guidelines?
  • Jim Politis: There are two federal bills right now, one in the House and one in the Senate. These bills have broad bipartisan support that makes industrial hemp a state’s rights issue.  Unless Virginia acts, the federal government can’t do anything.
    • Delegate Yost’s bill also has broad bipartisan support with 12 cosponsors, 8 Rs and 4 Ds.
  • Sandy: We have concern that if a bill is passed, we need to have the resources to administer a program to regulate it. Some of my counterparts in other states have found that it’s difficult to get seeds to even grow.
    • Kevin: We’ve gotten a lot of phone calls from people ready to grow right now. It is important to understand that the regulatory process will add another year and a half or two years at the minimum to get through the regulatory process.
    • Freddie: How far behind the eight ball will we be? We don’t want all the spoils to go to Kentucky.
    • Jim: There is a provision in the bill to allow for moving forward early in the session, an emergency clause. The best time to plant is late May through early July.
    • Ed Scott: You could include an enactment clause or a clause saying that it has some exemptions from the APA. Then, if things are getting ironed out, the agency is in a position to move along as quickly as they can.  They’ll typically bring together a stakeholder group to expedite the regulatory process.   With no consensus, this process can take time.  If you put the emergency clause in the bill, it has to have 80 votes to pass.  It would be a shame to have 79 votes for this bill and it not pass because of an unnecessary emergency clause.
    • Jim: It’s possible someone from Kentucky would be willing to sell seeds to Virginia.
    • Eric: The Agriculture Research Institute in Italy and several commercial breeders in Canada would surely be willing to sell their seeds to Virginia growers.
  • Kevin: Following the traditional administrative process, if this bill passed this session, it would be enacted July 1, 2015. Depending on the date of the next VDACS board meeting, it likely wouldn’t be heard until December 2015.  After going through the NORIA, public comment, stakeholder group, and draft legislation steps, the full process could end anywhere from the middle to end of 2016.
  • Ann Fitzgibbon: Coal dust is a huge issue.  If you can figure out a way to make a bag for coal out of hemp, that would solve several issues in our district.
  • Mostaghimi: Tobacco funds cannot be used for tobacco research. Is this same concept going to apply to hemp as well?

 

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