Planting the Seeds, Part 2: Notes from January’s Hemp Hearings

By: Mikel Weiser

January’s public hearing for the Dept of Agriculture’s Industrial Hemp Program felt less like the usual bureaucratic snooze-fest and more like a rollicking action-adventure movie.

This was the sixth meeting of the series. By now, Hemp Program Manager Brian McGrew and the various committee members (Dwayne Alford, Co-Chair, Paco Ollerton, Co-chair, Michael Stoltz, Colleen Keahey Lanier, JL Echeverria, Sean Dugan, and Alex Holley) are all demonstrating their unique personalities. As a result, the hearing was far more entertaining than anyone would ever expect from a simple reading of black and white PowerPoint slides.

The auditorium was packed and the show went on for hours with the audience glued to every word. There was drama, comedy, deep science, clever snark, pearls of wisdom from crusty old-timers, national breaking news, big reveals, a strong female lead character, and even the f-word. And it was all tied together by AZ’s quest to be part of the coming hemp revolution.

The phrase SRO, or “Standing Room Only,” gained new meaning that Friday with every seat taken, as well as every inch along the back and side wall, plus people sitting on every step in the auditorium. Another six or seven clustered outside the doors, with a few more trying to take notes out at the sign-in table. Unfortunately for the crowd, AZ Dept of Ag was technologically challenged that day with multiple arrangements of microphones repeatedly failing to amplify the speakers. Yet despite the uneven acoustics and frequent static, few left early.

On hand for the festivities was original bill sponsor, Sonny Borrelli (R-LD5), who shepherded the bill through the legislature for 3 yrs. to enjoy the festivities, along with newly-minted Republican cannabis power player, returning Sen. David Gowan (R-LD14), chair of the Senate Appropriations Committee. However, aside from the legislators, there was nary a suit in the crowd. The overflow crowd consisted of a smattering of county land use staffers and CBD entrepreneurs, a wide swath of dispensary cultivators and/or chemists, with the vast majority of the crowd being good old Arizona farmers, actually, good young Arizona farmers. Most seemed cut from the same cloth as Commissioner JL Echeverria, who arrived sporting a brand-new hipster haircut and scuffed up farm boots. A 5th generation Arizona cotton farmer, Echeverria aims to bring traditional AZ agriculture into the 21st Century.

America’s hemp industry is expected to become a ten billion dollar a year program within the next decade. With the signing of the US Farm Bill in late December, Arizona’s Dept. of Agriculture Industrial Hemp program instantly became the hottest topic in town. As Ascending Farms grower, Lucas Johnson told the over-packed house, “You guys gotta understand, you can’t be holding people back. This market is giant. You can get about $9000 out of an acre of hemp if you harvest it for the fiber. If you harvest it for the seed, bump that up to $12000 an acre. But if you’re harvesting to process CBD that acre will produce $370,000 an acre. You wanna try to contain this crop? Good luck with that.”

Big News #1: Time to Git R Done

The January hearing saw a big shift from the Dec meeting’s focus on the pilot program. One of Borrelli’s shrewdest moves on the hemp bill was creating a state program designed to be legal under the then-existing Farm Bill pilot program option, but that could instantly expand to full interstate commerce if hemp were legalized nationally. The passage of the Farm Bill cleaned up also much of the restrictive language in the December draft of AZ’s proposed state regulations, especially in sections like transportation and prohibited activities. It’s worth noting that the federal hemp provisions in the US Farm Bill that opened up the US hemp markets were created by otherwise beleaguered Senate Majority Leader, Mitch McConnell (R-KY).

This month the AZ’s Industrial Hemp Program officially kicked off their call for all potential growers and processors to begin filling out their application questionnaire. The deadline for completing and then preparing to implement the program’s regulations, is approaching fast. “Our fee structure is due at the Secretary of State’s office so they can add it to the state’s published fee schedule by at least 30 days before the June 1st start date, effectively meaning the committee must complete their work by May Day,” McGrew added that the program will actually be operating on agency funds for a month before the state funding even starts.

Commissioner Alex Holley, a hemp product processor, was eager to point out that with the Farm Bill legalizing interstate hemp commerce, processors, unlike the growers, who will have to wait for their crop to come in, can start processing out-of-state hemp day one.

Big News #2: The Price is … Missing?

As exciting as it was for the crowd to learn the proposed advanced start date was still on track and farmers could begin their prep work now, McGrew’s next big reveal was not nearly as well received. One of the critical challenges is that the program must raise its operating costs through the licensing. Even though the Ag Dept expects to launch its program by June 1, so growers can get their first crop harvested by year’s end, Ag still doesn’t have an estimate of how much the licenses will cost. Much of the money appropriated in the original bill to create the infrastructure of the program has already been allocated. The remaining $750,000 is needed to last over three years. Thus far, no one has been able to sign up for the program because the applications aren’t ready, so program manager Brian McGrew can’t accurately gauge the program’s potential popularity to set the individual fees. The fees are so unknown that when McGrew showed the slide of the fee chart, all the prices were simply shown as $$$.

 “We’re anticipating $250,000 to $300,000 in operating costs to run the program. If we get hundreds of applicants for thousands of acres, then the costs will be much lower. If not, then they could be as high as $25 an acre.” The statement made the room gasp.

Committee member and German hemp expert Michael Stoltz quickly spoke up to reassure the crowd, reminding them that Kentucky fees are only $100 to $350 despite the fact the cost of the program is totally sustained by grower and processor fees.  Stoltz warned over-the-top licensing costs for could limit production and would be out of line with the state’s fees on other agricultural commodities.

Colleen Lanier, from the HIA Hemp Industry Association, wryly asked McGrew for a break down on the surprisingly high cost of doing business, wondering “if other crops had to generate a quarter million in fees for their annual funding.”

When McGrew spoke up to point out that, despite its potential as superstar agricultural commodity, the production and regulation of hemp is still mired by the welter of federal and state laws regarding marijuana and medical marijuana. Stoltz, who immigrated nearly a decade ago to help build an AZ hemp industry, sharply challenged McGrew’s warnings about cost of regulation: “The FDA will be regulating hemp all it needs to be regulated. Now that it’s federally legal, I don’t know why we are regulating it so severely in the first place.” A line that drew applause.

Committee co-chairman and longtime farmer, Paco Ollerton suggested that instead of tying fees to acreage, the costs could be based on crop yields, instead of empty fields. Paco also drew both laughter and applause when he lamented, “Look, growers pay retail for our products, sell for wholesale, and expected to pay the freight both ways. They say shit rolls downhill, well, it seems every time that a lot of that shit falls on the growers.”

(Arizona Cannabis Monthly has pledged use our resources to get the call to action out there. Read more on this below.)

Big News #3: What Are They Smoking?

But the last, and easily the loudest, hot topic from three-hour meeting came up near what should have been the end of the program, in the section known as “Prohibited Activities” (R3-4-611). Amongst such offenses as making false statements, tampering with signage, or the dreaded ‘producing cannabis sativa with a THC count over .3%,’ McGrew proposed incorporating pre-Farm Bill language restricting the production and sale of hemp consumables from AZ’s list of approved hemp products (R3-4-611, sections E and F). The list included hemp flower and cigarettes.

The room went up in an uproar, “There you go, you’ve killed the market!” one voice cried. Another added, this is bringing back the prohibition just when the federal government just got rid of it.” Immediately chairman Paco Ollerton joined the crowd to the challenge the proposed prohibitions. Referring to the date the Farm Bill was signed, Ollerton loudly noted, “This committee appreciates the ways things have been done, but things changed Dec 20th.”

Going even farther, commissioner, Alex Holley was clearly incensed. When someone asked the commissioners what a person should be legally allowed to do with hemp, before he could stop himself, commissioner Alex, blurted out, “Whatever the fuck I want to do with it.”

That line also drew thunderous applause.

McGrew quickly conceded that he copied these pre-Farm Bill recommendations from other states and they were not the “end all and be all” by any stretch. Later McGrew laughed and acknowledged he expected the push back against the prohibited list and concedes it does not seem so practical in light of AZ’s post-Farm Bill market reality. “My job is not to dictate, but to figure out where that fine line is.”

In the end, McGrew highlighted the entire section for further review. “You could just delete it entirely,” a voice called out. McGrew replied there’s a good chance that could happen. And the way he said it strongly suggested that well might be exactly what he does.

The ironic part is that “Farm Bill legal” hemp is already being sold to Arizonans for smoking as high-CBD prerolls and buds. Much like Europe’s thriving smokable hemp market, smoke shops around the valley are already begun marketing products like Jefro Kush’s hemp buds and prerolls, and the public is clamoring for more. With hemp flowers legally flooding AZ smoke shops with buds grown elsewhere, AZ’s next crop of hemp growers are itching to get their share.

And, Lastly in Other, Less Earth-Shaking, News:

Among the more interesting but non-bombshell proposed rules presented that day: language regarding the Industrial Hemp Program Advisory Council was added this month with the Advisory Council consisting of five members who will be selected by August. Though the costs of licenses are admittedly still in the works, McGrew identified the program would have 3 types of license (grower, processor, harvester) and two types of registration (broker and nursery.) Nursery licenses will have to be contracted with at least one grower before starting production. Accepted varieties from certified European and American hemp seed producers. Seed genetics and potency will be reviewed annually.

Colleen Lanier, who helped shape the Tennessee hemp program, suggested the state use “Phytosanitary tests” for infected seeds, a type of test which is not currently in the Arizona testing protocols. McGrew promised to research the idea.

Hemp product processors were cautioned by a fellow audience member that extracted oils are likely to have a higher-than-.3% THC count even though the plants used had passed the THC test, since the oil itself is a concentration. Speaking of “hot hemp,” McGrew also introduced a much-needed provision that would allow high THC remediation by converting the whole “hot crop” to fiber.

McGrew clarified that DHS rules on CBD products in the state’s medical marijuana program are NOT impacted the Ag rules on hemp. In keeping with other regulated agricultural commodities, the program will require three years of record keeping. Applicants will have to pass a DPS fingerprint background check, which could take up to 30-65 days. When the crowd groaned, Lanier called out, “If you’re serious about applying, get that process going right away.”

AZ’s Industrial Hemp Program Wants YOU!

As part of ACM’s continuing commitment to doing everything in our power to advance cannabis operations in AZ, we are asking you to please go to the Dept of Ag Industrial Hemp Program webpage today and learn more about the program. During their discussion of the cost of the program, Ag Hemp project manager Brian McGrew made clear the total number of applications will determine the cost of the applications.

Current operating costs are estimated to run as high as $250,000. MITA-AZ and Arizona Cannabis Monthly have promised to do our part to spread the word. We repeat, the more qualified applicants, the lower the cost of the application fees. If you can qualify as a licensed AZ industrial hemp grower, we urge you to find the “Help Us Plan” section and fill out the questionnaire right away. While you’re there, fill out an info request form to see the whole current draft of hemp regulations.

The industrial hemp program will start issuing licenses May 31.

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