GENERAL GOVERNMENT

Department of Agriculture

Office of Agricultural Marketing

(New Administrative Regulation)

 

      302 KAR 50:070. Prohibited products.

 

      RELATES TO: KRS 260.850-260.869, 7 U.S.C. 5940

      STATUTORY AUTHORITY: KRS 260.862

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 260.862(1)(a) authorizes the department to promulgate administrative regulations to prescribe rules for any industrial hemp research pilot program in the Commonwealth of Kentucky. This administrative regulation establishes classes or categories of industrial hemp products that are eligible for sale, transfer, or distribution to members of the public.

 

      Section 1. Products Not to be Sold to Members of the Public. (1) The following hemp-derived products shall not be manufactured:

      (a) Hemp cigarettes;

      (b) Hemp cigars;

      (c) Chew, dip, or other smokeless material consisting of hemp leaf material or hemp floral material; and

      (d) Hemp leaf material or floral material teas.

      (2) The following hemp-derived products shall not be marketed, sold, or distributed to any person in Kentucky who does not hold a license from the Department, or any person outside the Commonwealth (but within the United States) who is not authorized by an institution of higher education, or state department of agriculture under the authority of 7 U.S.C. 5940 and the laws of that state:

      (a) Whole hemp buds;

      (b) Ground hemp floral material;

      (c) Ground hemp leaf material; and

      (d) Any hemp product with a delta-9-THC concentration in excess of three-tenths (0.3) percent.

      (3) If the department finds that it is more likely than not that a person has manufactured, marketed, sold, or distributed a hemp-derived product in violation of this administrative regulation, the department shall assess a civil monetary penalty against that person of not less than $100 and not more than $1,000 per violation, in addition to possible termination of the Grower Licensing Agreement or Processor/Handler Licensing Agreement.

 

RYAN F. QUARLES, Commissioner

      APPROVED BY AGENCY: December 15, 2017

      FILED WITH LRC: December 15, 2017 at noon

      PUBLIC HEARING AND PUBLIC COMMENT PERIOD: A public hearing on this administrative regulation shall be held on January 22, 2018, at 2:00 p.m., at the Kentucky Department of Agriculture, 111 Corporate Drive, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing was received by that date, the hearing may be cancelled. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through January 31, 2018. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.

      CONTACT PERSON: Clint Quarles, Staff Attorney, Kentucky Department of Agriculture, 107 Corporate Drive, Frankfort Kentucky 40601, phone (502) 330-6360, fax (502) 564-2133, email clint.quarles@ky.gov.

 

REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT

 

Contact Person: Clint Quarles

      (1) Provide a brief summary of:

      (a) What this administrative regulation does: This regulation established the guidelines for participation in the Industrial Hemp Pilot Project administered by the Kentucky Department of Agriculture.

      (b) The necessity of this administrative regulation: This regulation is necessary to establish provisions for growing, movement, processing and possession of industrial hemp.

      (c) How this administrative regulation conforms to the content of the authorizing statutes: KRS 260.850-260.869 requires the Kentucky Department of Agriculture to regulate industrial hemp. This administrative regulation satisfies this mandate.

      (d) How this administrative regulation currently assists or will assist in the effective administration of the statutes: This administrative regulation codifies the industrial hemp pilot program that has been administered by the KDA since the 2014 growing season.

      (2) If this is an amendment to an existing administrative regulation, provide a brief summary of:

      (a) How the amendment will change this existing administrative regulation: This is a new administrative regulation.

      (b) The necessity of the amendment to this administrative regulation: This is a new administrative regulation.

      (c) How the amendment conforms to the content of the authorizing statutes: This is a new administrative regulation.

      (d) How the amendment will assist in the effective administration of the statutes: This is a new administrative regulation.

      (3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation: The KDA has 243 grower applications, and 56 processor applications for the 2018 growing season. Additionally, this regulation affects the KDA and the Kentucky State Police, the University of Kentucky Division of Regulatory Services, and possibly local law enforcement agencies.

      (4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:

      (a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment: The 2018 applicants wishing to grow, process, or handle industrial hemp must comply with the administrative requirements listed in this collection of filings, including a criminal background check and testing of the crop produced.

      (b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3): This administrative regulation will add little to no cost to the entities listed for the growing seasons since 2014, other than the fees established and the governmental costs of additional testing and manpower.

      (c) As a result of compliance, what benefits will accrue to the entities identified in question (3): Entities will be allowed to grow, process, handle and conduct research on industrial hemp.

      (5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:

      (a) Initially: The administrative regulation itself adds very little cost to the KDA over previous growing seasons. The KDA employs three (3) full time staff, seasonal contractors, and the partial staff time of several employees to administer the pilot program.

      (b) On a continuing basis: The KDA anticipates that the growing market demand for the crop may necessitate additional staff and resources in the future.

      (6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation: The source of funds to administer will come from the fees created by this administrative regulation, as well as the KDA general fund.

      (7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment: This administrative regulation creates new fees. The KDA will evaluate after a period of time to determine if fee amounts will cover expenses of administration of the program.

      (8) State whether or not this administrative regulation established any fees or directly or indirectly increased any fees: Fees are directly established.

      (9) TIERING: Is tiering applied? No. All regulated entities have the same requirements.

 

FEDERAL MANDATE ANALYSIS COMPARISON

 

      1. Federal statute or regulation constituting the federal mandate. 7 U.S.C. 5940

      2. State compliance standards. KRS 260.850-260.869

      3. Minimum or uniform standards contained in the federal mandate. 7 U.S.C. 5940. Establish requirements for industrial hemp pilot programs. This administrative regulation establishes the requirements for participation in Kentucky.

      4. Will this administrative regulation impose stricter requirements, or additional or different responsibilities or requirements, than those required by the federal mandate? No, this administrative regulation does not impose stricter, additional, or different requirements or responsibilities than those required by the federal mandate.

      5. Justification for the imposition of the stricter standard, or additional or different responsibilities or requirements. This administrative regulation does not impose stricter, additional, or different requirements or responsibilities than those required by the federal mandate.

 

FISCAL NOTE ON STATE OR LOCAL GOVERNMENT

 

      (1) What units, parts, or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation? The Kentucky Department of Agriculture for the administration of the pilot program, plus Kentucky State Police, University of Kentucky Division of Regulatory Services, and local law enforcement.

      (2) Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation. KRS 260.850-260.869 and 7 U.S.C. 5940.

      (3) Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect. The KDA cannot estimate the costs of other agencies, but would reasonably guess that marginal costs increases may be anticipated due to program popularity.

      (a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year? The KDA estimates revenue of $250,000 at this time. Revenue for UK DRS will be approximately $85 per test sample submitted. We estimate no revenue for law enforcement agencies.

      (b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years? The KDA cannot estimate this amount as it is based on number of applicants and growing addresses.

      (c) How much will it cost to administer this program for the first year? The KDA fully anticipates the revenue generated to cover only a fraction of the costs to administer the program.

      (d) How much will it cost to administer this program for subsequent years? The KDA cannot estimate this amount as it is based on number of applicants and growing addresses.

      Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.

      Revenues (+/-): Perhaps $250,000

      Expenditures (+/-): Well in excess of $250,000

      Other Explanation: