The Week Ahead
(May 6, 2019)

Expect an influx of applicants to the WSDA’s Industrial Hemp Research Pilot.

The week is wide open. No public meetings at the WSLCB, the legislature has completed their long session of the biennium, and only six cannabis-related bills remain unsigned on the Governor’s desk.

Of the five cannabis-related bills already signed by Governor Jay Inslee, only SB 5276 had an immediate effective date. The hemp bill is now the hemp law.

The hemp law instructs the Washington State Department of Agriculture (WSDA) to develop a statewide “Hemp plan”—a distinct cannabis agriculture supplychain—and submit that program to the United States Department of Agriculture (USDA) for approval as required by the federal 2018 Farm Bill. Observers expect it will take until next spring for the USDA to begin approving State and Tribal plans.

SB 5276 (technically E2SSB 5276, denoting multiple transformations from its original form) also instructs the WSDA to update the existing Industrial Hemp Research Pilot (IHRP, RCW 15.120, WAC 16-305) to ensure compatibility with the 2018 Farm Bill and to better prepare Washington State hemp licensees to participate across a wide range of industries and global marketplaces.

Last week, the WSDA took its first actions.

On Wednesday May 1st, the appointed Director of the WSDA Derek Sandison addressed his approval of Policy Statement CI-19-0001 to the Office of the Code Reviser. In his introductory remarks, he summarized: “This policy statement interprets how WSDA intends to implement those sections of E2SSB 5276 that make immediate changes to the IHRP.”

Licensees in the WSDA IHRP gain four significant new advantages:

  1. “Licensed growers are solely responsible to procure hemp seed and must notify the IHRP of the source of the seed.” Previously, WSDA has carefully minded an authorization from the federal Drug Enforcement Agency (DEA) to import hemp seed into the state. With the passage of the 2018 Farm Bill, the DEA no longer has a role to play in the commerce of hemp as a federally legal and recognized agricultural commodity.
  2. “Licensed growers are not required to maintain a buffer from a licensed marijuana producer.” The four mile buffer defined at WAC 16-305-060(6) is no longer applicable to current or subsequently licensed growers in WSDA’s IHRP. Marijuana producers and processors could interpret this to also mean they may be able to diversify and grow hemp on the same property if zoning permits.
  3. “IHRP grower license requirements are simplified to align with new Hemp plan requirements.” Research goals are no longer required. At publication time, WSDA was continuing to revise the IHRP application – and is still accepting submissions and approving new licensees.
  4. “IHRP licensed growers may grow hemp under RCW 15.120.020 as amended under Sec. 14 of E2SSB 5276.” WSDA licensees can now process hemp in all of the ways that were formerly prohibited, as this statute has been repealed: “Processing any part of industrial hemp, except seed, as food, extract, oil, cake, concentrate, resin or other preparation for topical use, oral consumption or inhalation by humans is prohibited.”

The policy statement also remarks that WSDA IHRP licensees may transition into the new USDA-approved WSDA hemp plan, which will be adopted under expedited rulemaking upon federal approval. “Licensed growers” includes current WSDA licensees as well as those “subsequently licensed under the IHRP.”

On Thursday May 2nd, WSDA withdrew two previously opened IHRP rulemaking projects.

Last September, the IHRP was in a very different position. As a result, the agency opened rulemaking to greatly increase license fees (rulemaking docket). An annual $300 grower (producer) or processor/marketer license was expected to increase to $7500 per year, and a combined license (p/p) would have jumped to $14500 per year. The CR-101 was withdrawn on Thursday – and WSDA licensing fees remain low.

In February, WSDA announced expedited rulemaking (rulemaking docket, CR-105) “in order to allow a transition to the 2018 Farm Bill, Public Law No. 115-334, which took effect December 20, 2018.” The proposed changes would have removed the buffer zone and repealed WAC 16-305-150 defining an arcane hemp seed acquisition process. Expedited rulemaking eliminates “the need for the agency to hold public hearings, prepare a small business economic impact statement, or provide responses to the criteria for a significant legislative rule.” A written objection was received which re-routed WSDA’s process and required the agency to proceed through formal rulemaking, a process which typically takes months to accomplish. On Thursday May 2nd, WSDA also withdrew this rulemaking project.

While Washington State’s new hemp law creates two wholly separate cannabis supply chains in the state—marijuana (licensed by WSLCB) and hemp (licensed by WSDA)—it seems reasonable to ask: can hemp growers sell unprocessed and intermediate hemp products to marijuana processors? After all, it’s all cannabis.

It turns out WSDA and WSLCB were asked that very question by the legislature in 2017. During the last biennium’s initial regular session, SB 5131 requested an interim study be conducted by the two agencies. In December 2017, WSDA published “Preliminary Assessment for Allowing Industrial Hemp to be Sold or Transferred to Marijuana Processors”.

That report stated:

WSDA receives consistent inquiries from marijuana producers and processors interested in growing and processing industrial hemp for non-psychoactive cannabinoids like CBD. Providing the regulatory framework for industrial hemp to be sold or transferred to licensed marijuana processors will encourage the expansion of industrial hemp as an agricultural commodity in Washington. Industrial Hemp Research Pilot licensees would benefit by having an additional marketing avenue for their crop.

An important anticipated benefit mentioned in the report, especially in light of current WSLCB Board and DOH priorities, was a potential boost in the availability of medical cannabis products:

While it is unclear how a large influx of industrial hemp would perform in the current system, there is a potential that this would increase the availability of quality, tested, and regulated CBD products for medical patients.

While the new session law (Section 3) is very clear that “All rules relating to hemp, including any testing of hemp, are outside of the control and authority of the liquor and cannabis board,” the 2018 legislature passed HB 2334 which authorized the import of cannabinoid additives for I-502 products. Legally, it should be possible to treat CBD products grown and processed in Washington like products imported from elsewhere to bring cannabinoids in from the local hemp supply chain.

Sadly, MJ Freeway Leaf Data Systems still does not provide a workflow to support the import of these products into the traceability system, a practical roadblock to exercise of the statute that went into effect on June 7th, 2018. Worse, because the code changes required to implement the law were not part of MJ Freeway’s original scope of work, consideration of those changes has been allowed to wait until after delivery of version 1.40, projected for September 2019.

Given the challenges for marijuana licensees to participate in the local hemp supply chain, it may be wise to consider applying for WSDA’s Industrial Hemp Research Pilot.