farm bill

The 2020 elections will likely be historically significant for U.S. agriculture, but what can we expect?  Our partner, the National Agricultural Law Center, will try to answer that question with a webinar on January 13 at noon.  The webinar will feature Hunt Shipman, principal and director at Cornerstone Government Affairs in Washington, DC.   Mr. Shipman will share his predictions on what's in store for agriculture, including:

• Key appointments at USDA
• Congressional committees positions
• Implications for the next Farm Bill
• International trade impacts
• Changes in the federal and state regulatory environments

With nearly three decades of experience in Washington, Hunt Shipman has held a variety of positions in government and the private sector. Prior to joining Cornerstone, Hunt was a senior executive for the largest trade association serving the food and beverage industry, where he led the association’s government affairs and communications programs. From 2001 to 2003, Hunt was Deputy Under Secretary for Farm and Foreign Agricultural Services and served as the acting Deputy Under Secretary for Marketing and Regulatory Programs at the United States Department of Agriculture.  In this capacity, he led three agencies with over 18,000 employees stationed around the world, and administered over $31 billion in programs. Hunt was the Department of Agriculture’s principal negotiator with the Congress for the 2002 Farm Bill. Hunt also served as the staff director of the Senate Agriculture Committee, Professional Staff Member at the Senate Appropriations Committee, and on the personal staff of Senator Thad Cochran.

The webinar is free, but limited to the first 500 registrants.  To register, visit here.

Since the passage of the 2018 Farm Bill, the world of agriculture has been all abuzz about the potential for adding a new crop to the rotation—industrial hemp. (Our post on the hemp provisions in the Farm Bill is available here.) The passage of the bill caused states like Ohio, which did not previously implement hemp pilot projects in 2014, to scramble to introduce state legislation allowing hemp to be grown within their boundaries.  What is more, questions have arisen about how hemp and products derived from the plant should be regulated under the federal law. 

Ohio continues to tinker with its hemp bill

Ohio’s bill to legalize hemp is currently stalled in the Ohio House of Representatives. Speaker Larry Householder indicated that the House will not vote on the bill until September 2019.  The hemp bill was first introduced in the Ohio Senate in February, passed the Senate in March, and advanced to the House floor on June 4. The bill still contains a lot of the same language and provisions from when it was introduced in February, which you can read about in our post here.  However, since it was first introduced, numerous additions have been inserted into the language of the bill.

First, the original version of the hemp bill only required a license to cultivate hemp.  The version currently on the House floor also requires a license to process hemp into different products.  Moreover, the current version of the bill would make licenses for both cultivating and processing hemp valid for three years instead of five years.  The new language in the bill also creates a Hemp Marketing Program, which would fall under the same laws and regulations as the grain and soybean marketing programs.  Legally cultivated hemp would also be added to the list of agricultural uses permitted under the current agricultural use value (CAUV) for land, which would mean land used to grow hemp would qualify for a lower tax assessment. 

The most recent version of the bill also adds many more topics to the list for the Ohio Department of Agriculture (ODA) to promulgate via regulation.  The new version tasks ODA with adding conditions for acquiring hemp cultivation licenses, such as experience, and procurement of equipment, facilities, a sufficient amount of land, and financial responsibility requirements.  ODA is charged with establishing a compulsory setback distance between hemp cultivation and medical marijuana cultivation, and with including regulatory language banning hemp cultivation or processing licensees from also cultivating or processing marijuana.  ODA must also establish requirements for recordkeeping and reporting for licensees.  These are just a few of the new regulations ODA is authorized to enact. 

The most recent bill, much like the first version, includes overarching prohibitions.  The current list of actions banned under the law is as follows:

• No person shall cultivate hemp without a hemp cultivation license issued by ODA;
• No person shall process hemp without a hemp processing license issued by ODA;
• A person who is licensed to cultivate or process hemp shall not violate any provision of the hemp law or regulations;
• A person subject to a corrective action plan issued by ODA shall not fail to comply with the plan;
• No person may transport hemp in violation of the hemp law or rules; and
• Any other requirements or procedures necessary to enforce the law. 

The most recent rendition of Ohio’s hemp bill would keep the provisions of the first version of the bill relating to negligent and reckless violations of the law, but new enforcement tools have been added.  Finally, the new and improved hemp bill includes an emergency clause, which would make the legislation immediately effective upon its passage in both houses and signature by the governor. 

FDA holds a hearing on the safety of CBD products

On May 31, the Food and Drug Administration (FDA) held public hearing to gather information and scientific data about cannabis products, so that such information can be used for future regulatory oversight by the agency.  Industrial hemp is a type of cannabis plant, so the hearing included discussion of hemp and hemp-derived compounds, such as cannabidoil (CBD).  In particular, FDA was interested in whether different amounts of cannabis in a product would affect people differently, or cause safety concerns, whether there is any data to show that cannabis is safe in food and dietary supplements, whether there are, or if there need to be, industry standards in the manufacturing of cannabis products to ensure safety and quality, and how marketing and labeling should be used to address potential risks connected to using cannabis products.   The hearing did not result in any FDA decisions on cannabis products and their regulation, although it is an indicator that regulations will probably be coming soon.  This means that sales of CBD oil and other products made from hemp will have to follow FDA regulations in order to be manufactured and sold.  Information on the hearing is available here.  As we reported in one of our Ag Law Harvest posts, those people still interested in submitting their comments about cannabis and cannabis compounds to the FDA can do so until July 2. 

USDA releases its interpretation on transportation of hemp

In another federal development, on May 28, the United States Department of Agriculture (USDA) released a memo addressing the transportation of hemp.  The 2018 Farm Bill specified that states can ban hemp production and sales within their boundaries, but states cannot bar legally grown hemp from being transported through their state.  Since hemp regulations under the 2018 Farm Bill have not yet been promulgated, technically, there is no hemp that has been legally produced under the new law yet.  As a result, law enforcement in several states has continued to arrest people transporting hemp.  Furthermore, in at least one decision in Idaho, a court determined that it was illegal to transport hemp.  USDA released the memo to explain its disagreement with such interpretations.

In its memo, USDA says that the language decriminalizing hemp in the 2018 Farm Bill was “self-executing,” so it is no longer illegal to possess hemp or THC from hemp. USDA further asserts that hemp grown under pilot programs allowed under the 2014 Farm Bill can be legally transported across state lines because the 2018 Farm Bill did not immediately repeal the pilot programs.  USDA argues that this means that the hemp grown under 2014 pilot programs is legally produced, can be legally possessed, and therefore can be legally transported across state lines under the new Farm Bill.  

It is important to note that USDA’s memo is meant as guidance to the states, and is legally persuasive, but not legally binding.  This means a person could theoretically still be arrested for transporting hemp through a state, and the courts may or may not uphold the state’s decision.  After the federal regulations under the 2018 Farm Bill are in place, however, there will be less wiggle room for states to carry out their own interpretations, which will likely but an end to this controversy. 

What does it all mean?

While the regulation of hemp products, the transportation of hemp, and the legality of hemp in certain states may still be in question, all of this activity means that the state and federal governments are attempting to work all the kinks out.  Over time, the rules regarding how to produce, process, sell, and transport hemp, will likely become more defined and clear.  In the meantime, those interested in legally growing and processing hemp will have to play a waiting game. 

Hemp is one of the most talked-about provisions of the new Farm Bill passed earlier this month by Congress and signed by the President on December 20.   There’s a lot of excitement about the removal of federal restrictions on hemp production and the economic opportunities for growing hemp.  But what exactly does the Farm Bill say about hemp?  Can Ohioans now grow, use and sell hemp and hemp products?  We dove into the 807 pages of the Farm Bill Conference Report (available here for your reading pleasure) to find answers to your questions about the new legal status of hemp and hemp cultivation.

What is hemp?

Before we go much further in this discussion, it’s important to understand that both hemp and marijuana are species of cannabis, but they have different properties.  Of particular note is the fact that marijuana contains much more tetrahydrocannabinol (THC) than hemp.  THC is the part of a cannabis plant that can cause a psychoactive effect in certain concentrations, but hemp plants generally do not contain enough THC to produce a “high.”  Hemp has many uses— it can be used for construction materials, fabrics and clothing, and animal bedding.  It has even been discussed as a potential cover crop.  Cannabidiol, or CBD, is a very popular extract of the hemp plant that is alleged to help those with anxiety, pain, inflammation, and other ailments, but not much research has been done to verify its effectiveness for medical use.  Note that CBD is also an extract of the higher THC marijuana plant.

Hemp is removed from the federal list of controlled substances—but only if it meets certain requirements

First and foremost, the Farm Bill removes hemp from the federal list of controlled substances.  Section 12619 of the bill removes hemp from the definition of marijuana, which is still an illegal drug under federal law.  In the same section, the bill federally decriminalizes tetrahydrocannabinols (THC) in hemp.  Not all hemp, however, is subject to this exemption.  Only hemp and THC as defined in the Farm Bill and as grown under the conditions set forth in the Farm Bill are accorded the exemption.

So, how does the Farm Bill change the definition of hemp?  The main hemp provision of the bill, Section 10113, separates hemp from the definition of marijuana and redefines hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

Coming soon: state and federal hemp production plans

The new law doesn’t allow a producer to start growing hemp today.  Instead, Section 10113 of the Farm Bill describes the two situations under which a producer will be able to engage in legal hemp production in the future.  In the first situation, the States or Indian tribes may take charge of the regulation of hemp production within their boundaries.  To do this, a State must first submit a plan to the USDA through their state department of agriculture.  A State plan must include: 

1. A way to keep track of land where hemp is produced within the state;
2. Methods the state will use to test how much THC is in hemp plants;  
3. A way to dispose of plants or products that have a higher THC concentration than is legally allowed;
4. A procedure for inspecting hemp producers;
5. A plan for enforcing the law;
6. A system for dissemination of a hemp producer’s information to the USDA; and
7. Assurances that the state has the resources to carry out the plan. 

A producer who wants to cultivate hemp in a State that has an approved hemp production plan must first comply with the State’s plan before beginning to grow hemp.   Predictions are that it may take a State about a year to create its hemp production plan and obtain the required USDA approval for the plan.

The second situation for growing hemp comes into play if a State or Tribe does not submit a hemp plan to USDA.  In this case, as long as the State has not limited the regulation or production of hemp under state law, the Secretary of Agriculture for the USDA may establish a plan “to monitor and regulate” hemp production within that State.  A plan established by the USDA must meet the same criteria as a plan written by a State, and the law also requires the USDA to establish a licensing procedure for producers.   Thus, a producer in a State that doesn’t have a hemp plan could legally grow hemp by obtaining a USDA hemp license through the hemp regulations that the USDA will develop, unless the State has prohibited hemp cultivation.  Section 10113 specifically states that it does not preempt or limit any state law that “regulates the production of hemp” as well as any state law that is “more stringent” than federal law in regulating hemp production.  Thus, a State can outlaw hemp production within its boundaries or include additional restrictions and requirements in its State plan as long as the plan complies with the federal law requirements.  

Handling producer violations

What if a hemp producer doesn’t comply with the new law or with the State or USDA hemp production plan?  Section 10113 also describes how violations of the law will be handled.  If a hemp producer negligently violates a State or USDA hemp production plan, the producer could be subject to enforcement.  One negligent violation of the plan would not trigger criminal punishment, but the violator would have to comply with a corrective action plan prescribed by the State or USDA.  However, if a producer negligently violates a plan three times in five years, the producer will be banned from producing hemp for five years. Examples of negligent violations in the law include: not providing a legal description of the land where hemp is produced, growing hemp without obtaining a license “or other required authorization” from the State, Tribe, or USDA, or producing hemp with a THC concentration higher than 0.3 percent. If a producer violates a State or USDA plan “with a culpable mental state greater than negligence” (that is, purposely, knowingly, or recklessly), then the State or USDA must report the violation to law enforcement authorities.  Furthermore, persons convicted of a felony relating to a controlled substance under state or federal law are generally barred from hemp production for ten years following the date of their conviction, with the exception of persons convicted of a controlled substances felony but lawfully participating in a pilot program under the 2014 Farm Bill.  Finally, if a person falsifies an application to participate in hemp production, that person will be totally barred from producing hemp. 

Legal hemp not to be prohibited in interstate commerce

The new law also allows for the interstate commerce of legally produced hemp and hemp products. Section 10114 says that a State or Indian Tribe cannot prevent the transportation or shipment of legally produced hemp through its state or territory.  While a State may ban the sale of hemp or hemp products solely within its borders, it must allow hemp products to move freely through the State.  For example, imagine that Pennsylvania allows hemp production but Ohio does not.  Producers of legal hemp in Pennsylvania could not sell the hemp within Ohio, but Ohio could not prohibit a truck, train, or other type of transport from carrying the hemp through Ohio to a destination outside of Ohio. 

Hemp becomes eligible for crop insurance

Importantly, the Farm Bill also addresses hemp production risk by amending the Federal Crop Insurance Act to include hemp.  Section 11119 adds hemp to the definition of “agricultural commodities” that can be insured and section 11106 adds legally produced hemp to the list of crops that can be insured even after harvested.  Other provisions in Title XI waive marketability requirements for researching hemp. 

Making way for hemp research funding

Several provisions in the Farm Bill ensure that it is legally permissible to fund hemp research.  Section 7129 amends the National Agricultural Research, Extension, and Teaching Policy Act to allow the Secretary of Agriculture to award grants for researching hemp and the development of hemp products.  In section 7501, the bill amends the Critical Agricultural Materials Act to allow research on hemp, meaning that Congress believes hemp has the “potential of producing critical materials for strategic and industrial purposes.” 

Finally, section 7605 amends the hemp pilot program language from the 2014 Farm Bill (for information on the pilot program, see our previous blog post).  The Secretary of Agriculture is tasked with conducting a study on the pilot program and submitting a report on the study to Congress within a year.  Section 7605 also repeals the hemp pilot programs, but only one year after final regulation on hemp production under section 10113 is published. 

How does current Ohio law treat hemp production?

Ohio law defines marijuana as “all parts of a plant of the genus cannabis…” in Ohio Revised Code section 3719.01.  Hemp is in the genus cannabis, as discussed earlier in this post.  Therefore, under current Ohio law, hemp is the same as marijuana.  Marijuana is a controlled substance under Ohio law, and the law states that “[n]o person shall knowingly obtain, possess, or use a controlled substance.” 

What about hemp-derived CBD oil?  Ohio enacted a medical marijuana law in 2016, although dispensaries in the state have yet to open (so far, only one dispensary in the state has been licensed).  In order to obtain medical marijuana in Ohio, it would have to be prescribed by a physician with which the patient has a “bona fide physician-client relationship,” and the patient would have to have a qualifying medical condition.  Medical marijuana can be prescribed and used in oil form under the law.  Since Ohio law lumps hemp in with marijuana, this means that in order to obtain CBD oil derived from hemp, a person would also have to follow the steps to obtain medical marijuana. Hemp-derived CBD oil also does not fall under any exceptions in Ohio’s definition of marijuana.  Ohio’s State Board of Pharmacy specifically stated in a guidance document that CBD oil can only be legally dispensed from a licensed dispensary.  In releasing this guidance, the Board of Pharmacy is purporting to act under the rulemaking authority granted under ORC 3796.04.

Note, however, that there are exceptions to Ohio’s definition of marijuana.  According to Ohio law, marijuana “does not include the mature stalks of the plant, fiber produced from the stalks, oils or cake made from the seeds of the plant, or any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks, except the resin extracted from the mature stalks, fiber, oil or cake, or the sterilized seed of the plant that is incapable of germination.”  Since hemp falls under the definition of marijuana, it is possible that some of these exceptions could also apply to certain hemp products made from stalks or seeds. Thus, it is plausible that some hemp products could be sold and used in Ohio.  The law also states, however, that no person (other than those licensed under the medical marijuana law) “shall knowingly cultivate” marijuana.  Again, since hemp is part of the state’s definition of marijuana, under the law, that means that nobody can “knowingly cultivate” hemp, either. 

In sum, it appears as though some excepted hemp products could be sold in Ohio, but not CBD oil, as it does not fall under the exception.  Even if some hemp products can be sold in Ohio, hemp itself cannot currently be cultivated in Ohio.  The new hemp language in the Farm Bill allows states to be more restrictive with hemp than the federal government, so Ohio can continue its ban on certain hemp products even with the new federal law.  The State cannot, however, stop the transportation of hemp across the State, as explained above.  Conversely, Ohio’s General Assembly could remove hemp from Ohio’s definition of marijuana and redefine hemp according to the Farm Bill’s new definition, which could allow for legal hemp cultivation under the Farm Bill.  For the time being, growing hemp in Ohio is not legal, but that is subject to change. 

Stay tuned to the Ag Law Blog for continuing updates on hemp laws!

Amidst a great deal of controversy, President Trump signed the “Consolidated Appropriations Act, 2018” on March 23. The omnibus $1.3 trillion spending package includes a number of provisions that affect agriculture, not all spending related. One glaring omission from the bill that agriculture wanted, however, was language allowing the EPA to withdraw the Waters of the United States (WOTUS) rule. Otherwise, the new law contains fixes and clarifications for several key legal issues agriculture has faced in the past year and funding for important agricultural programs.

Section 199A tax deduction revised

Sellers of grain who were hoping to capitalize on the IRC § 199A 20% gross sales deduction when selling grain to their cooperative will be disappointed that the spending bill has removed the deduction and that the removal is retroactive to January 1, 2018. Congress enacted new provisions that will address sales to cooperatives. According to my colleague and tax expert Kristine Tidgren at Iowa State, “the cooperative patron is subject to a new bifurcated calculation and a hybrid 199A deduction. Essentially, the fix gives the cooperative patron a deduction that blends the new 199A deduction with the old 199 DPAD deduction (all within the new 199A). Depending upon their individual situations, cooperative patrons may be advantaged, disadvantaged, or essentially treated the same by selling to a cooperative rather than selling to a non-cooperative.” Read more of Kristine’s analysis here.

CERCLA emissions reporting for livestock goes away

The spending bill incorporates provisions of the “Fair Agricultural Reporting Methods Act” proposed earlier by a bi-partisan group of Senators concerned about a court ruling that subjected farms to air emissions reporting under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (explained in our previous post). The EPA had delayed the reporting requirement to May 1, 2018. The reporting mandate is removed under the new law, however, which states that air emissions from animal waste at a farm are not subject to CERCLA reporting requirements, nor are emissions from the application, handling or storage of registered pesticides. A “farm” is an area used to produce crops or livestock that have a total value of $1,000 or more.

Electronic logging device rule further delayed

We’ve reported several times on the Electronic Logging Device (ELD) rule that would require commercial agricultural haulers to utilize electronic technology that automatically records hours-of-service data. The Federal Motor Carrier Safety Administration (FMCSA) issued several waivers that delayed the requirement. The new spending bill effectively voids the ELD rule until September 30, 2018, by prohibiting the FMCSA from using its funds during that time to implement, administer, or enforce provisions regarding the use of electronic logging devices by operators of commercial motor vehicles transporting livestock or insects.

County-level ACRE pilot program to be established

The spending bill directs USDA to create a 2018 pilot program for county-level agriculture risk coverage (ARC) payments for the 2017 crop year. Farm Service Agency offices in each State will have the opportunity to provide agricultural producers a supplemental payment to ensure that there are not significant yield calculation disparities between comparable counties in the State.

Rural broadband grant program funded

The law allocates $600,000,000 for the USDA to conduct a new broadband loan and grant pilot program under the Rural Electrification Act. At least 90 percent of the households to be served by the project receiving a loan or grant under the pilot program must be in a rural area currently without sufficient access to broadband.

Conservation funding maintained

The spending bill maintains full funding levels for farm bill conservation programs and exempts farms participating in conservation programs from obtaining System for Award Management (SAM) and Data Universal Numbering System (DUNS) numbers. The Great Lakes Restoration Initiative received $300 million to carry out activities that would support the Initiative and the Great Lakes Water Quality Agreement, including grants for research, monitoring, outreach, and implementation.

Research funding increased

In stark contrast to significant cuts proposed by the White House, the spending bill contains the largest increase in research funding in over a decade. Research programs at the USDA would grow by $33 million, to $1.2 billion. The funding includes a $25 million increase to a $400 million budget for the Agriculture and Food Research Initiative (AFRI) established by the 2008 Farm Bill, surprisingly still $300 million shy of the 2008 Farm Bill’s proposed funding level.

Readers can dig into the 878 pages of the Consolidated Appropriations Act of 2018 here.