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Legalized hemp production in the U.S. took a major step forward today with the publication of the USDA’s rule establishing the “U.S. Domestic Hemp Production Program.” States and potential hemp growers have been awaiting this rule since the Farm Bill legalized hemp back in December 2018 but required that regulatory programs be established for overseeing hemp production. Today’s hemp rule sets up the regulatory framework for state departments of agriculture, Indian tribal governments and the USDA to license producers who want to grow hemp as a commodity crop.
What’s in the hemp rule?
The hemp rule lays out the requirements for establishing Hemp Production Plans within States or Tribal governments and creates a USDA administered licensing program for producers in areas that choose not to regulate hemp production. Other parts of the rule include definitions, appeal provisions, and reporting requirements. The rule also addresses the interstate transportation of hemp. Here’s a quick summary of provisions that affect Ohioans.
Requirements for State and Tribal Hemp Production Plans. A State or Tribe must include the following in a Hemp Production Plan that the USDA must approve before the State or Tribe can allow hemp production within its borders:
- Plans to maintain relevant producer and land information. A state must collect, maintain and provide USDA with contact and location information for each licensed hemp producer, including personal information about the individual or business and location information about the land where hemp is produced.
- Plans for accurate and effective sampling and testing. A plan must include procedures for collecting hemp flower samples; conducting sampling and testing of plants 15 days prior to any harvest; ensuring that sampling methods are reliable and represent a homogeneous composition of the sampling area; preventing commingling of plants from different sampling areas; requiring that producers are present during sampling; and allowing samplers to have unrestricted access to hemp plants and all land and facilities used for cultivating or handling hemp.
- Procedures to accurately test THC levels in samples. The rule lays out suggested reliable testing methods but does not establish a single, national testing procedure for determining whether a hemp plant falls beneath the 0.3 threshold for THC, the psychoactive ingredient that distinguishes hemp from marijuana. However, a State or Tribe must use a testing lab that is registered with the Drug Enforcement Agency and must require the lab to follow testing performance standards. The standards must include evaluation of “measurement of uncertainty,” a concept similar to determining the margin of error, and must account for the uncertainty in THC test results.
- Procedures for disposal of non-compliant plants. A State or Tribal plan must prohibit any handling, processing, or entering the stream of commerce of any hemp grown in an area that exceeds the acceptable THC level and must have procedures for disposing of the plants, verifying disposal, and notifying USDA of non-compliant plants, including provision of test results to USDA.
- Inspection procedures. A plan must include procedures for annual inspections of random samples of licensed producers.
- Reporting procedures. A plan must explain how a State or Tribe will submit all of the information and reports required by the rule, which includes monthly producer reports, monthly hemp disposal reports, and annual reports of total planted, harvested, and disposed acreage. The plan must also require producers to report crop acreage to the Farm Service Agency.
- Corrective action plans. A required corrected action plan will address procedures for allowing producers to correct negligent regulatory violations such as failing to provide a legal description, failing to obtain a license, and exceeding the THC level. The procedures must include a reasonable compliance date, reporting by the producer for two years after a violation, five years of ineligibility for producers with three negligence violations with a five-year period, and inspections to ensure implementation of corrective action plans.
- Enforcement for culpable violations. A plan must have procedures for reporting any intentional, knowing, willful or reckless violations made by producers to the U.S. Attorney General and chief law enforcement officers of the State or Tribe.
- Procedures for addressing felonies and false information. The plan must not allow a producer with a felony conviction relating to controlled substances to be eligible for a hemp license for a period of ten years from the felony conviction, and must prohibit a producer who materially falsifies information on an application to be ineligible for a license.
Plan review by USDA. The rule states that after a State or Tribe submits a hemp plan, USDA has 60 days to approve or deny the plan. The rule also allows USDA to audit approved state plans at least every three years.
Interstate commerce of hemp. The rule reiterates an important provision first mentioned in the 2018 Farm Bill: that no state can prohibit transportation of hemp or hemp products lawfully produced under an approved state plan or a USDA license.
USDA issued licenses. A producer in a state that chooses not to regulate hemp production may apply to the USDA for a license to cultivate hemp. The USDA’s sets forth its licensing program requirements in the rule, which are similar to provisions for State and Tribal Hemp Production Plans.
Effective date: today
It’s important to note that the USDA published the rule as an “interim final rule” that becomes effective upon its publication in the Federal Register, which is today, October 31, 2019. Federal law allows an agency to forego the typical “notice and comment” period of rulemaking and publish a final rule if there is good cause for doing so. USDA explains that good cause exists due to Congress’s interest in expeditious development of domestic hemp production, critically needed guidance to stakeholders who’ve awaited publication of the hemp rule, previous outreach efforts, and the public’s interest in engaging in a new and promising economic endeavor. The immediacy of USDA’s rule allows the agency to begin reviewing State and Tribal Hemp Production Plans now, in hopes that producers will be able to plant hemp for the 2020 growing season. USDA is seeking public input on the interim final rule for the next sixty days, however, and plans to consider such comments when it replaces the interim final rule with a “final rule” in two years time.
Is Ohio ready?
While Ohio’s Department of Agriculture (ODA) won’t be the first in line to have its hemp production program reviewed under the new USDA program, Ohio won’t be too far behind the twenty states and tribes that are already awaiting review. ODA proposed Ohio’s hemp regulations earlier this month after the General Assembly decriminalized hemp and authorized the agency to develop a hemp program in July of this year via Senate Bill 57. The USDA rule comes just one day after ODA closed the comment period on the proposed rules, which we summarize here. Once ODA publishes the final hemp regulations, it can proceed to submit Ohio’s Hemp Production Plan to the USDA for approval. Ohio’s timing may prove beneficial, as ODA now has the opportunity to review the USDA rule and ensure that Ohio’s plan will meet the federal requirements.
Our comparison of Ohio’s hemp laws and regulations to the USDA’s hemp rule indicates that Ohio is well prepared to meet the hemp rule requirements. Only a few provisions in the federal rule may require additional attention by Ohio before ODA submits its plan for USDA approval. Key among those are procedures for THC testing methods (technical details not included in Ohio’s proposed regulations) and procedures for corrective action plans (which are not clearly laid out in the proposed regulations but are addressed in Senate Bill 57). One potential conflict between the federal and Ohio rules regards destruction of hemp plants that exceed the allowable 0.3 THC level. The federal rule prohibits any further handling, processing or entering into the stream of commerce of any hemp plants from the sampling area and requires disposal of non-compliant plants, while Ohio’s regulations allow bare hemp stalks for fiber that is free of leaf, seed and floral material to be harvested, processed and used while all other material from plants that exceed 0.3 THC must be destroyed. We’ll soon see how ODA handles these and other issues when it submits Ohio’s Hemp Production Plan for USDA approval.
Read the interim final rule on “Establishment of a Domestic Hemp Production Program” here, which is also the site for submitting comments on the rule. USDA will accept public comments until December 30, 2019.
Written by: Ellen Essman and Peggy Hall
October is almost over, and while farmers have thankfully been busy with harvest, we’ve been busy harvesting the world of ag law. From meat labeling to RFS rules to backyard chickens and H-2A labor certification, here’s our latest gathering of agricultural law news you may want to know:
Federal judge upholds Missouri’s meat labeling law—for now. Missouri passed a law in 2018, which among other things, prohibited representing a product as “meat” if it is not derived from livestock or poultry. As you can imagine, with the recent popularity of plant-based meat products, this law is controversial, and eventually led to a lawsuit. However, U.S. District Judge Fernando Gaitan Jr. decided not issue a preliminary injunction that would stop the Missouri Department of Agriculture from carrying out the labeling law. He reasoned that since companies like Tofurky, who brought the suit, label their products as plant-based or lab-grown, the law does not harm them. In other words, since Tofurky and other companies are not violating the law, it doesn’t make sense to stop enforcement on their account. Tofurky, the American Civil Liberties Union, and the good Food Institute have appealed Judge Gaitan’s decision, asserting that Missouri’s law infringes upon their right to free speech. This means that the Missouri law can be enforced at the moment, but the decision is not final, as more litigation is yet to come.
Oregon goes for cage-free egg law. In August, Oregon passed a new law that would require egg-laying chickens, turkeys, ducks, geese, or guinea fowl to be kept in a “cage-free housing system.” This law will apply to all commercial farms with more than 3,000 laying hens. A cage-free housing system must have both indoor and outdoor areas, allow the hens to roam unrestricted, and must have enrichments such as scratch areas, perches, nest boxes and dust bathing areas. As of January 1, 2024, all eggs sold in the state of Oregon will have to follow these requirements for hens. The law does allow hens to be confined in certain situations, like for veterinary purposes or when they are part of a state or county fair exhibition.
City can ban backyard chickens, says court. The Court of Appeals for Ohio’s Seventh District upheld the city of Columbiana’s ordinances, which ban keeping chickens in a residential district, finding that they were both applicable to the appellant and constitutional. In this case, the appellant was a landowner in Columbiana who lived in an area zoned residential and kept hens in a chicken coop on his property. The appellant was eventually informed that keeping his hens was in violation of the city code. A lawsuit resulted when the landowner would not remove his chickens, and the trial court found for the city. The landowner appealed the trial court’s decision, arguing that he did not violate the city ordinances as they were written, and that the city applied the ordinances in an arbitrary and unreasonable way because his chickens did not constitute a nuisance. Although keeping chickens is not explicitly outlawed in Columbiana, the Court of Appeals for Ohio’s Seventh District found that reading the city’s zoning ordinances all together, the “prohibition on agricultural uses within residential districts can be inferred.” Furthermore, the court pointed out that the city’s code did not ban chickens in the whole city, but instead limited them to agricultural districts, and that the prohibition in residential areas was meant to ensure public health. For these reasons, the court found that the ordinances were not arbitrarily and unreasonably applied to the appellant, and as a result, the ordinances are constitutional. To read the decision in its entirety, click here.
EPA proposes controversial Renewable Fuel Standard rule. On October 15, EPA released a notice of proposed rulemaking, asking for more public comment on the proposed volumes of biofuels to be required under the Renewable Fuel Standard (RFS) program in 2020. The RFS program “requires a certain volume of renewable fuel to replace the quantity of petroleum-based transportation fuel” and other fuels. Renewable fuels include biofuels made from crops like corn, soybeans, and sugarcane. In recent years, the demand for biofuels has dropped as the Trump administration waived required volumes for certain oil refiners. The administration promised a fix to this in early October, but many agricultural and biofuels groups feel that EPA’s October 15 proposed rule told a different story. Many of these groups are upset by the proposed blending rules, claiming that way the EPA proposes calculate the biofuel volumes would cause the volumes to fall far below what the groups were originally promised by the administration. This ultimately means the demand for biofuels would be less. On the other hand, the EPA claims that biofuels groups are misreading the rule, and that the calculation will in fact keep biofuel volumes at the level the administration originally promised. The EPA plans to hold a public hearing on October 30, followed by a comment period that ends November 29, 2019. Hopefully the hearing and comments will help to sort out the disagreement. More information is available here, and a preliminary version of the rule is available here.
New H-2A labor certification rule is in effect. The U.S. Department of Labor has finalized one of many proposed changes to the H-2A temporary agricultural labor rules. A new rule addressing labor certification for H-2A became effective on October 21, 2019. The new rule aims to modernize the labor market test for H-2A labor certification, which determines whether qualified American workers are available to fill temporary agricultural positions and if not, allows an employer to seek temporary migrant workers. An employer may advertise their H-2A job opportunities on a new version of the Department’s website, SeasonalJobs.dol.gov, now mobile-friendly, centralized and linked to third-party job-search websites. State Workforce Agencies will also promote awareness of H-2A jobs. Employers will no longer have to advertise a job in a print newspaper of general circulation in the area of intended employment. For the final rule, visit this link.
And more rules: National Organic Program rule proposals. The USDA has also made two proposals regarding organic production rules. First is a proposed rule to amend the National List of Allowed and Prohibited Substances for organic crops and handling. The rule would allow blood meal made with sodium citrate to be used as a soil amendment, prohibit the use of natamycin in organic crops, and allow tamarind seed gum to be used as a non-organic ingredient in organic handling if an organic form is not commercially available. That comment period closes on December 17, 2019. Also up for consideration is USDA’s request to extend the National Organic Program’s information collection reporting and recordkeeping requirements, which are due to expire on January 31, 2020. The USDA’s Agricultural Marketing Service specifically invites comments by December 16, 2019 on: (1) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
Great Lakes restoration gets a boost from EPA. On October 22, 2019, the EPA announced a new action plan under the Great Lakes Restoration Initiative (GLRI). The plan will be carried out by federal agencies and their partners through fiscal year 2024. Past GLRI action plans have removed environmental impairments on the lakes and prevented one million pounds of phosphorus from finding its way into the lakes. The plans are carried out by awarding federal grant money to state and local groups throughout the Great Lakes, who use the money to carry out lake and habitat restoration projects. Overall, the new plan’s goals are to remove toxic substances from the lakes, improve and delist Areas of Concern in the lakes, control invasive species and prevent new invasive species from entering the lakes, reduce nutrients running off from agriculture and stormwater, protect and restore habitats, and to provide education about the Great Lakes ecosystem. You can read EPA’s news release on the new plan here, and see the actual plan here. We plan to take a closer look at the plan and determine what it means for Ohio agriculture, so watch for future updates!
Unfortunately, the death of a farmland owner can create conflict within a family. Often, transition planning by the deceased could have prevented the conflict. Such is the case in a family disagreement that ended up before Ohio’s Third District Court of Appeals. The case pitted two brothers against one another, fighting over ownership of the family farm.
When their mother passed away in 2006, the five Verhoff siblings decided to sell the family farm. Two of the brothers wanted to purchase the farm, but one of them was also the executor of the estate. The estate’s attorney advised the executor brother that he should not buy the land directly from the estate due to his fiduciary duties as executor. The attorney recommended that the executor wait and purchase one-half of the farm from the other brother after it was transferred from the estate to the other brother.
Following a series of discussions between the two brothers, the executor brother sent half of the farm’s purchase price to the other brother and issued the farm’s deed to the other brother. Over the next eight years, the two brothers shared a joint checking account used to deposit rental income from the farmland and to pay for property taxes and utilities on the property. But when the executor brother asked the other brother for a deed showing the executor brother’s half-interest in the farm, the other brother claimed that the executor brother did not have an ownership interest. The money rendered by the executor brother was a loan and not a purchase, claimed the other brother. The other brother then began withholding the farm rental payments from the joint checking account. The relationship between the two brothers broke down, and in 2016, the executor brother filed a lawsuit to assert his half-ownership of the farm and his interest in the rental payments.
At trial, a jury found that the brothers had entered into a contract that gave the executor brother half ownership of the farm upon paying half of the purchase price to the other brother. The trial court ordered the other brother to pay the executor brother half of the current value of the farm and half of the rental income that had been withheld from the executor brother. The other brother appealed the trial court’s decision. The court of appeals did not agree with any of the other brother’s arguments, and upheld the trial court’s decision that a contract existed and had been violated by the other brother. Two of the arguments on appeal raised by the other brother are most relevant: that Ohio’s statute of frauds required that the contract be in writing and that the contract was illegal because an executor cannot purchase land from an estate.
A contract for the sale of land should be in writing, but there are exceptions
Ohio’s “Statute of Frauds” provides that a contract or sale of land or an interest in land is not legally enforceable unless it is in writing and signed by the party to be charged. The other brother argued that because there was no written agreement about the ownership of the farm, the situation did not comply with the Statute of Frauds and could not be enforceable. However, the court focused on an important exception to the Statute of Frauds: the doctrine of partial performance. The doctrine removes a verbal contract from the writing requirement in the Statute of Frauds if there are unequivocal acts of performance by one party in reliance upon a verbal agreement and if failing to enforce the verbal agreement would result in fraud, injustice, or hardship to that party who had partly performed under the agreement.
Based upon evidence produced by the executor brother, the appeals court agreed with the trial court in determining that an oral contract did exist between the two brothers and that the executor brother had performed unequivocal acts in furtherance of the verbal contract. The court explained that the executor brother had endured “risks and responsibility” by giving the other brother money with the expectation that he would receive rental income from the farm and own a one-half interest in the property. An injustice would occur if the verbal contract was not enforced because of the Statute of Frauds, as the other brother would receive a windfall at the executor brother’s expense, said the court. The court concluded that because the doctrine of partial performance had been met, the writing requirement in the Statute of Frauds should be set aside.
Did the executor brother violate his fiduciary duties by purchasing the land?
The other brother also claimed that the verbal contract was illegal because the executor brother made a sale from the estate to himself. According to the other brother, the sale violated Ohio Revised Code section 2109.44, which prohibits fiduciaries from buying from or selling to themselves or having any individual dealings with an estate unless authorized by the deceased or the heirs.
The court pointed out, however, that the executor brother did not buy the farm from the estate. Instead, the executor brother purchased the farm through a side agreement with the other brother who purchased the farm from the estate. The court noted that this type of arrangement could be voidable if other heirs challenged it. But since no other heirs did so, the court determined that the executor brother had not violated his fiduciary duties to the estate and allowed the side agreement to stand.
Estate and transition planning can help prevent family disputes
Imagine the toll this case took on the family. It’s quite possible that parents can prevent these types of conflicts over what happens to the farm when they pass on. An initial step for parents is to determine which heirs want to transition into owning and managing the farm, and what their future roles with the farm might be. This often raises other tough questions parents must face: how to provide an inheritance to children who don’t want the farm when other children do want the farm? Must or can the division of assets be equal among the heirs? What about other considerations, such as children with special issues or not having heirs who do want to continue the farm? These are difficult but important questions parents can answer in order to prevent conflict and irreparable harm to the family in the future.
The good news is that there are legal tools and solutions for these and the many other situations parents encounter when deciding what to do with the farm and their assets. An attorney who works in transition planning for farmers will know those solutions and can tailor them to a family’s unique circumstances. One agricultural attorney I know promises that there’s a legal solution for every farm family’s transition planning issues. Working through the issues is difficult, but identifying tools and a detailed plan for the future can be satisfying. And it will almost certainly prevent years of litigation.
The text of the opinion in Verhoff v. Verhoff, 2019-Ohio-3836 (3rd Dist.) is HERE. For more information about farm estate and transition planning, be on the lookout for our soon-to-be released Farm Transition Matters law bulletin series or catch us at one of our Farm Transition Planning workshops this winter.
Mentoring is a rewarding part of my position with OSU, but it is often a bittersweet experience to see young people come and go. Such is the case with our law fellow Evin Bachelor, whom I’ve had the privilege of mentoring for the past two years. Evin left the Farm Office on September 30 to pursue private practice.
While I’m happy to send Evin off to serve farmers with his brilliant legal mind, I’m sad to see him go. I will miss his passion, his cleverness, his analytical gifts, and his hearty laugh. But it’s been a joy to help Evin evolve from a law student curious about agricultural law to an attorney prepared to impact the world of agricultural law. He has deftly exceeded every challenge I’ve given him.
One of those challenges was to co-author a set of law bulletins on legal documents used in farm financing arrangements, his final project. The Financing the Farm law bulletin series, which specifically targets new and beginning farmers, is now available. The series includes explanations of mortgages, promissory notes, installment contracts, leasing arrangements and secured transactions, and how they’re used in farm financing. Access the law bulletins in the Financing the Farm series here.
Evin will be practicing law with our good friends at Wright & Moore Law Co. LPA in Delaware, Ohio. He's an excellent addition to an already outstanding agricultural law firm. You’ll continue to see his work on the Farm Office, however, as I’ll be contracting with Evin on a few more finance and farm transition projects in the next year. The mentorship and Evin’s time at OSU is over, but the relationship will continue. A bittersweet ending, to be sure.
In August, the Secretary of the Interior announced that the Trump Administration would be making revisions to the way the Endangered Species Act (ESA) is carried out under federal regulations. The move was made in part to further the Administration’s goal to “ease the regulatory burden” on citizens. The revised regulations apply to sections 4 and 7 of the ESA, which means they make changes to how species are listed as endangered, how critical habitat for species is determined, how threatened species are treated, and how the different federal agencies cooperate to carry out the ESA.
Revision of endangered, threatened, and critical habitat protections
The changes to how the ESA is carried out were made in three rulemakings published on August 27, 2019. One of the rules, available here, is meant to increase cooperation between federal agencies when carrying out the ESA (this rule is set to become effective on October 28). Changes made by the other two rules, available here, and here, are much more controversial because they have a great impact on how endangered and threatened species and their habitats are treated under federal regulations. The new rules went into effect on September 26, 2019. We discuss some of the biggest modifications below.
First, the rules change the term “physical or biological features” to “physical or biological features essential to the conservation of the species.” This change will likely diminish the number of natural features and areas that will be protected, since only those deemed essential to an endangered species will be protected. Similarly, the new rules give the federal government more leeway to determine when habitat is not critical habitat for species, which may result in less habitat being protected under the new iteration of the rules.
In yet another change, the new rules separate the discussion of “threatened” and “endangered” species within the regulatory text. Due to this uncoupling, some read the new version of the rule as stripping threatened species of protections they enjoyed when they were more closely related to endangered species. The new edition of the rules instead includes factors for determining whether a species can be listed as threatened, such as whether it is likely the species will become endangered in the “foreseeable future,” which will be determined on a case by case basis. Critics of the new rules believe that this language will give the government the discretion to overlook the effects of climate change on a species, which could play out over a period of time longer than the “foreseeable future.” Along the same lines, the rules also make it harder to ban certain activities in order to protect threatened species.
The rules weaken the ESA by allowing the federal government to take into account the actions of states, other nations, and local jurisdictions when listing and delisting species. In other words, if the species is being protected on another level of government or by another country, the U.S. government may be less inclined to protect the species; either by choosing not to list the species, or by removing its threatened or endangered status. Importantly, the new rules also allow “commercial information,” not just scientific information, to be considered when making a decision. Under the old rules, agencies were not allowed to consider the economic impacts of listing or delisting a species. On the whole, the rules seem to give the federal government a lot more discretion to determine that species or habitats should not be protected.
On September 25, 2019, the day before the new rules became effective, the attorneys general from 17 states, including Ohio’s neighbors Michigan and Pennsylvania, sued the Trump Administration in federal court over the changes to the rules. You can find the complaint here. The states assert that the rulemaking violates several federal statutes, including the Administrative Procedure Act, which governs federal administrative agencies. The states further claim that the weakening of protections for endangered and threatened species and their habitats will cause harm to their natural resources, harm to their citizens through environmental degradation, take away the current and future economic benefits of protected species, and increase costs for state governments.
Amidst all the rule changes and lawsuits, members of Congress have been working on their own potential changes to the ESA. Recently, the Congressional Western Caucus, a group of congress members from all around the country who are concerned with land use and resource rights, among other causes, introduced nineteen bills meant to “modernize” the ESA. If you’re interested in the specifics of each bill, they are listed on the Caucus’ website, here. Overall, the bills focus on fixing the ESA by implementing “defined recovery goals” for species, relying on “standardized…publically available” science, and allowing more involvement from states and stakeholders on endangered species decisions.
With action taking place on the administrative, legislative, and judicial levels of the federal government, the way the ESA is written and interpreted seems to be up in the air at present. We will be sure to update the Ag Law Blog with any developments.
By Peggy Kirk Hall and Ellen Essman
Ohio’s newly created hemp program is one step further toward getting off the ground. On October 9, the Ohio Department of Agriculture (ODA) released its anxiously awaited proposal of the rules that will regulate hemp production in Ohio. ODA seeks public comments on the proposed regulations until October 30, 2019.
There are two parts to the rules package: one rule for hemp cultivation and another for hemp processing. Here’s an overview of the components of each rule:
1. Hemp cultivation
The first rule addresses the "cultivation" of hemp, which means "to plant, water, grow, fertilize, till or havest a plant or crop." Cultivating also includes "possessing or storing a plant or crop on a premises whre the plant was cultivated until transported to the first point of sale." The proposal lays out the following regulatory process for those who wish to cultivate hemp in Ohio.
Cultivation licenses. Anyone who wants to grow hemp must receive a hemp cultivation license from the ODA. Licenses are valid for three years. To obtain a license, the would-be hemp cultivator must submit an application during the application window, which will be between November 1 and March 31. The application requires the applicant to provide personal information about the applicant, and if the applicant is a business, information about who is authorized to sign on behalf of the business, who will be primarily responsible for hemp operations and the identity of those having a financial interest greater than ten percent in the entity. The cultivation license application will also seek information about each location where hemp will be grown, including the GPS coordinates, physical address, number of outdoor acres or indoor square footage, and maps of each field, greenhouse, building or storage facility where hemp will grow or be stored. Cultivators must pay a license application fee of $100, and once licensed, an additional license fee of $500 for each growing location, which the rule defines as "a contiguous land area or single building in which hemp is grown or planned to be grown." All applicants and anyone with a controlling interest in the hemp cultivation business must also submit to a criminal records check by the bureau of criminal identification and investigation.
Land use restrictions. The proposed rules state that a licensed hemp cultivator shall not:
- Plant or grow cannabis that is not hemp.
- Plant or grow hemp on any site not approved by the ODA.
- Plant, grow, handle or store hemp in or within 100 feet of a residential structure or 500 feet of a school or public park, unless for approved research.
- Co-mingle hemp with other crops without prior approval from ODA.
- Plant or grow hemp outdoors on less than one-quarter acre, indoors on less than 1,000 square feet, or in a quantity of less than 1,000 plants without prior approval from ODA.
- Plant or grow hemp within half a mile of a parcel licensed for medical marijuana cultivation.
- Plant or grow hemp on property that the license holder does not own or lease.
Hemp harvesting. Licensed growers would be required to submit a report to ODA at least 15 days before their intended harvest date and pay a pre-harvest sample fee of $150. ODA then has to sample the hemp for THC content, and only if approved can a cultivator harvest the crop, which in most cases must occur within 15 days after the sample is taken. Failing to harvest within the 15-day window might require a secondary sampling and sampling fee. A cultivator would be required to have a hemp release form from ODA before moving any harvested materials beyond the storage facility.
Random sampling. The proposed rules also allow for random sampling of hemp by ODA and provide details on how ODA will conduct the sampling and charge sampling fees. Any cultivator is subject to random sampling in each location where hemp has been cultivated. ODA will report testing results that exceed 0.3 THC to the cultivator, who may request a second sample. A cultivator must follow procedures for destroying any leaf, seed, or floral material from plants that exceed 0.3 THC and any material that was co-mingled with the 0.3 THC materials, but may harvest bare hemp stalks for fiber.
Destruction of hemp. Under the proposed regulations, a license holder must submit a destruction report before destroying hemp and ODA must be present to witness the destruction. The proposed rules also authorize ODA to destroy a crop that was ordered destroyed, abandoned, or otherwise not harvested and assess the costs against the licensee.
Reporting and recordkeeping are also important in the proposed rules. Licensed cultivators must submit a planting report on an ODA form for each growing location by July 1 or within 15 days of planting or replanting, which shall include the crop’s location, number of acres or square footage, variety name, and primary intended use. The rule would also require licensees to submit a completed production report by December 31 of each year. A licensee that fails to submit the required reports would be subject to penalties and fines. Cultivators must maintain planting, harvest, destruction and production reports for three years.
Control of volunteer plants. A licensee must scout and monitor unused fields for volunteer hemp plants and destroy the plants for a period of three years past the last date of reported planting. Failing to do so can result in enforcement action or destruction of the plants by ODA with costs assessed to the licensee.
Pesticide and fertilizer use. The laws and rules that apply to other crops will also apply to hemp, except that when using a pesticide on a site where hemp will be planted, the cultivator must comply with the longest of any planting restriction interval on the product label. ODA may perform pesticide testing randomly, and any hemp seeds, plants and materials that exceed federal pesticide residue tolerances will be subject to forfeiture or destruction without compensation.
Prohibited varieties. The proposed rule states that licensed cultivators cannot use any part of a hemp plant that ODA has listed as a prohibited variety of hemp on its website.
Clone and seed production. Special rules apply to hemp cultivators who plan to produce clones, cuttings, propagules, and seed for propagation purposes. The cultivator can only sell the seeds or plants to other licensed cultivators and must maintain records on the variety, strain and certificate of analysis for the “mother plants.” The licensee need not submit a harvest report, but must keep sales records for three years of the purchaser, date of sale, and variety and number of plants or seeds purchased.
Cultivation research. Universities may research hemp cultivation without a license but private and non-profit entities that want to conduct research must have a cultivation license. Cultivation research licensees would be exempt from many parts of the proposed rules, but must not sell or transfer any part of the plants and must destroy the plants when the research ends.
Enforcement. The proposed rule grants authority to the ODA to deny, suspend or revoke cultivation licenses for those who’ve provide false or misleading information, haven’t completed a background check, plead guilty to a felony relating to controlled substances within the past 10 years, or violated the hemp laws and rules three or more times in a five-year period.
2. Hemp processing
The proposed rules package by ODA also addresses processing, which the rule defines as “converting hemp into a hemp product” but does not include on-farm drying or dehydrating of raw hemp materials by a licensed hemp cultivator for sale directly to a licensed hemp processor. Because of this definition, many farmers who want only to grow and dry hemp would need only a cultivation license. Growers who want to process their licensed hemp into CBD oil or other products, however, must also obtain a processing license. The processing rules follow a similar pattern to their cultivation counterpart, as follows.
Processing licenses. In addition to submitting the same personal, business and location information as a cultivation license requires, a hemp processing license application must list the types of hemp products that the processor plans to produce. An “extraction operational plan” including safety measures and guidelines is required for processors who want to extract CBD from hemp to produce their product, and an applicant must indicate compliance with all building, fire, safety and zoning requirements. The amount of the license fee depends on what part of the hemp plant the processor plans to process. Processing raw hemp fiber, for example, requires a $500 license fee for each processing site, whereas processing the raw floral component of hemp requires a $3000 fee for each site. Like the cultivation license, a processing license is valid for three years. Applicants and those with a controlling interest in the business must submit to a background check.
Land use restrictions. The proposed regulations would prevent a licensed processor from:
- Processing or storing any cannabis that is not hemp.
- Processing or storing hemp or hemp products on any site not approved by ODA.
- Processing, handling, or storing hemp or hemp products in or adjacent to a personal residence or in any structure used for residential use or on land zoned for residential use.
- Processing hemp within 500 feet of a school or public park, except for approved research.
Financial responsibility. A licensed processor must meet standards of financial responsibility, which require having current assets at least $10,000 or five percent of the total purchase of raw hemp materials in the previous calendar year, whichever is greater, and possessing a surety bond.
Inspection and sampling. As with cultivation licensees, hemp processing licensees would be subject to inspection and sampling by ODA under the proposed rule.
Food safety regulations. The proposed rule requires hemp processes to comply with federal and state food safety regulations.
Sources and extraction of cannabinoids (CBD). A processor who wants to extract or sell CBD products must obtain the materials from a licensed or approved cultivator or processor in Ohio or another state with hemp cultivation licenses. The regulation outlines components of the extraction operational plan that a processor must submit with the processing application, as well as acceptable extraction methods and required training.
Product testing. A hemp processor must test hemp products at an accredited testing laboratory before selling the products. The proposed rule describes the testing procedures, which address microbial contaminants, cannabinoid potency, mycotoxins, heavy metals, pesticide and fertilizer residue and residual solvents. There are testing exemptions, however, for hemp used exclusively for fiber, derived exclusively from hemp seed and hemp extracts. The testing laboratory must create a certificate of analysis for each batch or lot of the tested hemp product.
Processor waste disposal. Under the proposed rule, a licensed processor must follow procedures for proper disposal of hemp byproducts and waste and must maintain disposal records.
Product labeling requirements are also proposed in the rule. A processor must label all hemp products except for those made exclusively from hemp fiber as outlined in the rule and in compliance with federal law and other existing Ohio regulations for standards of identify and food coloring.
Recordkeeping. As we’d expect, the proposal states that hemp processors must maintain records for five years that relate to the purchase of raw, unprocessed plant materials, the purchase or use of extracted cannabinoids, and the extraction process.
Prohibited products. Finally, the proposed rules include a list of hemp products that cannot be offered for sale, which includes hemp products with over 0.3 percent THC by dry weight basis, hemp products which laboratory testing determines do not meet standards of identity or that exceed the amount of mytoxins, heavy metals, or pesticides allowed, and any hemp products produced illegally.
What’s next for the hemp rules?
Keep in mind that these rules are not yet set in stone; they are a simply a proposal for hemp licensing rules in Ohio. Those interested in cultivating or processing hemp in the future should read the draft rules carefully. The proposed rule for hemp cultivation is here and the proposal for hemp processing is here. Anyone can submit comments on the proposed rules here. Your comments could affect what the final hemp rules require for hemp cultivators and processors. After ODA reviews all comments, it will issue its final hemp licensing regulations.
Federal law requires that after Ohio finalizes its rules, ODA must submit them to the USDA for approval. That approval won’t occur, however, until USDA completes its own hemp regulations, which are due out in proposal form any day now. Ohio’s rules will become effective once USDA approves them, hopefully in time for the 2020 planting season. Stay tuned to the Ag Law Blog to see what happens next with hemp production in Ohio.