Vermont Legislature SmartTranscripts:

[Rep. David Durfee (Chair)]: My understanding is that H. 45, which we're going to have, that's sort an example just quickly introduced to

[Rep. Jed Lipsky (Clerk)]: it, is a bill

[Rep. David Durfee (Chair)]: that was introduced at the request of a constituent, and that you're perhaps not the world's leading expert on the subject. So we're not going to grill you, but we do want you to know whatever it is you know and want to share with us, and it has something to do with them.

[Rep. Scott Campbell (St. Johnsbury)]: You're right. Okay. Wonderful understatement, Mr. Chair. Representative Scott Campbell of St. Johnsbury, for the record. And yes, I received an email from a constituent, which I'm going to summarize for you, and I sent to Patricia to post, I think I think she's probably gotten up by now, about her CBD business. She she makes topical oils and things like that. And I really don't know anything more about it than that. I bought one of her products a couple of times. And so I'm just here to perform my duty as representative and represent her interests, that I think, having heard some of Mr. Pepper's testimony, dovetail very well with what you're talking about, at least in terms of hemp and the CBD and psychoactive cannabis products. So, this is Annica McKen, is the woman in St. Johnsbury who is concerned about this. So what she says is that in reference to the federal legislation last year that was in the I guess it was in the budget bill last summer. That legislation ended federal government shutdown in November, or I guess it was November, included a provision which redefines hemp. The new law criminalizes any product containing more than zero point four milligrams of THC per container, not per serving, as I think was highlighted in previous testimony, which includes all what she calls full spectrum CBD products. And she says it's not possible to manufacture CBD products with anywhere near the THC levels. Essentially, these products are being redefined as class one narcotics. Which means that she won't be able to sell her products anymore. And the only place that she could she could sell her products legally would be in in state dispensaries. And she says most of her sales comes from interstate sales right now. So she says the the purpose of the legislation was to control the proliferation of intoxicating hemp products like hemp derived delta eight and delta nine THC, whatever that is, which can get people just as high as recreational cannabis products, but are poorly regulated or unregulated and available for sale in places like gas stations with no age limits. Vermont banned these types of products years ago. They're mostly an issue in states that don't have legal cannabis. So in her opinion, these products should be regulated, but the federal government hasn't done it. The FDA has refused to regulate them, funding the issue back to Congress. Let's see. She says, you may read that this legislation only bans synthetic products not or that are sold in gas stations or that it only bans intoxicating hemp products, but it also outlaws full spectrum CBD. According to some cannabis lawyers, even CBD isolate products, which contain no THC, would become unavailable. They would be legal to sell but be illegal to manufacture because the new law limits the amount of THC concentrates, called intermediates in the legislation, used to make CBD isolate. So I'm way out over my skis on this.

[Rep. Jed Lipsky (Clerk)]: So

[Rep. Scott Campbell (St. Johnsbury)]: she says that there are roughly 20 to 30 small CBD manufacturers currently operating in Vermont. And if the current legislation stands, the majority would be forced to go out of business. Her only option would be to apply for a recreational cannabis manufacturing license at $1,100 plus additional fees of around $2,500 annually. She would only be allowed to sell, as I mentioned, only be allowed to sell in dispensaries, and she would not be able to her business, she would have to shut down. So what she says is, Obviously, I hope the federal legislation is rewritten to allow interstate sales of non intoxicating hemp products like CBD. If that doesn't happen, I hope Vermont creates a hemp program which would allow me to continue to sell CBD products outside of dispensaries without onerous regulations and expensive fees required for recreational cannabis. And that is she wrote a little bit more besides that, but again, it's been posted to your website. But that really is the gist of it.

[Rep. David Durfee (Chair)]: Know enough about her business to say whether she has employees or I

[Rep. Scott Campbell (St. Johnsbury)]: don't believe so, but I I can't say for sure.

[Rep. Jed Lipsky (Clerk)]: Representative Lipsky. Yeah. Thank you, representative. Just I'm wrapping my head. Most of her sales are interstate clients, but if she requesting us to keep for her to convert to an interest state job, meaning only if the mom can't work, what can we do to protect her from interstate? Yeah.

[Rep. Scott Campbell (St. Johnsbury)]: The interstate issue is a federal issue. It sounds like obviously, would prefer that this get taken care of at the federal level. Absent that, being relieved of having to get the licenses and pay the fees associated with selling intoxicating cannabis, she would like for the state to recognize that there's a difference between those products and non intoxicating CBD products. That's what I understand her request is. But that would still be It would be a side hustle, as she puts it, not something that she could really For her to operate. Interest rate. Yes. Right. Right. She comes to the farmer's market, for example, and sells there. But, you know, it's not And she also has another job as a nurse. So this isn't going to put her out on the street or anything, but it's still obviously an issue and something that she's passionate about.

[Rep. David Durfee (Chair)]: It sounds like, and I think we've heard, that she's not the only person, the only Vermonter in this industry who stands to be impacted by what's happened federally and what we could do at the state level to remediate or make it easier. Representative Bos-

[Rep. Michelle Bos-Lun]: Yeah, I was just going to ask, do you have a sense like like she mentioned she would only be selling at dispensaries? So does that mean like, are all the recreational shops, are those dispensaries? Is that what we're talking about?

[Rep. Scott Campbell (St. Johnsbury)]: Yes. Mean, that's what I understand.

[Rep. Michelle Bos-Lun]: So what what is the market she's giving up? And you mentioned the farmer's market, but like, where else would she sell her product already that she would be losing? Like, does she sell them at co ops? Does she sell them? Yeah, gas stations. I don't know. We're hearing all these different things.

[Rep. Scott Campbell (St. Johnsbury)]: I've seen her products at the local natural food store, for example. Yeah. And the co op is going to open in July. Oh, yeah, I'm looking forward to that. But I

[Rep. Jed Lipsky (Clerk)]: don't know whether

[Rep. Scott Campbell (St. Johnsbury)]: they plan to carry it. She can sell it in stores now, but she wouldn't have to sell it only in cannabis dispensaries.

[Rep. Michelle Bos-Lun]: So it would be a substantial reduction in the market.

[Rep. Scott Campbell (St. Johnsbury)]: Right. Right. So this so. Having this clarified in state law would at least enable her to broaden her her. Distribution network, I guess you would call it to regular stores

[Rep. Michelle Bos-Lun]: within our

[James Pepper (Chair, Cannabis Control Board)]: Within our state. Yes.

[Rep. Jed Lipsky (Clerk)]: And

[Rep. Scott Campbell (St. Johnsbury)]: I'm learning about this just a few weeks ago. I don't have any expertise.

[Rep. David Durfee (Chair)]: I think Ledge Council is coming in next, we can to make sure that we're clear on Yep. Good idea. Also, yeah, representative Nelson.

[Rep. Richard Nelson]: Yeah. I'm sorry. I wasn't here earlier, so I'm sure the conversations with mister Pepper and CBD canvas control board all types in this. The intermediate, the by product is the issue. It's not so much the hemp product itself for in state sale. The the out of state sale that the federal issue is the battle of Kentucky, Rand Paul and Mitch McConnell. They both disagreed. Mitch McConnell brought that legislation to protect the bourbon industry. And Kentucky is a huge manufacturer of CBD and whatnot. So the the it's the byproduct of taking down that THC. If there's if there's too much THC in the plant, it's taking it down, and then they store it on-site. From what they do with it there, mister Pepper could explain to us a lot better than I can or someone else. But but, you know, I I understand and, you know, I I if we don't do something, it is severely gonna limit their where they can sell their non intoxicating saps and and tinctures and whatnot. And it's gonna regulate it all to the dispensaries, and and then it'll be an overburden. It will put people out of business.

[Rep. Scott Campbell (St. Johnsbury)]: Yeah. And and I I think the issue is is is the reduction in the in in where people can sell their products also. I mean, I imagine a lot of people who would be interested in the size and the tinctures would not wanna go into a dispensary.

[Rep. Richard Nelson]: True story. Right? Me being one of them. Not that there's nothing wrong with that. Right.

[Rep. Scott Campbell (St. Johnsbury)]: It's just it's just the Yeah. They don't want their neighbors to see them going into a cannabis or whatever it might be. Certain whatever. Stigma or something.

[Rep. David Durfee (Chair)]: I think what we'll do is, if there are any other committee questions, thank representative Kimbell for joining us and let him go back to work in the energy committee. Right, I know something about stuff. You're meeting, think. Yes. Yes.

[Rep. Richard Nelson]: Just wondering, do you think your constituent would be willing to come in we

[Rep. Scott Campbell (St. Johnsbury)]: Oh, yes. She was willing to come in today, but it it there wasn't really time today. So I I I'm I'm going to send her contact information to the committee assistant so you can get hold of her whenever you take up this issue.

[Rep. David Durfee (Chair)]: Alright. Thank you. And yours. Patricia, if you're able to confirm that our next witness, alleged counsel, did confirm Yes, he did. Here he is now. Here he is now. Great.

[Rep. Scott Campbell (St. Johnsbury)]: Thank you very much. Good

[Tucker Anderson (Legislative Counsel)]: morning. Impeccable time issue. I'm known for it. Morning, everyone. Tucker Anderson, legislative counsel. First time in this committee in six years. So the last time I was here was tree wardens. And there are no carryover members. One carryover member from tree wardens.

[Rep. David Durfee (Chair)]: In fact, were you the bill presenter? I

[Rep. John L. Bartholomew (Vice Chair)]: was. Yes. Fee simple. We've had a great lecture on fee simple.

[Tucker Anderson (Legislative Counsel)]: Fee simple, absolute easements laying over fee simple like carpets. Those are the roads. That

[Rep. David Durfee (Chair)]: sounds like a poem.

[Tucker Anderson (Legislative Counsel)]: It was, I did my entire presentation in dog roll. Well, good morning. You have in front of you, I hope H945, which was a by request short form. It's very straightforward to walk through, and I see that you have the chair of the CCB in the room who can give you plenty of technical background that I am not as adept at presenting. So the short version of what the short form is getting at is that there are some changes to the federal definition of hemp that are set to take effect in November 2026. In addition, there's been lots of talking and posturing at the federal level about maybe changing that prior to November. Some other updates to the world of, we'll say, CANA broadly, both hemp and cannabis, and some indicators that we may not know what the future holds, at least for 2027. Certainly, what we do know is that the threshold, the THC threshold for hemp, based on what is currently going to take effect, will be looked. And that could have impact on what is allowed to travel in interstate commerce between states to have hemp producers. And because of that, the short form proposes to make changes both to Title VI and to Title VII to essentially insulate the state's hemp producers from potential effects resulting from changes in federal law. It's the easiest way to put that out there. You've seen similar proposals that have passed, even just last session, attempting to shield essentially or protect the status of Vermont law from changes at the federal level, whether those be statutory or regulatory. So for example, the Administrative Procedures Act, you might remember, was amended last session to essentially say that state level administrative rules that rely on definitions in federal administrative rules will be frozen in time until 2029 in order to not have fluctuation in meaning of Vermont law as we move forward? Something similar is proposed here. How do you freeze definitions or the market itself in Vermont pending changes in federal law.

[Rep. David Durfee (Chair)]: Title VI is the agriculture title that we are relatively familiar with. Title VII?

[Tucker Anderson (Legislative Counsel)]: Alcoholic beverages, cannabis, tobacco.

[Rep. David Durfee (Chair)]: It's entitled. In former era, might have called it.

[Tucker Anderson (Legislative Counsel)]: This In is a former era, may have called the chair might have called my position the vice lord position in legislative council. And all of those vices I'm not qualifying as that are now in my portfolio. So cannabis, tobacco, alcoholic beverages, lottery, and sports away drink. Wow. What a time to be alive.

[Rep. David Durfee (Chair)]: Do we have any questions for the chesso? Oh, go ahead.

[Rep. John L. Bartholomew (Vice Chair)]: I just wondered, have other states gone in this direction already?

[Tucker Anderson (Legislative Counsel)]: Because I don't work with a lot of the hemp bills, it's typically the ag attorney. I haven't done any research on what is bubbling up in other states, and I can't remember if that's in the presentation that the chair put together, but I'm almost certain that he would know the answer to that. Certainly, something to flag is that this is something that has been discussed in the context of the miscellaneous ag bill in the Senate, and I believe that hemp is still covered in the text of that bill in the Senate.

[Rep. John L. Bartholomew (Vice Chair)]: I was wondering if, as a parallel analogy to cannabis becoming legal in Vermont and other states. If now states might essentially do the same thing with hemp, that it's with guidelines, but within this context, it's legal in the state and we're trying to insulate it from federal harassment in some ways.

[Tucker Anderson (Legislative Counsel)]: So to take a step back conceptually, what you might tangle with, with changes at the federal level, is you have potentially a shift in product definition from hemp to cannabis, right? Even at the state level. Now, the market is really what you're trying to deal with here, because there's a shift in market availability where you can move those products, whether they're allowed to cross state lines. That's truly what is impacted here. So, that's the big picture, right? The legality of growing, manufacturing, selling might not shift that dramatically in the definition change intrastate inside of Vermont. The issues might come up with interstate commerce if a product shifts from being defined as hemp to suddenly being cannabis subject to criminal prohibition at the federal level, but legal if it's licensed by the CCB in Vermont.

[Rep. John L. Bartholomew (Vice Chair)]: Right now, THC isn't allowed to be interstate commerce.

[Tucker Anderson (Legislative Counsel)]: Hemp products that contain certain levels of THC can move in interstate. Yes, I believe there are some interesting slides on how the loophole affects All

[Rep. David Durfee (Chair)]: right, any other questions? Just since you referenced the Senate bill, which hasn't hasn't been tapped, we we don't have that bill. But to your to the extent that you understand that language, the section of that language dealing with hemp and then the intent of this bill, is there anything inconsistent between this and that?

[Tucker Anderson (Legislative Counsel)]: I don't want to comment on the conceptual consistency, but the miscellaneous ag bill directly addresses this issue. So it has a response to it.

[Rep. Jed Lipsky (Clerk)]: I don't wanna waste a lot of time, but when you've talked about the tree border bill, just for full transparency, probably a half a mile from where Tucker grew up. I was the deputy tree warden in the southern town of Monterey and supposed to sign me to the old town.

[Tucker Anderson (Legislative Counsel)]: We've talked a lot about the Kankapot River and a very rural corner of New England that we both existed in at one point.

[Rep. Jed Lipsky (Clerk)]: It was this incarnation in my life.

[Rep. David Durfee (Chair)]: Thank you for joining us. Chair Pepper, I don't know whether you've been listening, if there's anything you'd like to say to help clarify for the committee what we just heard?

[James Pepper (Chair, Cannabis Control Board)]: Again, for the record, James Pekker, chair of the Council Troll Board. I believe without knowing this individual, who's the impetus for nine forty five, without knowing what her business model is exactly, I can say that what's being contemplated in the miscellaneous ag bill in the Senate is to deal with this situation directly and to offer the same opportunities that this person has now. As long as her products aren't her end products aren't exceeding one point five milligrams serving or ten milligrams per package, then it seems to me like this is what's what's being contemplated is aimed directly at preserving at least Vermont market access for this person. What happens on interstate commerce? As Tucker mentioned, if what goes into effect in November is what's currently in law, we have no control over products that exceed zero point four milligrams per package. Those will be at the discretion of the DEA, whether they want to enforce any sort of prosecute any sort of prostate traffic interstate commerce.

[Rep. David Durfee (Chair)]: And maybe worth just mentioning that as far as I understand anyway, adult use cannabis sold in Vermont is or grown in Vermont is only sold in Vermont, that it doesn't cross state lines. So

[Rep. Richard Nelson]: in the Senate version, what are they doing with the hemp people and their intermediaries? Their Delta nine product.

[James Pepper (Chair, Cannabis Control Board)]: So that's obviously the crux of the issue because the people that are taking raw hemp material and distilling it, you know, creating distillate to then introduce into a legally compliant hemp product by state definition, they're going to be in possession of what both the state and federal government would consider cannabis at some point, because it's going to exceed that 0.3% on a driveway basis. It's going to exceed our definition of what's hemp and what's cannabis. So it's going to cross that Rubicon into cannabis. So we need to through a rule, the bill contemplates is give the board authority to define what an intermediary it is and how it can be transferred amongst businesses that are within the supply chain. You know, it's intended for, you know, the hemp market, not the cannabis. So it allows people, hemp processors and producers to stay fully outside of the cannabis market so that they don't have any of the negative entanglements and like increased banking costs, increased insurance costs, getting a full, you know, that $5,000 cannabis license. So.

[Rep. Richard Nelson]: Would they be able to sell their intermediary? Their byproduct? To somebody else that has that licensure to do something with it, That's what we again, it's the bill itself leaves that to rulemaking, but that's, of course,

[James Pepper (Chair, Cannabis Control Board)]: what has to happen. You know, there aren't people and that's just the whole thing is that there aren't there's people that wanna grow hemp, but never wanna process it. There's people that wanna process hemp into distillate, the intermediary, but never want to make the, you know, the gummies, the hemp gummies or seltzers or beverages. And then there's the people that don't want to process it, but they want to take that intermediary and make the gummies. So there's, you know, three areas of the supply chain. And then there's the people who want to sell sell those products. So how that intermediary transfers between those businesses is left as rulemaking. Again, I know that that makes some people a little bit nervous. But before we before any rule is going to be promulgated, you guys will have another bite at the apple on this. You know, if we get to work, as I was saying, we get to work, I saw you weren't in the room, but if we get to work on July 1, when this bill is set to take effect. I mean, this is a complicated rule. We have a framework from the agency of agriculture, but it actually doesn't deal with this piece of the supply chain. But, you know, if we have a rule filed with the Secretary of State's office by the end of the year, that would be fairly quick in the rulemaking process, not terribly quick. But, you you guys will have an opportunity if you don't like what we did on the intermediaries to get another bite at the apple. I think the reason why so much is left to rulemaking too, I just want to underscore this is that no one knows what's going to happen in November when this law is set to take effect. No one knows if there's even going to be

[Rep. David Durfee (Chair)]: a market. Federal law.

[James Pepper (Chair, Cannabis Control Board)]: Federal law. Sorry. Yes. No one if there if what we hear consistently from the people that are currently operating in Vermont in this space is 90% of their sales are out of state. If they can't, if they lose 90% of their sales, are they even going to want to make hemp products for an interstate market? And if the products that they're making are considered cannabis at the federal level, then that banking costs, the banks aren't going to cover them. The traditional is going be the state chartered credit unions. They're going to charge. So is there really going to be a viable, intrastate hemp market operating parallel to a cannabis market when the federal government considers you a cannabis processor. So that's why, you know, it makes people a little bit nervous about leaving so much to rulemaking, but it's the only way to really accommodate, unless you just want to put a pause on the whole hemp conversation altogether and wait for November, which is what I proposed to the Senate also. They said, No, we need to move forward. We just need to offer a flexible pathway here.

[Rep. Jed Lipsky (Clerk)]: James, what, you know, counselor Anderson talked about, about being active on this, it would at least freeze it's in place until 2030. I don't know if that protects five to ten years further. Make sure you're green. Do still operate on intrastate? Or

[James Pepper (Chair, Cannabis Control Board)]: Intrastate, yes. Interstate, no. Yeah. But again, you know, the DEA, I mean, the Department of Justice under Obama in 2013, with kind of a stroke of the pen, just said, we're going to deprioritize enforcement of people that are operating in a state run cannabis industry. So, as long as they're well regulated and as long as profits aren't being redirected to criminal enterprises and kids don't have access to cannabis, then you're not, you know, we're not going to raid your cannabis facility. We're not going go arrest your cannabis regulators. They could do the same on interstate hemp products. If the sending state and the receiving state are both regulating these products, they're both okay with them being in there, the DEA might just, or the DOR justice might say, we're not going to enforce this. And we're not going to enforce the theoretical prohibition on interstate commerce. It's complicated. It is really complicated. And it a lot depends upon how much attention this gets in Congress with everything else that's going on, how much attention this gets in the Department of Justice, and whether there is sufficient lobbying amongst the hemp industry to seek a delay on the implementation or have some sort of meaningful change to what the definition of a hemp product is at the federal.

[Rep. John L. Bartholomew (Vice Chair)]: James, in this sort of processing journey of the distillate, are there times when because it becomes a concentrate, now it's federally, it's full on schedule one, even though the ultimate product it may go into follows at least state law. And is it also true sometimes in the other direction where the THC cannabis processors and the distillate, there's a byproduct that then the CBD and the essentially federally legal hemp world can use? No,

[James Pepper (Chair, Cannabis Control Board)]: not currently. We have a very closed loop on the cannabis seed to sale. And so once something is grown by a marijuana cannabis cultivator, it is forever more cannabis.

[Rep. John L. Bartholomew (Vice Chair)]: The other way, if it crosses with the concentrate into essentially hot hemp, it can never go back into legal CBD world?

[James Pepper (Chair, Cannabis Control Board)]: Theoretically, yes. But that's what this bill is aimed at addressing. That is the crux of the issue, is the people that want to trade in that intermediary amongst licensed hemp processors. How can they do that in a way that doesn't leak into the like cross pollinate into the cannabis world? And how do they do that in a way that we can verify for the purposes of their banks and their insurance companies and their business partners that this is all above board, just hemp, not cannabis. Yeah.

[Rep. David Durfee (Chair)]: All right, well, Sheriff Cooper, thank you again for joining us. And I know we had to, I'll say again, postpone your appearance several times.

[James Pepper (Chair, Cannabis Control Board)]: No worries. I know it's a very challenging week. Yes,

[Rep. David Durfee (Chair)]: so no worries. Once we have a bill, we will, as I mentioned, the council walk through. We'll be taking pretty extensive testimony on all sections of the bill, including this one. I think this has been very helpful as background so that when we're seeing the language for the first time, it will be a lot more meaningful than it have otherwise.

[Rep. John L. Bartholomew (Vice Chair)]: Tucker, did you write the hemp section in the Agnes Linus? Okay, so we switch councils.

[Rep. David Durfee (Chair)]: Yeah. So we'll see you again in another six years.

[Rep. Jed Lipsky (Clerk)]: Like that. Yeah. Okay. Thank

[Rep. David Durfee (Chair)]: you.