Vermont Legislature SmartTranscripts:

[Rep. John O'Brien (Chair)]: Go ahead. Go live, and, Patricia

[Rep. Richard Nelson (Ranking Member)]: I just did it.

[Rep. John O'Brien (Chair)]: Okay. Just wanted maybe we could start seeing if anybody's got any questions about the conversation we had before lunch on this topic.

[Riley Shuman (Office of Legislative Counsel)]: If I could follow-up Yes. Like I said earlier.

[Rep. John O'Brien (Chair)]: Yes. So,

[Riley Shuman (Office of Legislative Counsel)]: Riley Shuman, officer of legislative council. So I think one of one of your last questions was whether this amendment, actually, I did not sign it to the Zoom. Sorry. I'll do that. But whether the amendment addresses that issue of kind of hemp products that are legal today but might be become cannabis if the federal law goes into effect. And and I don't think I I think the amendment text as currently written, does not strictly authorize or direct the cannabis control board to do that, to create rulemaking on that specific issue. And I think if the legislature would like to delegate its authority to to do that instead of designing a statutory scheme, asking the agency to make rules, then it should give some more specificity. That would be my more clear answer as I was processing that question.

[Rep. John O'Brien (Chair)]: So that's a thing that we want to build in. I think that's probably an important thing to either just add it to the list of things that we're gonna have them included in rulemaking. If we go that if we go the rulemaking route and if we go another route, we wanna have it on the list also.

[Rep. Richard Nelson (Ranking Member)]: So you've got an email? Yes. Yes. Yes. So, you know, those are some of the things I was alluding to earlier, the intermediaries. Mhmm. Of course, we talked about fees.

[Rep. John O'Brien (Chair)]: So can we talk about the intermediaries for a second? This is a this is sort of the chemistry or the processing piece that gets a little bit beyond my area of experience, certainly.

[Rep. Richard Nelson (Ranking Member)]: Yeah. And and maybe we we wanna talk to, like, c b you know, cannabis, the CCB about it. Yeah. I don't

[Rep. John O'Brien (Chair)]: know. Do you, Bradley, know enough about it to say one way or the other whether our proposed amendment language deals with that question?

[Riley Shuman (Office of Legislative Counsel)]: It's What is what

[Rep. John O'Brien (Chair)]: is the question? Maybe you can rephrase the question.

[Riley Shuman (Office of Legislative Counsel)]: Okay. So I think the question that you sent me by email Yes. Was along the lines of, can we permit someone to sell hemp intermediaries as long as they're not selling it to the public? Is that is that

[Rep. John O'Brien (Chair)]: Yeah. And I think the idea was that in the in the process of preparing a CBD product, whether it's something you drink or eat or apply topically, you, in your private business and private space, are for a short time dealing with some material that has a high level, I don't know how high, but a higher level of the good stuff. Yeah, then Self numbing all it. Yeah, so you are you, Dennis. You don't wanna be we don't wanna put somebody at risk for being in that situation, or at least we wanna be mindful of there is that situation.

[Rep. Richard Nelson (Ranking Member)]: We don't want to make them an outlaw through the normal process of doing their business.

[Rep. John O'Brien (Chair)]: Yeah. Bradley?

[Riley Shuman (Office of Legislative Counsel)]: So currently, the hemp intermediaries are not, are are not specifically defined in our statute. They are defined in the new federal law that would go into effect that would have the same I believe that would have the same THC content restrictions as, as any other hemp product. And, so that's one potential issue. I do need to I've just now researched this, so I do need to delve into it more fully. Okay. But these so these are my top level kind of concerns, is that hem intermediaries are going to be woven into that federal fabric if that doesn't change. And so that creates some ambiguity there. And then currently, under Vermont law, we don't discuss hemp intermediaries in our statutes in-depth, other than to say that, a hemp product does not include a manufacturing intermediary that contains more than 0.3% THC. So that's what our law says. So if you have a hemp intermediary that contains more than 0.3% THC, it is not considered a hemp product, so it's not considered something that a person could sell with a hemp license. Oh, sorry.

[Rep. John O'Brien (Chair)]: Yeah. Did you have a hand up earlier, Kyle? Did you have a question?

[Kyle (committee member; surname unknown)]: Oh, just in response to what you were saying, it sounds like the intermediary could potentially not even have levels of THC that would worry anybody right now, but it has enough cannabinoids in it. So potentially in the lab, you could create THC hemp products?

[Riley Shuman (Office of Legislative Counsel)]: Based on my half an hour research, yes, that is a potential concern is that you could turn an intermediary into something else. And so our administrative rules from the secretary of agriculture only concerns hemp intermediaries, they call they only talk about hemp intermediaries as a hemp concentrate. And you can sell an intermediary, but you can only sell it to a grower of a hemp crop if the grower is also a processor or to another processor. And so if the request from the public is to allow people to sell intermediaries more broadly than that, our current regulatory framework does not account for that. And then there's also the federal question mark hanging over everyone's head, which might scoop up those intermediaries anyway. So, one thing

[Rep. John O'Brien (Chair)]: that we can do as a committee, when we're at a place like this, we can say, this is a question that needs to be answered, but maybe the government operations committee should be charged with doing that. And we can specifically say, this is something that needs to be addressed, but perhaps your committee is better at addressing it than our committee. Doesn't necessarily apply here right now in this situation, but it might. So just want to toss that out there. Representative Lipsky.

[Rep. Jed Lipsky (Clerk)]: Yeah, this is pretty basic, but could you define intermediary in this context?

[Riley Shuman (Office of Legislative Counsel)]: So I would not be able to give you very robust definition of intermediary. Using the word for ten minutes. So, and, we currently, what I found, is that the secretary of agriculture, when defining an intermediate, actually, they're defining a hemp concentrate. So they have the definition of the word hemp concentrate. Hemp concentrate means a process intermediate obtained by separating cannabinoids from a hemp crop using a mechanical, chemical, or other process which consists primarily of cannabinoids. Hemp concentrate is not a hemp product or hemp infused products as defined by these rules. And so what that means beyond those words that I just repeated to the committee, I'm not that familiar with. I need to do more research. And now that we have the CCB here, they might be able to offer their expertise on that piece as well about what these products could entail, how their, what their THC content is, and how they're used to to make products that could be hemp, could be cannabis, or or whatever it is. They they might be able to give some more context on that piece.

[Rep. John O'Brien (Chair)]: Okay. Richard, do you have a thought?

[Rep. Richard Nelson (Ranking Member)]: I'll save it for our next speaker. Okay. Yeah.

[Kyle (committee member; surname unknown)]: Maybe we covered this yesterday, but can a hemp, I guess, either grower or processor, I mean, it's a processor at some point, sell intermediary to a licensed THC processor.

[Riley Shuman (Office of Legislative Counsel)]: I think based on a strict reading of our rules, and again, I've only spent a half an hour on this issue, give or take. But based on a strict reading of our rules, it would be another hemp processor. So our rules only allow them to sell it to another hemp processor. There might be some other rules in place that permit someone to sell a hemp intermediary to a THC processor, and and I'm not familiar with that in full.

[Rep. John O'Brien (Chair)]: Rather, you have a colleague who staffs the government operations committee.

[Riley Shuman (Office of Legislative Counsel)]: Yes. I do. That would be Tucker.

[Rep. John O'Brien (Chair)]: That is?

[Kyle (committee member; surname unknown)]: Yeah. That would be Tucker.

[Rep. John O'Brien (Chair)]: Tucker. Yes. We have Tucker come in

[Kyle (committee member; surname unknown)]: and walk us through that stuff.

[Rep. Richard Nelson (Ranking Member)]: But from the dark side. Device. Right. Yes.

[Rep. John O'Brien (Chair)]: Other thoughts I wanna there was another point that was raised during the lunch hour and a question that came in or a request, which was clarifying in statute here in our amendment that somebody can have both a cannabis operation and a non cannabis operation and doesn't have to worry about cross contamination if they're using the same very expensive piece of equipment. I mean, they do have to worry about cross contamination, but legally, use the same piece of equipment for both cannabis and hemp. I don't think there's anything in our amendment or in the bill that addresses that. There's nothing that addresses that specific issue. Okay. Would that be statutorily difficult to address given all of the complicated environment?

[Riley Shuman (Office of Legislative Counsel)]: Perhaps by statute, that might be a challenge to identify what those issues are, identify clear standards and set our processors up for success by statute because we would have to anticipate those things. It strikes me at first blush, again, I haven't fully dived into it, but it strikes me at first blush as something that is appropriate for rulemaking, given the kind of testing separation guidelines that might have to go in place in order to ensure that there isn't some kind of cross contamination. That's just my my at first blush take on that piece, though. And this might be an easy issue to solve by statute. I I'm just not familiar.

[Rep. Richard Nelson (Ranking Member)]: I represent that. And I'd like next to bottling whole milk and then switching to bottling skim milk and then go on a bottling chocolate milk. Okay. I think it's do one process, clean up your machine, clean out. Maybe maybe they have to remove one product out of the area to work on the second one just so they don't have someone grab the wrong bag of stuff to throw in the hopper, but they also gotta do test their batches somehow, and I don't know how often that is. But and and maybe rule making is a way to do it as long as we get it done because that's an expensive piece of equipment. And if somebody can do both and further their business in both worlds, I think it's a great deal. Yeah.

[Kyle (committee member; surname unknown)]: Okay, I just want one more question. I just remember this came up during the whole debate about hemp and the pilot program was that, do you know now if I harvest a crop, say the flower bud of hemp, but it's essentially hot hemp, like it's testing too high for THC, which does happen. What as a hemp grower are my options for that? I think at one point it had to be destroyed, but now

[Riley Shuman (Office of Legislative Counsel)]: I don't know. I think under certain circumstances, might have to be destroyed if it is grown as a hemp product. But I'm also not fully familiar with the cross pollination, use that term colloquially, not natural pollination. That's the crossover between hemp and cannabis And and how that would how that would interact. I would need to research that more fully.

[Rep. John O'Brien (Chair)]: Any other questions on these topics that I wanted to just see whether committee members had any feelings

[Rep. Richard Nelson (Ranking Member)]: one way

[Rep. John O'Brien (Chair)]: or the other on the basic structure of the amendment that would direct, would give authority, since it's May rather than shall, give authority to the board to draft rules that would deal with the fees. We deal with ultimately everything but the fees is the key thing I want to talk about now. So, that's what's written in there. Again, we might feel that we want to put a little more guardrails around it. We might want to direct this to the ops committee and have them go into the nitty gritty of it. But I think we do want to at least convey the sense that we feel it's our intent anyway, that we not make it more difficult than it already is for this struggling industry segment to survive because their fees suddenly go up dramatically.

[Unidentified Committee Member]: Is there a reason for us not to just put some numbers in there? We saw numbers that we heard that the producers don't like. Could we not modify that and just come up with a number that we think is a reasonable number? Or is there some reason that it's better to have rule making happen from another body? Yeah,

[Rep. John O'Brien (Chair)]: good question. I think that the rule making process allows for, is intended to have lots of public input, lots of testimony to try and drill out of what that number should be so that it's not just, you know, an arbitrary number that we might come up with that sounds reasonable. I know that when we enacted cannabis legislation, there was a lot of time spent in the legislature trying to figure out what those fee amounts should be and what the levels should be. It went on and on and on.

[Kyle (committee member; surname unknown)]: I just wondered if are there ever fees or registration for retail outlets? Because what Sam Bellavance was saying, if he has a bunch of products and they all have to have registration compared to the Unilever who has it in a thousand stores in Vermont, but is paying just one go on that. I wondered if somebody said one of these craft processors went to the St. Albans Farmers Market and had online sales, that would be two. And so that it reflect just how much they're out there in the marketplace. Yeah, I don't know whether do you know

[Rep. John O'Brien (Chair)]: the answer to that, Bradley, whether there's any?

[Riley Shuman (Office of Legislative Counsel)]: Currently, the bill in its current form does not account for that, and the rulemaking could account for that. I think if the if that was the committee's goal, it the committee might want to give the cannabis control board more direction in that in that way, in terms of directing the rule rulemaking. Because that as it stands with that amendment I presented earlier, think I that could be

[Rep. John O'Brien (Chair)]: a

[Riley Shuman (Office of Legislative Counsel)]: possibility, but not a necessary outcome.

[Unidentified Committee Member]: So yesterday, I heard the person who was testifying about hemp mentioned the idea of having a bigger fee, but getting rid of the individual registration fee for every product. And we actually have had other people also testify about the fact that they don't like that individual registration fee idea. Would we wanna narrow it down with that issue before we send it to the house? Or do you feel like

[Rep. John O'Brien (Chair)]: We could. That's certainly a possibility. Okay. Yeah.

[Unidentified Committee Member]: Yeah, great. Just clarifying question. The current statute, Bradley, has it said that any product, CBD product sold within the state would have to be registered. Product itself. It's the language. If I was a company in, if interstate commerce is still allowed, if I was a company in North Carolina and had product in Vermont, would I have to pay a fee to sell here?

[Riley Shuman (Office of Legislative Counsel)]: Yes, yes.

[Unidentified Committee Member]: I think there's a component there that actually makes it more fair in terms of if it's only the growers in Vermont that are paying a licensing fee, I don't know unless there was a

[Rep. Richard Nelson (Ranking Member)]: way

[Unidentified Committee Member]: to have a licensing fee by the North Carolina grower that's selling a product here. I could see where, I don't know, I'd like your input on that, it seems like, are you going to be able to place a licensing fee on the North Carolina producer or not. And if not, then it makes sense to me that having a product registration would create more equity. Because if the Vermont growers are paying for licensing fee, but all these CBD products are coming in and they don't necessarily pay they're not paying any fees on bringing it into the state. I see a positive negative on both sides.

[Riley Shuman (Office of Legislative Counsel)]: Okay. I think my only I think that those are policy choices with the exception of if there is a fee, it does have to apply to in state out of state equally in terms of commerce. Right? Our interstate commerce. And so so, you know, if there's a fee on a product, it'd have to apply to products from North Carolina, it'd to apply to products from Vermont. If there's a fee on on processors, You know, if you're processing in Vermont, then you pay the fee. You know, if you're using facilities out of state and just selling the products, perhaps you don't have you you likely don't have to do that processor fee. Right? And so, you know, I think that those are the policy choices, but I think the same action should have the same fee as long as it's it should not discriminate based on interstate commerce, I guess, is what I'm

[Kyle (committee member; surname unknown)]: trying to get at there.

[Rep. John O'Brien (Chair)]: All right. I'm not sure whether the cannabis control board wants to say anything at this point on the record. Yeah.

[James Masland (introduced as Chair, Cannabis Control Board)]: For the record, James Masland, our chair of the cannabis control board and counsel, David Gilman.

[David Gilman (Counsel, Cannabis Control Board)]: I'm happy to answer any questions at all on this. I think conceptually, what we've taken away from the conversation since this bill has left the Senate, and got to remember that a lot of the language was conceived of in the Senate prior to this change that happened last November. So it was contemplating a robust interstate market and all these large corporations that are shipping products into the state. It wasn't contemplating just a purely interest the market of small craft producers. So what the amendment that you saw today tries to borrow concepts that we actually already have in the cannabis industry and apply them to hemp, which is, for instance, if you're a small cultivator, you gave us on the cannabis side, authority to waive regulations for small cultivators. We create similarly, we created a tier called a tier one manufacturer, which is essentially the smallest tier of manufacturing, and they've got a lower fee and they've got reduced regulations as well. And that's based upon the Department of Health's, like, cottage processor, food processor, their lowest tier. So those those manufacturers, in order to qualify, you have to have less than $50,000 annual sales. So we've and and then also you allowed us to waive reduce or waive fees for applicants that have been can demonstrate that they've been harmed historically by the war on drugs. So we got to define what that meant. And we said that as you've been incarcerated for at least a day for a cannabis related offense. If you qualify and you have to be at least a majority owner of the business. If you qualify under that, we have a graduated fee schedule. So, you pay 25% of the rate, standard fee in year 50% in year two, seventy five percent in year three, know, 100% afterwards. So that's what was trying to be done today, or the amendment that you saw today, Allow the board to create a definition of a craft processor and allow us to waive regulations that aren't necessary for a small craft operator, allow us to reduce the fees for those folks. And then there's a third part of what you saw today, which is let us just move entire categories of products out of that product registration process. Like if you're making dog treats, and no offense to dogs, but what we're concerned about are human ingestible products. Those are the ones where if you haven't gone through a purity process, you're not using good manufacturing processes or sanitation processes, there's real consumer risk there. And that is the point in which we look for those things, those contaminants, adulterants. So the amendment you looked at today tries to bridge the gap between all the testimony you've heard from the smaller operators in the state. Now, you don't define in statute what craft means in the proposal. You ask the board to do that. And I think that is important because until November, we don't know if we're going to have out of state people shipping products in the state, or this is just going to be purely within the kind of, you know, the iron curtain goes up around Vermont, and only every product that's sold here has to be produced here. The hemp has to be processed here. So if if this is a. Intrastate market and we have the big players from out of state coming in, a guy like Sam Bellavance might be a craft cultivator. He's got, I think, somewhere around 30 employees When you compare that to the big players that are in California and Minnesota and Oregon, that's a small craft company. But if this is a purely interesting market, you think about the sole proprietors as the craft cultivators, people would want less than 10 employees as the really craft. So we don't know what it's going to look like in November. So we don't know, don't I don't think we want to lock in what craft processor means in statute until we know is this Sam Belavance, a craft cultivator that we can reduce regulations for? Or is it just the, you know, on a come to cans of the world that are really just, you know, under $100,000 in annual revenue. So it's hard to say that was the intention here was to try and, you know, reduce the regulatory burdens, reduce the fee. As far as selling at a farmer's market, I know that came up today with the law or the proposal, the bill that came over with the Senate directs the cannabis board to decide where these products can be sold. As in, you're talking about a one point five milligram seltzer, there's still THC in there. I know people say it's CBD and it's not intoxicating, but you have four or five of them, you're in the dog use world. So we may wanna say that those have to be sold at places that have a class two liquor license, so that where you can sell beer and wine, know, sell them at, you know. And then if so we get we have a discretion on where the products would be sold under this rule making authority. And then if someone is a craft cultivator qualifies as a craft or craft processor, sorry, then we can waive that and say, no, you can sell them at a farmer's market as well. You know, you could sell them in these areas as well. So it tries to provide maximum flexibility given that the uncertainty is very real right now.

[Rep. John O'Brien (Chair)]: What about the suggestion that dealer also be licensed or need to pay a fee in order to sell

[David Gilman (Counsel, Cannabis Control Board)]: products? It's certainly doable. I think it adds a lot of compliance costs to us, but it's certainly doable. I mean, we essentially have to inspect everyone we're licensing. And we've decided that under this proposal, knowing how whether this is intrastate, intrastate, that we're dedicating one or reclassifying one of our positions to be a hemp compliance licensing person. So one FTE, if we have to license and then inspect and send the kind of secret shoppers in and all the rest of it to every licensed retailer, it might balloon the cost of the program. But again, if you set the fee such that it covers that cost, then that's fine. Of course, you know, the whole point of this is to, you know, these are lower. These are low THC products. People want more market access, not less. And if adding a fee at the retail location will certainly reduce the number of people that are even willing to carry these products. Yeah.

[Rep. Richard Nelson (Ranking Member)]: Thank thank you for that. And I understand with this, if the federal changes all come about November, money handling changes. Yeah. A lot of things change and perhaps they'll have to be sold through a dispensary or whatnot, just can't use a credit card, you can't can't use crop cash plus. Yes. So, but some of the other questions we heard, like the handling of the equipment. You know,

[Rep. Jed Lipsky (Clerk)]: and and

[Rep. Richard Nelson (Ranking Member)]: mister Belovance's situation, he does both. Right. Very expensive equipment, state of the art equipment. You know, you ought to be able to come up with rule making so we could do both.

[James Masland (introduced as Chair, Cannabis Control Board)]: I don't

[David Gilman (Counsel, Cannabis Control Board)]: want to anticipate this, what the board will end up with, but I fully appreciate that you can't just duplicate all the cannabis equipment that exists. We have 75 manufacturers that have all this very expensive equipment. And we're talking about if this is a purely interstate market within Vermont, and all of a sudden all the hemp processing has to occur within the state because it's naturally going to turn into an intermediary that's considered cannabis at the federal level. There's no way that we can afford and you don't get access to bank loans. These businesses aren't going to be able to, you know, there's no way that we have the private capital to start up a whole hemp processing facility when we have all these existing cannabis manufacturing facilities. It's a little bit So the answer is we are going to have to figure that out. And we can't do it. We can't come up with a solution. It's not a solution. If hemp processors are buying a bunch of hemp and they have nowhere to process it, you know, that's not a solution. But what mean, what I would do is look to other models currently under existing law, the people that are making these seltzers with THC in them and using existing alcohol licensed facilities to do it, they have to have a break just like you suggested between when they're producing alcohol and when they're producing hemp infused beverages. And that's how they stay compliant with the federal agencies that regulate alcohol. That's how they stay compliant with DLL. And so they just want to see those regulatory agencies want to see a clean break. So you can make your hemp products for three months out of the year. You can make your cannabis products for the other

[James Masland (introduced as Chair, Cannabis Control Board)]: nine months out of the year.

[David Gilman (Counsel, Cannabis Control Board)]: However you want to structure that is fine with us or fine with me. But there is a little bit of possibility of cross contamination because once you convert something into THC, our tests can't tell whether it was from hemp or from cannabis. Therefore there's a possibility of inversion, taking that hemp grown THC, hemp derived THC, and putting it into the cannabis market. And that just will rip the lure out of all of our cultivators.

[Rep. Richard Nelson (Ranking Member)]: While we're talking about that, let's talk about being intermediaries. I call it the byproduct. Yes. Creating tinctures and full spectrum tinctures and stuff. They come up with this little bit of this product that can't be used in the hemp world because it's at a concentration that's intoxicated. Now I don't know if they blend that out and that's how they make their seltzer. I don't know. I'm not in that world. Should be, but I'm not. But anyway, you know, those

[David Gilman (Counsel, Cannabis Control Board)]: intermediaries, is there a way that they can move that into the licensed intoxicating side without blowing the wheels off that bus? So we don't allow hemp derived delta nine THC to move from the hemp side into the cannabis side. We have a seed to sale system. So all the THC that's supplying the cannabis market has to be grown from a licensed cannabis cultivator. We do allow certain of the minor cannabinoids, the CBD, CBN, CBG. Yeah, CBG. The whole alphabet soup. We allow some of those to be produced from hemp and brought into the cannabis market, but not the Delta nine THC. And but this bill does allow for intermediaries to be developed on the hemp side, just purely on the hemp side to to be developed, to be transferred between two hemp licensees and to be used to make those low THC products.

[Rep. Richard Nelson (Ranking Member)]: And so they're not a criminal for having that?

[David Gilman (Counsel, Cannabis Control Board)]: For our purposes, no. You know, the Fed we can't ever change the federal definition, but I don't think that this is like, you know, for the people that are doing this right under our well regulated state system, the federal government historically is just not caring about this thing.

[Rep. Richard Nelson (Ranking Member)]: And you're worried about if those intermediaries go from the hemp side to the cannabis side, you'll be severely impacting your cannabis market. Is that what you're saying?

[David Gilman (Counsel, Cannabis Control Board)]: If we allow in a broad level THC to be grown from hemp, if we allow the products that on the cannabis side to be sourced from hemp derived THC, we don't have small cannabis cultivators anymore. I mean, it's just the incentives, the licensing fees to be a cannabis cultivator compared to the fact that it's free to be a USDA registered hemp cultivator, you know, it's $1,200 to be a cannabis small cultivator. You know, the amount of testing and everything that goes into being a cannabis cultivator, and then the 280E tax situation, the bank situation, insurance situation, everyone will be sourcing their THC from hemp, not cannabis. So it just pulls the rug out of all of our cannabis cultivators if we allow Delta nine THC to come in from hemp into the cannabis. So

[Rep. John O'Brien (Chair)]: just want to be clear when you say that this bill would allow someone to buy and sell these intermediate, is it the underlying bill that we got from the Senate or is No, the it's

[David Gilman (Counsel, Cannabis Control Board)]: the underlying bill.

[Rep. John O'Brien (Chair)]: It's already there. It's already in. So maybe there's some there seems to be disagreement or maybe there's some just confusion about it because if we were asked to specifically change the bill so that it would allow that and not prohibit it.

[David Gilman (Counsel, Cannabis Control Board)]: If you look up the word process intermediary, you can see where it comes up in the rulemaking and just see that we allow the kind of trans One of the authorizations is to allow the possession and transfer of it between licensed process. Yeah, if it needs clarification, that's fine. But that's the whole intent here. Don't have Annika McCann was a prime example. She's not touching the biomass or some of these companies you've heard from, they're not actually touching biomass ever. They're buying the intermediaries and making the formulations.

[Rep. John O'Brien (Chair)]: Thinking about your point that depending on what happens in November or sometime in the future, you might look at the word craft and define it differently, we'll draw more specifically. I'm guessing that a larger Vermont based producer who would fall in the craft category when you were talking nationally might still feel that in a market that's just intrastate, that's tightly limited by state boundaries and everything else, that it would be difficult for them to survive and that what they're selling is a product that's not a danger to anyone, that isn't currently regulated, that just because the federal government has made a somewhat arbitrary decision now needs to be looked at more closely, but that it's overkill. And that charging them on top of everything else is not equitable. And I don't know whether, I don't want to put words in anybody's mouth, but I think that the testimony we had was that this is unfair for us too, not just for the small tabletop producers, but for the large businesses.

[David Gilman (Counsel, Cannabis Control Board)]: So the thing I know it's a little bit of a leap of faith, but what you're doing is you're authorizing the board to decide craft, and we could say everyone's craft and start reducing those things. What we don't know right now is, are these really big corporations out of state going to be participating in the Vermont market or not? And if it turns out that this is just a Vermont market, we could use that same authorization to just say if you have less than 100 employees, which I think covers probably everyone in this industry right now in Vermont, you know, your craft and here's the regulations that we're reducing or striking are just not applying to you. And here's the fee waivers that we're going give you. And again, you know, we can't really start defining craft. We can have various options until we know what happens in November and rulemaking at its best is a four month process. So you guys will have another bite at the apple on that definition of craft before we ever get to a, you know, the notice and con like, it will be a notice and comment likely by the time we know what happens in November. By the

[James Masland (introduced as Chair, Cannabis Control Board)]: time you guys are back, there's

[Rep. John O'Brien (Chair)]: a message. Thank you. Who who

[Rep. Richard Nelson (Ranking Member)]: would work with the board on rulemaking? Is it strictly done within the board, or do you work with some of the state process or farmer type stakeholders?

[David Gilman (Counsel, Cannabis Control Board)]: The latter, I mean, anyone can participate. When we have very robust participation in our cannabis rules, as you might imagine, it's not just industry representation. We had a lot of comments from public health oriented folks and from student advisory groups and people that really are concerned about this industry and the rules that are governing.

[Rep. Richard Nelson (Ranking Member)]: And as of today, right now, hemp products that are coming from out of state, we have no control over. If they call it hemp? For the most part, that's that's right.

[David Gilman (Counsel, Cannabis Control Board)]: I hate to say that because I don't wanna encourage.

[Rep. Richard Nelson (Ranking Member)]: I I understand. Yeah. And and the, you know, the person that testified yesterday is all in favor of there being somebody to police that to keep the intoxicating product under control or better.

[David Gilman (Counsel, Cannabis Control Board)]: So you have a good model on this already in tobacco. It's the internet sales ban, the delivery sales ban, which has real teeth behind it, but it's administered by the attorney general's office. And so we are in conversations with them about adding cannabis and intoxicating hemp products to the internet salesmen, but it's a resource issue for them because you send the cease and desist letter, people ignore it. Well, you gotta have a graduated sanction. And so it's not just something that they can just pull in

[James Masland (introduced as Chair, Cannabis Control Board)]: a whole industry or a

[David Gilman (Counsel, Cannabis Control Board)]: whole new category of products to without us figuring out how we're gonna divide the labor.

[Rep. John O'Brien (Chair)]: So, go ahead. Right now,

[Kyle (committee member; surname unknown)]: I was a hemp grower and processor, and I ended up with an intermediary that federally had too much THC, do I, I mean, I'm not doing anything felonious if the final product is diluted back to a federally okay level.

[David Gilman (Counsel, Cannabis Control Board)]: That's an area where the FDA and DEA are supposed to be involved and they're not. So I don't, right now, no one in Vermont is regulating. So that's the kind of, that wasn't the original impetus for this bill is that these folks wanted regulation because they're trying to enter into contracts or they're trying to, with distributors, they're trying to enter in, they're trying to get bank loans and everything else. And they just don't have any, they need to prove that they're a hemp company,

[James Masland (introduced as Chair, Cannabis Control Board)]: that they're following some rules

[David Gilman (Counsel, Cannabis Control Board)]: and that the state has visibility of their operations. They don't have that right now. So, I mean, that that's the gray area. It's allowing all this kind of interstate commerce, both intermediaries and intoxicating problems.

[Rep. Richard Nelson (Ranking Member)]: So the way it would be then, intermediaries from hemp will stay in the hemp world and can transfer in state in the hemp world. And the THC, the cannabis intermediary will stay in that world and do what whatever y'all do on the dark side.

[David Gilman (Counsel, Cannabis Control Board)]: And then that will allow a hemp company, if they are allowed to kind of do traditional banking and file their taxes without the implications of February, they can stay fully on the hemp side and not be dragged into all the kind of restrictive aspects of the cannabis. Just

[Rep. John O'Brien (Chair)]: going back to the equipment question, the dual use equipment, was it your perspective that that would be something that we could address in statute easily enough, or would it be better left to the board to consider in rules?

[David Gilman (Counsel, Cannabis Control Board)]: I would have I think I think all three board members, I hate to speak on their behalf. I think all the three board members understand it has to be the co location has to be allowed. But how it looks, do we do we need separate LLC, separate bank accounts? Do we need, you know, strict SOPs on the ingredients? What, you know, do we need just a strict separation? You can operate your hemp company for a span and you can operate your cannabis company for a span of time. You know what, what that looks like. If you want to put it into statute, the colocation is permissible or is, you know, I don't know what would you, how you draft it. But I think the board fully recognizes that we can't just ask the 75 we can't ask these hemp processors to go find the money to buy all this equipment when it already exists in Vermont. It's just on the cannabis side.

[Rep. John O'Brien (Chair)]: Realistic. So, okay, good, thank you. What I'm thinking we might wanna propose then, and we're gonna have Bradley draft something up, is take So add a few things based on what conversation we've just had here to the specifics of what we would want rule making to include. And then add some intent language at the beginning of the section at the beginning of the amendment that says it's the legislature's intent to do and then list the things that we've talked about that are important. So not to overcharge, allow smaller businesses a path forward that doesn't make them outlaws in the state anyway, if the four milligram or 0.4 will lose head and have that be our proposal. Have gov ops look at that, take testimony. They'll probably hear from same folks that we heard from. And if they feel that they should should be doing something a little bit differently, they'll have an opportunity to say say first. But just

[Kyle (committee member; surname unknown)]: on the growing side, if, I mean, it's all about what happens in November, but if say, nothing happened in November and we sort of work back to our status quo now. But this bill, this language passed so that hemp has moved to CCB jurisdiction. Are those growers still eligible for, say, USDA loans? I'm not

[David Gilman (Counsel, Cannabis Control Board)]: an expert on that. So we're not taking back cultivation. Cultivation is staying with USDA under this. There is a cultivation fee. And honestly, that could be that the only reason that's there is because hemp and cannabis, if you're just to the, you know, you're just driving by a field, they look pretty similar, almost indistinguishable. It just allows us when we get complaints about illegal grows that we can go and just test it. We can know that, no, this is a licensed cannabis cultivator with us. And we just, you can see the authority is just for testing to ensure compliance with the 0.3%. I don't know if that takes away their ability to get USDA loans, if they have a permit with us. I don't think so, but maybe Steve Collier would know, maybe USDA, no. Steve Collier has looked at this language, I won't speak for him, but I think he would have raised that if that was a serious concern.

[Kyle (committee member; surname unknown)]: We want to make sure that as much as possible, farmers, unlike the THC growers, are still eligible for, if their fields were flooded at FEMA reimbursements or equivalent, whatever those might be.

[Rep. Richard Nelson (Ranking Member)]: I get it.

[Rep. John O'Brien (Chair)]: I'm certain that the agency of agriculture doesn't have a problem with the language they've came over and k. Presented it basically. So but I don't know the answer to that question. All right. Any other thoughts? So thank you very much for Let's coming back just see if Bradley needs some more direction.

[Rep. Richard Nelson (Ranking Member)]: We can wrap up. John, I was thinking the biggest pain before I had was trying to dry it. Could've used bare quads at desk. There you go.

[Kyle (committee member; surname unknown)]: Intoxicating. For

[Riley Shuman (Office of Legislative Counsel)]: the intent language Yeah. They can you can I ask you to draft something that what you're thinking of the intent to be and then send that

[Rep. John O'Brien (Chair)]: to me? Brainstorm it here. Okay.

[Riley Shuman (Office of Legislative Counsel)]: It's because it's an awkward position for office legislative council to write the intent, right? That should be your language. But I'm happy to help.

[Rep. John O'Brien (Chair)]: Sure. Okay. Good. Right. Well, we can make sure we'll have the committee weigh in, and then we can I can put something together?

[Riley Shuman (Office of Legislative Counsel)]: And there is one other issue that I just identified. But with the fees generally in s three twenty three, there actually is not a special fund for the cannabis control board to deposit those fees into. And so I just did some quick research, and they you you folks that the cannabis control board does have a special fund that they deposit, cannabis regulation fees into, and we're wondering if, or the recommendation would be to to include in an amendment a line saying that funds, fees received shall be deposited into the cannabis controlled special fund.

[Rep. John O'Brien (Chair)]: Yeah. I mean, I believe the point of the fees is to support the work of the board. That's correct. So it we wanna set it up so they could do that. If there's an existing fund, is there a reason not to?

[Riley Shuman (Office of Legislative Counsel)]: I don't think so. Do you you

[Rep. Richard Nelson (Ranking Member)]: Representative Nelson? Yeah. And and may I ask the question of Sure. Yeah. Your fees you collect from the cannabis people, do you get to handle roles like the state handles any other fees or you gotta handle those different because they're from cannabis?

[David Gilman (Counsel, Cannabis Control Board)]: For the record, Stembert, no we handle them just like any other fee, although the only thing that's interesting about this is that

[James Masland (introduced as Chair, Cannabis Control Board)]: our fees are the fees that we bring in are nowhere near enough to cover the operating expenses, about a third. And that was an intentional decision by the legislature recognizing through a lot of the same conversations you had today, trying to push the entire regulatory burden operating the agency onto the small cultivators that made up the backbone of our licensed seeds, one would be able to participate. It would be like five companies that can afford a million dollar fee. So we just don't And I anticipate that might be the case here.

[David Gilman (Counsel, Cannabis Control Board)]: But that cannabis regulation fund is the

[James Masland (introduced as Chair, Cannabis Control Board)]: depository account that pays our bills first.

[Rep. John O'Brien (Chair)]: So the tax structure placed

[Kyle (committee member; surname unknown)]: on cannabis, does any of

[James Masland (introduced as Chair, Cannabis Control Board)]: that money go with operating your board? It used to, not anymore.

[David Gilman (Counsel, Cannabis Control Board)]: There's a change that was made in

[James Masland (introduced as Chair, Cannabis Control Board)]: the appropriations committee last year, they directed and split up the cannabis excise tax which is 14% on the retail sale of cannabis, 30% to a special fund where the department fell, 70% to the general fund, then we just making the normal budget process with the appropriations committee. So whatever that delta between the fees and administrative penalties bring in, where operating expenses are, are paid through the churn. And

[Rep. Richard Nelson (Ranking Member)]: is there any taxes on hemp products being sold?

[James Masland (introduced as Chair, Cannabis Control Board)]: I believe the sales and use tax applies, that'd be no one on the night.

[Rep. John O'Brien (Chair)]: Okay, same tax rate as any other product that's

[Rep. Richard Nelson (Ranking Member)]: 6%.

[David Gilman (Counsel, Cannabis Control Board)]: 6%, yeah, I can't imagine that meals

[James Masland (introduced as Chair, Cannabis Control Board)]: and rooms apply, I mean, local option would probably apply if your town has one. All

[Kyle (committee member; surname unknown)]: right,

[Rep. John O'Brien (Chair)]: we want to make sure that we're all in agreement and give Bradley some direction here. What is our intent?

[Rep. Richard Nelson (Ranking Member)]: Perhaps that yeah. Our intent is to allow a young business a young industry in the state of Vermont to continue growing and thriving without an undue hindrance. In this particular industry. Yeah.

[Rep. John O'Brien (Chair)]: In this Yeah. K.

[Rep. Richard Nelson (Ranking Member)]: Realizing that there's changes.

[Rep. Jed Lipsky (Clerk)]: You're a better word, Smith, than

[Rep. Richard Nelson (Ranking Member)]: I am. Totally. Okay. So we

[Rep. John O'Brien (Chair)]: we wanted something that that sort of captures that summation. Feeling that we want this industry despite federal Maybe federal. Yeah, yeah. It's It's summation.

[Rep. Jed Lipsky (Clerk)]: And I, you know, I think, you know, Greg's comments earlier, fully grown for also some of like, well, mean, we wanna support these agricultural businesses in case I'm willing to survive and thrive. But your general overworker very, relatively succinct.

[Rep. John O'Brien (Chair)]: You go back and back and I

[Kyle (committee member; surname unknown)]: just find the hardest thing is for us move forward with policy with what happens in November drastically changing what will happen. If all these rural agricultural economies lose 90% of their business, that's

[Rep. Jed Lipsky (Clerk)]: The thing

[Rep. Richard Nelson (Ranking Member)]: about though we heard yesterday is they welcome the protections of to Vermont's market, the protection of the cannabis control board to the I don't know if we call them bad actors or whatever, but the intoxicating Right. Products that are coming into the state willy nilly. And and they they're for that protection because when these people are crafting their hemp products, they're making them non intoxicating regardless of what Mitch McConnell said.

[Rep. John O'Brien (Chair)]: So I think we also then want to say that we it's our intent to create a separate carve out, I don't if you wanna use that term, but regarding fees of, you know, different category for small craft producers. And that might be enough as far as intent goes. I do think for the equipment piece, maybe we can have you write, Bradley, in that section or in an appropriate section that we want there to be So we want there to be Not only permissible for the equipment to be used in both cases, but we want to direct the board to develop the rules.

[Kyle (committee member; surname unknown)]: It probably wouldn't be an intent, but I think what the CCB is saying of there's a lot of latitude and rules for them to navigate the changes.

[Rep. John O'Brien (Chair)]: I

[Kyle (committee member; surname unknown)]: think this committee would support that too, just because it's pretty fluid. Okay,

[Rep. John O'Brien (Chair)]: anything else? All right, good. I think we can stop there. We will, if we can take a quick look at this tomorrow morning maybe before we start our other testimony. Later in the morning, think you're scheduled to go to go out to whatever we have at the time.

[Kyle (committee member; surname unknown)]: Yeah.

[Riley Shuman (Office of Legislative Counsel)]: But I'm scheduled to I'm scheduled from 09:30 on tomorrow morning.

[Rep. John O'Brien (Chair)]: Okay. You're scheduled to that's somewhere.

[Riley Shuman (Office of Legislative Counsel)]: Somewhere at 09:30 on. Yeah.

[Rep. John O'Brien (Chair)]: Okay. So maybe we can if you have that language anyway, without you, I think we can look at it. Okay. But I'll check-in with you later today to If the committee hasn't seen the amendment, would you like

[Riley Shuman (Office of Legislative Counsel)]: me to share that with GovOps or just tell them there's an amendment brewing that might come later?

[Rep. John O'Brien (Chair)]: I think we should plan to share it, and I think we can look at it even if you're not here too. Okay. Do you have time before 09:30?

[Riley Shuman (Office of Legislative Counsel)]: I could probably come in around nine tomorrow.

[Rep. John O'Brien (Chair)]: I'm not sure that it needs a half hour, but maybe we could just take a few minutes here at 09:15 even, but here's what it is. Right, well, let's possibly do that. Okay, thank you very much. Thanks. All right, we think we're done for the day and the attendant that we might gather a little early.