Vermont Legislature SmartTranscripts:

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Thank you, everyone.

[Rep. Kate Nugent (Member)]: Kate Nugent. Back again in House Government Operations and Military Affairs, changing gears to discuss S-three 23, an act relating to miscellaneous agricultural subjects, specifically the hemp provisions in sections 22 to 25. And we have here a new legislative counsel for our committee, Bradley Shoman. Have a seat. Welcome.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Thank you.

[Rep. Kate Nugent (Member)]: Nice to meet you.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Nice to meet you, folks. I think most of you are new faces to me. Not all. Always nice to meet new people. Bradley Chillman, Office of Legislative Council. And today I'll be doing a walkthrough of a few sections, primarily sections 23 of S-three 23. But there's a couple other sections that are informing changes. We'll go over those as well. Does the committee like me to share my screen to go over the bill behind me? Or do we have it in front of ourselves?

[Rep. Kate Nugent (Member)]: Should have it.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Sounds great. It is page 33. Section 22 is the first section. It's at the bottom of page 33 on the as passed by unofficial version of S323. And while you're getting to the correct page, I can just give you some general overview of what this looks like. So, this is a redesignation. It's moving the authority to regulate hemp from the Agency of Agriculture in Title VI to the Cannabis Control Board in Title VII. And so Section 22 is that transition. It just repeals everything in Title VI and then Section 23 establishes hemp regulations in Title VII. So everything in Section 23 will be underlined. That doesn't mean it's brand new language, it just means it lives in a new place. And so, I'm going to try my best to highlight the biggest changes because that's not abundantly clear from just what's underlined or what's not underlined. The committee may already be familiar with, and if you are, feel free to stop me. But we are on pages 33, line 19, looking at some findings of purpose. And so what brought us here is a change in federal hemp regulations. So up until this point, up until about 2025, the federal regulations have been permissive or at least more permissive in terms of what is hemp versus what is cannabis. So in 2018, federal regulations changed to define a hemp or hemp product as containing 0.3% of delta-nine THC content by weight. And so if you have that amount of THC content in your product or less, You're a hemp product, you're not cannabis. And if you're not cannabis, you're not Schedule one. If you're a hemp product, hemp is an agricultural product and it's able to be sold in commerce. And what this led to was a proliferation of hemp infused products and Congress took the occasion last year to re examine what is and is not hemp, what is hemp and what is cannabis, and came up with new regulations. And so, the new regulations, it is looking at 0.3% THC by weight, so not just Delta nine, there are other strains of THC, Delta eight, Delta ten A, and that when synthesized, could make some intoxicating substances, even though the THC content is still ostensibly lower, synthesized or burned or something of that sort could make an intoxicating substance potentially. And so it's looking at 0.3% THC in total, not just a particular strain. That might be the incorrect word, but compound might be the correct word. And then in a piece that is challenging for a lot of hemp processors right now is that there is a provision if something has more than zero point four milligrams total in your final produced hemp product, that is not hemp, it is cannabis. And so you can see how that's problematic. We're going from a percentage of a weight to a total weight of THC, more than zero point four milligrams of THC in a final product. And so if you have a a product that's a kilogram, a kilogram of honey or something of that sort, it might have 0.3 THC but by weight it will have more than zero point four milligrams. And then so that product will no longer be considered a hemp derived product, it'll be considered a cannabis. And then a cannabis is unlawful interstate commerce. And so that has caused some regulatory uncertainty for hemp growers. And so the purpose section gives you the CliffsNotes version of that. And this law has not gone into effect yet. It will go into effect in November. However, there is some brewing at the federal level that might change based on feedback from growers and business people. But as of right now, in November 2026, that will be the law and some hemp products that are on the market and there's been testimony saying maybe perhaps many or most hemp products that are on the market might be unlawful in commerce. So the purpose of this sub chapter is to unify oversight of cannabis and hemp derived cannabinoids under the cannabis control board to more effectively prohibit illicit cannabis and cannabis product trade while positioning growers and processors of non intoxicating hemp products to take advantage of the natural market opportunities that may exist. The House Agriculture has an amendment brewing but is not ready to share. But they have told me that I can give folks the give this committee the put scope version. But the House Agriculture version also wants to add to the purpose section to promote small business and intrastate commerce. We can explain why in a moment, but the cliffstone version of that is if you have a product that was hemp and the federal law goes into effect and now it's no longer hemp, it's cannabis, what does that producer do with that product? Do you sell it as cannabis? Do you create a third category for it? What are the regulations? House Ag is grappling with that issue right now and is grappling with the idea of asking the cannabis control board to do some rule making to talk about what perhaps a low THC content product and what that market might look like in that. So now let's get into the meat and potatoes of the rule. We are looking at, we are on page 34, line 11. So this is the definition section. These definitions are largely brought over from current law. And what this bill does is what it changes is it clarifies three different categories. So growers or hemp farmers are going to be considered producers. So we still use the word grow and grower but the regulations and licensing will consider these folks producers. So when we say grower, we mean producer and that's what we're talking about. And so that's change there. And we are going to look at we're scrolling down to page 35 at hemp product or hemp infused product. And so this is changing to conform with federal law. So currently our statute says 0.3% THC content. In this section, it does not refer to delta nine, but it does refer to delta nine in other places in current law. But in this piece, current law refers to a hemp product as containing zero point three percent THC by weight or less. This bill would change that to conform with the federally defined THC concentration level for hemp derived from or made by processing plants or plant parts, etcetera. There's a notwithstanding clause here. So hemp or hemp product does not include any substance, manufacturing, intermediary, or product that is prohibited or deemed regulated cannabis by the cannabis control board, and it's not unlawful in interstate commerce. And it might go without saying, but one thing that has changed in this bill from current law is that the agency of agriculture regulates hemp now. So any instance of it saying the board, it used to say agency of agriculture. So just a heads up on that piece. So any hemp product that is not lawful in interstate commerce, that does not meet the federally defined definition of hemp, We're on line 18 of page 35. Hemp derived product or substance that is excluded from the definition of hemp product or hemp infused product pursuant to the subdivision B of this subdivision four is considered cannabis product as defined by this title. However, a person duly licensed or registered by the board lawfully may possess such products in conformity with the person's active hemp processor license. And so there's a couple caveats here and the House Ag Committee is going to ask this committee to take a look at this issue and perhaps use expertise with cannabis. But when you're processing hemp, you get what is referred to as a hemp intermediary. And my expertise on the actual processing and science of hemp is limited because I'm not a scientist, but I can explain the process from a lawyer's perspective. You get a hemp intermediary and this intermediary might have a much higher THC content than your final product might have. And so there's a couple of questions that are involved in that. One, you have what is ostensibly cannabis, but it's just a hemp intermediary and you're going to use that to process something into a hemp product that does meet the definition of hemp. But it is cannabis. So this bill and current law creates safe harbor for growers to have that product as long as just part of how this process works. The other issue, and this is something the House Agricultural Committee would like this committee to consider, is intermediaries. The bill does not say that intermediaries, or excuse me, processors may sell these hemp intermediaries to other processors of hemp, Because hemp intermediary might be a higher THC content than hemp and it might be cannabis based on THC content unlawful interstate commerce. But as kind of an exception to that, would it be possible for to create a rule or an amendment that would permit processors, hemp processors, to sell that hemp intermediary to other processors if they so choose. That would have to be Excuse me, it does not have to be a law because that is currently the rule. The Agency of Agriculture has submitted rulemaking or has done rulemaking about hemp and it does permit hemp processors to sell hemp intermediaries to other processors. So it is permitted by rule. However, the cannabis control board would have to do a new rulemaking. And will the cannabis control board do that? They can tell you they can answer that question directly, but there's concern that maybe they won't. So that's one issue there. But under current rule, hemp processor can sell hemp intermediaries, but that is an issue that the agriculture committee is asking this committee to take a look at. Okay. Going into more definitions, we have definition of process and processors. So process is turning the hemp crop to a hemp product and a processor is the person or entity that is doing that. Hemp is considered, we're on bottom of 36, hemp is considered an agricultural product. Cannabis is not. Hemp is considered an agricultural product and it is grown and commercially traded under provisions of Vermont law and the administrative rules of the Cannabis Control Board that they may or will adopt. Hemp also has to follow the required agricultural practices rule. That's a rule in the agricultural world, but it largely regulates water quality, but it regulates agricultural practices that affect water quality, which is actually a large scope of agricultural practices. But it's just that piece and that piece is there, the agency of agriculture will continue to oversee the growing of hemp because it is an agricultural product. Top of page 37, and we're looking at registration and licensure. And hemp as an agricultural product is current law. And this section is also current law but they change it. And so this bill changes the registration and creates three categories: producers who are growers of hemp processors who take the farm product and turn it into a hemp or hemp derived product and then products. Producers and processors have approximately the same requirements to register annually and pay a fee under the subchapter. There is an amendment to correct a cross reference. That is incorrect here. There is an amendment in the House Agriculture Committee to correct that cross reference, my apologies. And then a new fee or a new category of registrants is registering a hemp derived product. This is a change from current law and each hemp derived product have to be excuse me, all hemp derived products containing a reasonably expected to contain more than zero point four milligrams of THC shall be registered with the board prior to sale within The States. And so, not all products, but the products who meet that definition. And then so, each product has to be registered for sale in The States and then pay a fee. That fee is $75 and we'll talk about these in a moment. And I can relay witness testimony, but you might hear directly from witness testimonies that there are actually a lot of THC hemp derived products that contain zero point four milligrams. And some people have said if not a lot, most of them do. But you take testimony directly from people who would be affected. And then the board can deny applications for the following reasons. These reasons are carried over from current law, but they end their fairly straightforward items. Failure to comply with state and federal law, refusing the board to come in and test the product to ensure that it's hemp and not cannabis, failure to submit information, and failure to pay the fee. We are at rulemaking authority. This section is also brought over with some additions. And so under current law, the Secretary of Agriculture may and has done rulemaking to flush out the to make regulations or to make rules for hemp and hemp products. And so just breezing over some of these quickly, rulemaking includes things testing for THC levels, authorizing methods for testing, requirements for inspection and supervision of hemp, requirements that labels and number four, requirements that labels contain transparent accurate product information. Moving on to number five on the next page at the top, requiring disclosure of the amount of cannabinoids in the hemp products. And I believe it is starting at seven are additions. And so requiring that licensees and registrants, including out of state purveyors of hemp products, obtain and maintain commercially reasonable insurance. Oh, yes.

[Rep. Kate Nugent (Member)]: Ref Waters Evans has a Hello. So this current right here with the rulemaking authority, says it may include rules too. So it's directing.

[Rep. Chea Waters Evans (Ranking Member)]: The board to address these issues, it's just suggesting some things they. Want them to think about?

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: That is correct. That is correct. And and that is how the current law is designed. That doesn't necessarily mean that 's how this bill needs to be designed, but that is correct.

[Rep. Kate Nugent (Member)]: Okay. And is this section new, this rulemaking authority section, or is it moved?

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: This up to number six is in current law. And seven eighty nine are new. It might be six seventy nine. I misplaced my note which one, but part of it is new.

[Rep. Chea Waters Evans (Ranking Member)]: Okay, thank you.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: And so the new pieces include requiring licensures have commercially reasonable insurance, prohibit number eight, prohibit hazardous additives to hemp products, and specify additive limits relative to substances that are toxic and not generally recognized as safe or designed to make the product more addictive and appealing to people 21. And specify when a registered hemp product contains more than zero point four milligrams THC, it must be for restricted sale if you're 21 years of age or older and restricted for sale in specific settings or both. And so this is optional rulemaking or permissive rulemaking, I should say, and meant to address a little bit address the issue of what do you do with products that are lawfully hemp today, but if the federal law goes into effect, they are no longer lawfully hemp, they are cannabis. And so this bill currently leaves that discretion up to the Cannabis Control Board to make those determinations. There are some additions that the House is considering in amendments that would also permit the Cannabis Control Board to define a specific category of grower called a craft producer. Craft producers are not defined in the statute, but the idea is that they would have special needs or purposes have special needs. I don't want to say more than what's actually in the amendment, but they have special needs such that compliance with these rules and regulations and paying these fees would not be necessary. So it would authorize the cannabis control board to define what those craft processors are. And processors, again, a reminder, take the crop and turn it into a product and define what those crop processors are. Make different fees or the option to waive the fees, waive or reduce the fees. And then a third piece of rule making, a third piece of optional rulemaking that is proposed to go into the section would also permit the Cannabis Control Board to waive fees for certain types of products in a category basis. Because there has been feedback from the community or from the public stating that a $75 fee per product might be onerous. We can talk about fees a little bit more, but this would give the Cannabis Control Board some wiggle room to waive fees in certain circumstances. That's not currently in the bill, it's a proposed amendment. And the rest of section, is brought over. It is a little I will just go through it, but it does require the board to adopt rules for the licensure of hemp processors, hemp derived process intermediaries and hemp products. And then it also goes into some additional optional rulemaking about the requirements for the consumer sale of any product containing THC or other cannabinoids. And then additional rules, may adopt additional rules, prohibiting a person from making false or misleading or abstentionated claims for their cannabinoid containing products. So we are going into test results. In fact, that's my notes. And we're going into test results. So we are on page 40. This is a parallel in current law. And so this section just defines how the cannabis control board would go about testing for THC content. So the main change from current law is that current law restricts the THC concentration to delta nine in this section and so it changes to conform with federal law. So, we're looking at lines five and six exceeding the applicable federally defined THC concentration level for hemp. And then goes into some sections about how the board will conduct testing. And so this section authorizes the board to enter the premises where hemp is grown or produced for inspection, inspect retail locations where hemp is sold, and it also permits the top of page 41, it also permits the cannabis control board to issue stop sale orders when a product or processor is in violation of the cannabis control board's rules, state law, federal law, can issue a stop sale order. That is brought over from current law. The agency of agriculture also has that authority to do that. And then this section provides for some appeal rights for individuals who do receive a stop sale order, including appeal timeframes and things of that sort. Looking at administrative penalties, we're at the bottom on page 41. And this change has changed a little bit from current law. Current law defines what the administrative penalties are. This bill does not. This bill gives that discretion to the canvas control board. Current law defines the penalties as $1,000 per violation and individuals could receive a penalty of up to $5,000 per violation if the individual failed to comply with a corrective action for a previous violation, has had a violation three times in a five year period, or has had a violation of culpable mental state greater than negligence. So this bill, in contrast, gives the Cannabis Control Board more flexibility to define what those penalties are without defining them in statute. And so the Board may assess violations and administrative penalties against persons licensed or registered pursuant to a sub chapter as well as persons required to be licensed of a sub chapter who failed to do so. Compliance and enforcement authorities and procedures applicable to the cannabis establishment shall apply to people's licensed under the sub chapter. So the Cannabis Control Board already has some procedures that are in line with the Administrative Procedure Act, appeal rights and due process rights for individuals to appeal to the board, and those are incorporated by reference here. And then this section, this subsection C kind of exists outside of the APA, but the board may enforce a final administrative penalty by filing a civil collection action in the Superior Court. Current law allows both the agency of agriculture and an affected individual to appeal to a superior court. Allowing the affected individual to appeal to a superior court has been taken out of this bill, but the Administrative Procedure Act allows an individual to appeal a final decision from the administrative body to the Supreme Court. So there is still an appeal right into the court process, it's just not the Superior Court anymore. These fees are changing pretty substantially. So the fee for a producer is $50 and so producers are farmers. And a fee for a processor is $500 Under current law, hemp growers, which are also known as producers and processors, might get a fee of $100 or $25 per client to grow or process hemp for personal use. And then there is also kind of a per acreage fee schedule in current law that growers or processors on a half acre or less than five pounds processed have a $100 fee. If you're growing on half acre to 9.9 acres or processing a 10,000 pounds, it's $500 for the fee. 10 to 50 acres of 50,000 pounds, it's a thousand dollar fee, and then more than that is a $3,000 fee. And this committee is welcome to take testimony directly from the Agency of Agriculture and the Cannabis Control Board about whether these fees are, how heavily these fees are enforced, but those fees are written into statute. And then this section adds the product fee that we've talked about, a $75 per product fee to register if that product has more than zero point four milligrams of THC in it. And there is an amendment brewing in the House Agricultural Committee because the special fund that the cannabis control board, just of how this statute landed or how this piece landed, the special fund for Cannabis Control War, should need to amend to specify that they can collect the funds and deposit these funds into that special fund. So we need to make a quick amendment and the House Agricultural Committee will do that. Okay, and now the rest of these, I could breeze over these really quickly because I've taken a half an hour to go through this. The rest of these on section 24 on page 42, these are conforming amendments. Just because we're moving the law, we're changing just some citations. So 24 is a citation that's changing. A tobacco tax piece on section 25, that citation is changing. And that's it. So just two conforming changes on section twenty four and twenty five.

[Rep. Kate Nugent (Member)]: Thank you. Any questions for counsel? This point. It's kind of a lot to absorb, especially without being able to see agriculture's amendment. So, not really certain exactly what they want to amend, but we'll see it, I guess, and talk more about it. Rob Coffin?

[VL Coffin IV (Member)]: Yeah. I just had one question about the we were talking about the appeals process, and they can no longer go to superior court with that. Did you say? Did I hear that right?

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Yeah. Yeah. Yeah. But

[VL Coffin IV (Member)]: it takes away one appeal for them? Yeah. So

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: let me get to that section. We're on the top of page 42, subsection c on lines four and five. Mhmm. You know, they're the right for an individual who's affected by a decision by the board to appeal to the Superior Court has been removed. However, the Administrative Procedure Act does permit individuals to appeal directly to the Supreme Court. So there is still an appeal right that is available, but there is no right to appeal to the Superior Court has been Any reason for that? Think that cannabis control board can explain that.

[VL Coffin IV (Member)]: I'm sure Okay. Why one legal step would be taken out of it.

[Rep. Kate Nugent (Member)]: Seeing no questions further, we'll take this up again, I think when we see House Agriculture's amendment. So we'll probably have you back in to walk us through the amendment.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Yes, and hopefully soon.

[Rep. Kate Nugent (Member)]: Yeah, great. Thank you very much.

[Bradley Shoman (Legislative Counsel, Office of Legislative Counsel)]: Thank you.

[Rep. Kate Nugent (Member)]: And for a couple of minutes, we'll take a break until 10:45, Nick.