DAR File No. 43146

Agriculture and Food, Plant Industry

Rule R68-25

Industrial Hemp Research Pilot Program for Processors

Notice of Proposed Rule

(New Rule)

DAR File No.: 43146
Filed: 08/10/2018 03:36:02 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This purposed rule sets forth the licensing and operational requirements for individuals seeking to process industrial hemp in the state of Utah in accordance with Subsection 4-41-103(4).

Summary of the rule or change:

This purposed rule sets forth the licensing requirements for individuals interested in industrial hemp. It establishes that a person must be at least 18 years of age to apply for a license and they must submit a criminal history. Additionally, all employees who handle material that is over the 0.3% THC are required to submit a criminal history and be over 18 years of age. This purposed rule places limitations on where industrial hemp and industrial hemp materials can be extracted or processed and restrictions on what material can be sold. It outlines the testing and sampling methods the Department of Agriculture and Food (Department) will use for testing industrial hemp. This purposed rule outlines the necessary recordkeeping requirements.

Statutory or constitutional authorization for this rule:

• Subsection 4-41-103(4)

This rule or change incorporates by reference the following material:

• Adds 21 CFR 110, Current Good Manufacturing Practice in Manufacturing, Packing, or Holding Human Food, published by Government Printing Office, 04/01/2017
• Adds 21 CFR 111, Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements, published by Government Printing Office, 04/01/2017

Anticipated cost or savings to:

the state budget:

As this is a new program, the state will have the additional cost of starting up the program and purchasing the needed equipment to effectively run the Industrial Hemp Program. The Department will need to hire two new employees, an office specialist to oversee the application, licensing, and reporting processes and an inspector to inspect the processing facilities and to take samples to the lab. It is estimated that the new employees will cost $136,000. These employees will need to be receive training which the Department anticipates will cost $10,000. Testing equipment and standards will be necessary to test the products for THC compliance. Standards and laboratory equipment will run around $5,000. Sampling equipment and supplies are estimated to cost $3,000. The total cost of the first year of the program is then estimated to be $154,000. The second year the Department anticipates that the cost will stay much the same with some slight decreases in inspection supplies, as well as the cost for training, but the Department does anticipate the need to have at least one additional employee. It is likely, depending on the number of growers, that another inspector will be needed to cover both the northern and southern ends of the state. Therefore, the cost of employees would be $216,000. The training cost would be $5,000. The cost of laboratory testing standards and maintenance of the laboratory equipment will remain the same at $5,000. The Department will need to purchase another vehicle and sampling supplies for the new inspector which is estimated at $31,500. For a total cost of the second year being $257,500. It may be necessary to hire more inspectors as the program grows in the third year, but the Department anticipates that the cost for the program will remain similar to the second year in the third year. The cost may decrease if no new inspectors are needed as training will not be necessary nor will new vehicles or supplies. The cost of employees will remain the same at $216,000 and laboratory costs will remain at $5,000. Sampling cost of training will be $0 and there will be minimal sampling equipment which the Department estimates at $700. The total cost then for year three would be $221,700. The Department has a Processor Licensing Fee of $1,000. Each processor must pay the licensing fee before they are issued a license. The Department is unable to estimate the amount this licensing fee will generate for the Department as this is a new and developing industry and there are currently no legal growers of industrial hemp in the state. However, the Department will be generating some revenue from the licensing fees.

local governments:

Local governments may experience an increase in law enforcement costs due to the nature of the crop being grown. Local law enforcement may wish to coordinate more with the Department in making sure the growing sites are licensed with the Department. The Department will be working with them to notify them of all licensed growing areas. However, those are decisions that will need to be left up to local governments to determine and the Department cannot adequately estimate those cost. Additionally, local governments will see an added benefit as these new businesses will have to obtain business licenses from local governments in which their processing facilities are located. As with the cost to local governments, it is impossible for the Department to adequately estimate the benefits to local governments.

small businesses:

This rule allows for the growth of a new and innovative industry in the state of Utah. Previously, the growth of industrial hemp was not allowed under both state and federal laws. This would allow for individuals to start a new business. As it has not been allowed, the proposed rule does not place any additional cost to the business aside from the $1,000 licensing fee assessed by the Department. Because it is a new program, the Department is unable to estimate how many participants there will be in program.

persons other than small businesses, businesses, or local governmental entities:

This proposed rule allows for the development of a new industry in the state. It will allow for the production and distribution of new products to the consumers of the state. However, due to the nature of the industry, it is impossible for the Department to estimate the cost or benefits to the consumer.

Compliance costs for affected persons:

There will be a $1,000 licensing fee assessed for a license. Due to the nature of the business and the previous legal statutes of industrial hemp, there has been no prior legal processing of the plant in the state of Utah. Therefore, the only cost to the affected persons is the licensing fee. All other costs are the costs of engaging in the processing of industrial hemp.

Comments by the department head on the fiscal impact the rule may have on businesses:

This proposed rule will open new markets to our agricultural producers and manufacturers previously closed to them. This proposed rule will allow for producers to diversify the products they produce and attempt to enter into a new and emerging market. The licensing fee is necessary for the department to comply with both state and federal law to ensure that all products produced have under the 0.3% THC.

LuAnn Adams, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Agriculture and Food
Plant Industry
350 N REDWOOD RD
SALT LAKE CITY, UT 84116-3034

Direct questions regarding this rule to:

• Robert Hougaard at the above address, by phone at 801-538-7187, by FAX at 801-538-7189, or by Internet E-mail at rhougaard@utah.gov
• Scott Ericson at the above address, by phone at 801-538-7102, by FAX at 801-538-7126, or by Internet E-mail at sericson@utah.gov
• Melissa Ure at the above address, by phone at 801-538-4976, by FAX at , or by Internet E-mail at mure@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/01/2018

This rule may become effective on:

10/08/2018

Authorized by:

LuAnn Adams, Commissioner

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY 2020	FY 2021
State Government	$154,000	$257,700	$221,700
Local Government	$0	$0	$0
Small Businesses	$1,000	$1,000	$1,000
Non-Small Businesses	$1,000	$1,000	$1,000
Other Person	$0	$0	$0
Total Fiscal Costs:	$156,00 0	$259,70 0	$223,70 0
Fiscal Benefits
State Government	$1,000	$1,000	$1,000
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$1,00 0	$1,00 0	$1,00 0
Net Fiscal Benefits:	-$155,000	-$258,700	-$222,700

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non - Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

Each processor must pay the licensing fee before they are issued a license. The Department is unable to estimate the amount this licensing fee will generate for the Department as this is a new and developing industry and there are currently no legal growers of industrial hemp in the state. However, the Department will be generating some revenue from the licensing fees. This rule will allow for the growth of a new and innovative industry in the state of Utah. Previously, the growth of industrial hemp was not allowed under both state and federal laws. This would allow for individuals to start a new business. As it has not been allowed,the proposed rule does not place any additional cost to the business aside from the $1,000 licensing fee assessed by the Department. Because it is a new program, the Department is unable to estimate how many participants there will be in program.

 

The Commissioner of the Department of Agriculture and Food, LuAnn Adams, has reviewed and approved this fiscal analysis.

 

 

R68. Agriculture and Food, Plant Industry.

R68-25. Industrial Hemp Research Pilot Program for Processors.

R68-25-1. Authority and Purpose.

Pursuant to Section 4-41-103(4), this rule establishes the standards, practices, procedures, and requirements for participation in the Utah Industrial Hemp Research Pilot Program for the, processing and handling of industrial hemp.

 

R68-25-2. Definitions.

1) "CBD" means cannabidiol.

2) "Department" means the Utah Department of Agriculture and Food.

3) "Industrial Hemp" means any part of a cannabis plant, whether growing or not, with a concentration of less than 0.3% tetrahydrocannabinol by weight

4) "Handle" or "Handling" means possessing, transporting, or storing industrial hemp for any period of time.

5) "Processing" means any or all parts of harvesting, extraction, refining, altering, manufacturing, or making industrial hemp into a finished industrial hemp product ready for market.

6) "Processor" means a person licensed by the department to engage in processing industrial hemp

extracting and manufacturing industrial hemp and hemp products.

7) "Manufacturing" means storing, preparing, packaging, or labeling of industrial hemp or hemp products.

8) "THC" means total composite tetrahydrocannabinol, including delta -9- tetrahydrocannabinol and tetrahydrocannabinolic acid.

9) "Third- party laboratory" means a laboratory which has no direct interest in a grower or processor of industrial hemp or industrial hemp products that is capable of performing mandated testing utilizing validated methods.

 

R68-25-3. Application Requirements.

1) The applicant shall be a minimum of eighteen (18) years old.

2) The applicant is not eligible to receive a license if they have:

a) been convicted of a felony or its equivalent; or

b) been convicted of a drug-related misdemeanor within the last ten (10) years.

3) An applicant seeking an industrial hemp processing license shall submit the following to the department:

a) a complete application form provided by the department;

b) a physical description of the processing facility;

c) a plain review of the building, facilities, and equipment;

d) a photographic aerial map and street address for each building or site where industrial hemp will be processed, handled, or stored;

e) the planned source of industrial hemp material;

f) a statement of the intended end use or disposal for all parts of the industrial hemp plant and hemp material; and

g) a research plan.

4) An applicant shall submit a nationwide criminal history from the FBI completed within three (3) months of their application.

5) The applicant shall submit a fee as approved by the legislature in the fee schedule.

6) The department shall deny any applicant who does not submit all required information.

 

R68-25-4. Processing Facility Restrictions.

1) A licensee shall not process or store leaf or floral material from industrial hemp in any structure that is used for residential purposes.

2) A licensee shall not process or store industrial hemp within 1,000 feet of a school or a public recreational area.

3) A licensee shall not process or handle industrial hemp or hemp material from any person who is not licensed by the department or from a person outside the state who is not authorized by the laws of that state.

4) A licensee shall not permit a person under the age of eighteen (18) to handle living plants, viable plant parts, viable seeds, leaf material, or floral material.

5) A licensee shall submit a nationwide criminal history from the FBI to the department for each employee with access to hemp material or product which contains over 0.3% THC or has the potential to contain over 0.3% THC within the first month of employment.

 

R68-25-5. CBD Extraction Methods.

1) In addition to the requirements of R68-25-3, an applicant seeking to engage in the extraction of CBD shall submit to the department a detailed description of the proposed extraction method.

2) The applicant shall describe the proposed process for the removal of all harmful solvents added during the extraction process, if applicable.

3) The applicant shall describe the safety measures proposed to protect the public and employees from dangers associated with extraction methods.

4) The department may deny a license for methods which pose a significant risk to public health and safety.

5) The department shall not allow the use of butane or propane in any extraction method.

 

R68-25-6. Processing Practices.

1) The department incorporates by reference 21 CFR 111, Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements for a licensee engaged in processing a CBD product intended for human consumption.

2) The department incorporates by reference 21 CFR 110, Current Good Manufacturing Practice in Manufacturing, Packing, or Holding Human Food for a licensee engaged in processing non-CBD products for human or animal consumption.

3) All other licensed processors shall comply with the federal Food Drug and Cosmetic Act, 21 U.S.C. Chapter 9, and all other applicable state laws and regulations relating to product development, product manufacturing, consumer safety, and public health.

 

R68-25-7. Required Reports.

1) A licensee shall submit a completed Production Report on a form provided by the department by December 31 ^st.

2) A licensee shall submit a report of the results of the research as set forth in the research plan by December 31 ^st.

3) The failure to submit a timely completed form may result in the denial of a renewal license.

 

R68-25-8. Additional Records.

1) The licensee shall keep records of receipt for all industrial hemp material obtained including:

a) the date of receipt;

b) quantity received; and

c) an identifying lot number created by the licensee;

d) the seller's information including;

i) the seller's department license number;

ii) seller's contact information; and

iii) the address of the facility or growing area from which the industrial hemp material was shipped.

2) The licensee shall keep records for each batch of industrial hemp material processed containing the following information:

a) the date of processing;

b) the lot number of the material;

c) the amount processed;

d) the type of processing; and

e) any lab test conducted on the industrial hemp material or product during the processing.

3) The licensee shall keep records of all tests conducted with the identifying lot number

4) All records shall be maintained for a minimum of three (3) years.

5) All records are subject to review by department officials at the time of inspection or upon request.

 

R68-25-9. Testing.

1) For industrial hemp products that will be used for human consumption or absorption the product shall be tested for the following before being made available for retail:

a) cannabinoid profile;

b) solvents;

c) pesticides;

d) microbials; and

e) heavy metals.

2) The testing shall be completed by a third- party laboratory.

3) The department shall conduct random testing of industrial hemp products and materials.

4) The sample taken by the department shall be the official sample.

 

R68-25-10. Inspections and Sampling.

1) The department shall have complete and unrestricted access to all industrial hemp plants, seeds, and materials and all land, buildings, and other structures used to process industrial hemp.

2) Samples of each industrial hemp product may be randomly taken from the facilities by department officials.

3) The department shall review all records kept in accordance with rule requirements.

4) The department shall notify a licensee of test results greater than 0.3% THC.

5) Any laboratory test with a result greater than 0.3% THC may be considered a violation of the terms of the license and may result in an immediate license revocation.

6) Any laboratory test with a result of 1% THC or greater of final product will be turned over to the appropriate law enforcement agency and revocation of the processor license will be immediate.

7) The department shall notify the licensee of any solvents, metals, microbials, or pesticides found during testing.

8) The presence of deleterious or harmful substances may be considered a violation of the terms of the license and may result in a license revocation.

 

R68-25-11. Storage of Industrial Hemp and Hemp Material.

1) A licensee may store hemp and hemp products provided:

a) the licensee notifies the department of the location of the storage facility;

b) the licensee informs the department of the type and amount of the product being stored in the storage facility;

c) the storage facility is outside of the public view; and

d) the storage facility is secured with physical containment such as walls, fences, locks, and with an alarm system to provide maximum reasonable security.

2) A licensee may store hemp product that exceeds the 0.3% THC provided:

a) the product is kept in a secure room;

b) the product is kept separate from other hemp products;

c) access to the product is limited; and

d) a record is kept of the amount of product being stored and when it is being moved.

3) All storage facilities shall be maintained in accordance with the practice adopted inR68-25-6.

4) All storage facilities and records are subject to random inspection by department officials.

 

R68-25-12. Transportation of Industrial Hemp Material.

1) A licensee may move nonviable hemp product without an industrial hemp transportation permit.

2) An industrial hemp transportation permit is required for each day and each vehicle used to move industrial hemp or industrial hemp products.

3) The licensee shall submit an industrial hemp transportation permit request form provided by the department.

4) Requests for an industrial hemp transportation permit shall be submitted to the department at least five (5) business days prior to movement.

5) An industrial hemp transportation permit authorizes the transportation of industrial hemp materials only within the borders of the state.

6) The department may deny any application for an industrial hemp transportation permit that is not completed in accordance with this rule.

7) A licensee extracting CBD shall not transport any product until the department has been notified of the THC test results for the product being transported.

 

R68-25-13. Restriction on the Sale and Transfer of Industrial Hemp Material.

1) A licensee shall not sell or transfer living plants, viable plants, viable seed, leaf material, or floral material to any person not licensed by the department.

2) A licensee shall not sell or transfer living plants, viable seed, leaf material, or floral material to any person outside the state who is not authorized by the laws of that state.

3) The licensee may sell stripped stalks, fiber, and nonviable seed to the general public provided the product's THC level is less than 0.3%.

 

R68-25-14. Renewal.

1) A licensee shall resubmit all documents required in R68-25-3, with updated information, before December 31 ^st of the current year.

2) The department may deny a renewal for an incomplete application.

3) The department may deny renewal for any licensee who has violated any portion of this rule or state law.

 

R68-25-15. Violation.

1) It is a violation to process industrial hemp or industrial hemp material on a site not approved by the department as listed on the license or within 1,000 feet of a school or public recreational area.

2) It is a violation to process industrial hemp or industrial hemp material from a source that is not approved by the department.

3) A licensee shall not allow unsupervised public access to hemp processing facilities.

4) It is a violation to employ a person under the age of eighteen (18) in the processing or handling of industrial hemp or its products.

5) It is a violation to sell a product to the general public in violation of this section or state laws governing the final product.

6) It is a violation to add CBD to a food product.

7) It is a violation to fail to keep records required by this section.

8) It is a violation for a licensee to allow an employee that has been convicted of a felony or its equivalent access to hemp material or product which contains over 0.3% THC or has the potential to contain over 0.3% THC.

9) It is a violation for a licensee to allow an employee that has been convicted of a drug-related misdemeanor within the last ten (10) years access to hemp material or product which contains over 0.3% THC or has the potential to contain over 0.3% THC.

 

KEY: cannabidiol, hemp products, hemp extraction, hemp oil

Date of Enactment or Last Substantive Amendment: 2018

Authorizing, and Implemented or Interpreted Law: 4-41-103(4)