Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF AGRICULTURE

OF THE STATE OF MONTANA

In the matter of the adoption of New Rules I and II, and the amendment of ARM 4.19.101 pertaining to hemp processing and associated fees

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

1. On June 28, 2019, at 9:00 a.m., the Department of Agriculture will hold a public hearing in Room 225 of the Scott Hart Building, at 302 N. Roberts, Helena, Montana, to consider the proposed adoption and amendment of the above-stated rules.

2. The Department of Agriculture will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Agriculture no later than 5:00 p.m. on June 24, 2019, to advise us of the nature of the accommodation that you need. Please contact Cort Jensen, Department of Agriculture, P.O. Box 200201, Helena, Montana, 59620-0201; telephone (406) 444-3144; fax (406) 444-5409; or e-mail agr@mt.gov.

3. The rules as proposed to be adopted provide as follows:

NEW RULE I HEMP PROCESSING LICENSE AND FEE (1) A Montana Hemp Processing License for hemp floral and root extracts is required.

(a) The fee for processing hemp floral and root extracts is $2,500 per year.

(b) All other hemp processors of hemp grain, seed, seed oil, and fiber may apply for a Hemp Processing License for $1,000 per year.

(2) Persons compliant with other state and federal licensing requirements specific to processing and manufacturing of hemp plants and plant parts are exempt from this processing license.

(a) A Hemp Processing License is required to be exempt from the Commodity Dealer License requirement.

(3) Licensed hemp growers may process their own hemp production without a Hemp Processing License.

(4) Hemp Processing Licenses expire on December 31 each year.

(5) A hemp processor is subject to inspection, THC testing, pesticide testing, and any other testing requested by law enforcement or the Montana Department of Agriculture. Both the hemp stored therein, and the products derived from the hemp must comply with state and federal law.

(6) Hemp processing derivatives may include products for food, fiber, oils, supplements, or drugs except for THC production. THC extracted from hemp plants or hemp floral extraction must be legally disposed of in a manner consistent with state and federal regulations.

(7) Manufacturers purchasing from licensed hemp processors in Montana are not required to possess a Hemp Processing License.

(8) Hemp processors must comply with city, county, and tribal ordinances and laws. Such ordinances may prohibit hemp processing and/or specify additional requirements.

(9) Use of hemp and its derived products in food is subject to the laws and regulations of the United States Food and Drug Association (FDA) and the Montana Department of Public Health and Human Services (DPHHS).

AUTH: 80-18-107, MCA

IMP: 80-18-102, 80-18-103, 80-18-107, MCA

REASON: The department created a simple system for hemp processing license requirements to provide consistency and comply with new United States Department of Agriculture (USDA) oversight established in the 2018 Farm Bill. The proposed rule will help the Department of Agriculture avoid jurisdictional confusion with the Department of Public Health and Human Services (DPHHS) and allow new businesses to have some degree of regulatory certainty. The rule also mandates hemp processors comply with city, county, and tribal ordinances. The proposed $2,500 fee adequately covers the cost of performing the necessary regulatory services and interactions with federal and state counterparts.

NEW RULE II HEMP PROCESSING FOR A COMMODITY DEALER (1) A person or entity with a Hemp Processing License for calendar year 2019 to 2020 may contract with licensed Montana hemp producers without a Commodity Dealer License under the following conditions:

(a) the hemp producer acknowledges the hemp processor is not a licensed commodity dealer in Montana, meaning the processor does not have a commodity dealer bond, by signing a written statement;

(b) the total amount of contracted hemp does not exceed $10 million; and

(2) Hemp processors are subject to all remedies of the department included in 80-4-612, MCA, and powers of inspection included in 80-4-601, MCA.

(a) In the event a hemp processor does not pay a licensed hemp producer possessing a contract that would otherwise be subject to Agricultural Commodity Dealer laws, the department may pursue remedies.

AUTH: 80-4-402, 80-4-601, 80-18-107, MCA

IMP: 80-4-402, 80-4-601, 80-18-102, MCA

Reason: Hemp processing regulations are subject to federal laws that are not yet defined. The department recognizes a need for regulatory flexibility to allow new market entrants and provides this rule pertaining to commodity dealers to issue caution to producers of the potential dangers associated with doing business with non-bonded processors. The hemp industry has associated risks that are not inherent to traditional commodity trading. The department will act as a resource for hemp producers and processors which is expected to have little direct economic impact. Commodity dealers operating under this rule will likely benefit from avoiding the time and costs associated with financial disclosure law compliance, but the exact amount of savings cannot be calculated.

4. The rule as proposed to be amended provides as follows, new matter underlined, deleted matter interlined:

4.19.101 DEFINITIONS (1) and (2) remain the same.

(3) "Hemp plant extract" means a processed product from hemp plant or floral material including but not limited to oil, powder, cake, pellet, etc.

(4) "Hemp root extract" means a processed product that includes exclusively hemp root material including but not limited to oil, powder, cake, pellet, etc.

(5) "Hemp seed oil" means oil extracted exclusively from hemp seeds.

(3) remains the same but is renumbered (6).

(7) "Manufacturing" means further processing hemp plants that have already been processed from a raw, unaltered state.

(4) remains the same but is renumbered (8).

(9) "Processing" means heating, mixing, grinding, separating, extracting, cutting, freezing, or otherwise physically or chemically altering hemp plants or plant parts from a raw, unaltered state or changing the physical characteristics of hemp plants or plant parts from a raw, unaltered state.

(5) and (6) remain the same but are renumbered (10) and (11).

AUTH: 80-18-107, MCA

IMP: 80-18-101, 80-18-102, 80-18-103, 80-18-106, 80-18-107, 80-18-110, 80-18-111, MCA

Reason: Definition additions are necessary to clarify the intent of the new hemp processing rules. No fiscal impact is associated with amendments to ARM 4.19.101.

5. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Cort Jensen, Department of Agriculture, P.O. Box 200201, Helena, Montana, 59620-0201; telephone (406) 444-3156; fax (406) 444-5409; or e-mail agr@mt.gov, and must be received no later than 5:00 p.m., July 19, 2019.

6. Cort Jensen, Department of Agriculture, has been designated to preside over and conduct this hearing.

7. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 5 above or may be made by completing a request form at any rules hearing held by the department.

8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

9. With regard to the requirements of 2-4-111, MCA, the department has determined that the adoption and amendments of the above-referenced rules will not significantly and directly impact small businesses. The department estimates between 5-20 businesses require a Hemp Processing License and associated fees will generate approximately $5,000 - $20,000 per year.

/s/ Cort Jensen /s/ Ben Thomas

Cort Jensen Ben Thomas

Rule Reviewer Director

Agriculture

Certified to the Secretary of State May 28, 2019.