BEFORE THE DEPARTMENT OF AGRICULTURE
OF THE STATE OF MONTANA
In the matter of the adoption of New Rules I, II, III, and IV and the amendment of ARM 4.12.3104 and 4.19.101 through 4.19.106 pertaining to hemp
NOTICE OF ADOPTION AND AMENDMENT
TO: All Concerned Persons
1. On March 15, 2019, the Department of Agriculture published MAR Notice No. 4-19-255 pertaining to the public hearing on the proposed adoption and amendment of the above-stated rules at page 254 of the 2019 Montana Administrative Register, Issue Number 5.
2. The department has adopted the following rules as proposed: New Rule I (4.19.107), New Rule II (4.19.108), New Rule III (4.19.109), and New Rule IV (4.19.110).
3. The department has amended the following rules as proposed: ARM 4.12.3104, 4.19.101, 4.19.102, 4.19.103, 4.19.105, and 4.19.106.
4. The department has amended the following rules as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:
4.19.104 FEES (1) The fee for a Montana State Hemp License is $450.
(2) The planting fee
for location registration is $400 per location of a single owner Montana State Hemp License plus:
(a) $5 per acre or partial acre outdoors; or
(b) $0.35 per 1,000 square feet indoors.
(a) an additional $250 for Category C seed varieties.
(3) The total fees under (2) may not exceed $10,000.
5. The department has thoroughly considered the comments and testimony received. A summary of the comments received and the department's responses are as follows:
COMMENT #1: Multiple commenters referred to the full legalization of hemp and expressed their belief that no state regulation is necessary since hemp is no longer a controlled substance.
RESPONSE #1: The department disagrees with these comments. While the 2018 Farm Bill decriminalized the cultivation of hemp under compliant state, tribal, or federal programs, it did not deregulate hemp completely. Hemp remains a highly regulated plant, although its jurisdiction moved from the Drug Enforcement Agency (DEA) to the United States Department of Agriculture (USDA). States and tribes are expected to comply with requirements to assure hemp (plants with less than 0.3% THC) and not marijuana is cultivated. To be cost-effective and compliant with the 2018 Farm Bill, the Montana Department of Agriculture included the proposed New Rules I through IV in its State Plan which was submitted to the USDA. Additionally, state law requires the department administer a self-sufficient (non-reliant on general funding, taxes) licensing program.
COMMENT #2: Multiple commenters requested lower fees.
RESPONSE #2: Following extensive consideration and strategic planning, the department estimates a cost-effective hemp program will cost between $150,000 and $250,000 annually. Program costs are contingent on the number of licensed growers and their distribution in areas across the state. Training requirements and associated costs for potential new, seasonal, or temporary staff may also be necessary to include in this growing season's regulatory framework. Cost-saving measures, such as self-sampling, were included in Montana's State Plan, but the department recognizes it may not be able to fully implement them in the first year (2019) since the USDA has not approved of them yet. Montana's hemp program fees are low relative to other states. The department determined it cannot significantly lower the proposed fees without risking the hemp program being unable to cover its own expenses. However, by eliminating the location and acreage fee and replacing it with a planting fee, the department did lower the grower license for nearly all entities.
COMMENT #3: Multiple commenters questioned the necessity for two department employees and recommended utilizing volunteers or MSU Extension staff instead.
RESPONSE #3: Upon review, the department maintains that at least two additional employees are necessary to operate the state hemp program. For example, one position will likely be full-time, working year-round to support the hemp program, while the second position may be comprised of multiple, seasonal, part-time employees. Ideally, seasonal employees will be located near growing areas, located outside of Helena, to reduce travel time and expense. It's possible such seasonal positions may be filled by contractual agreements with other entities, like MSU Extension, but the department is not legally able to employ volunteers for regulatory work.
COMMENT #4: Many commenters anticipate a lot more hemp growers this year. Since there are more growers, the commenters ask the department to consider lowering fees.
RESPONSE #4: The department concurs with the expectation for an increased number of hemp growers in Montana during the 2019 growing season. However, as the number of growers increases, the costs for operating a state program also increase. If the fees generated in the first growing season (2019) are more than regulation costs, fees may be lowered the following year.
COMMENT #5: Several comments were received that suggested Medical Marijuana money/fees be used to pay for the hemp program.
RESPONSE #5: Since the fees for Medical Marijuana are currently allotted to the Montana Department of Public Health and Human Services (DPHHS), and for administering their Montana Medical Marijuana Program, the Department of Agriculture does not foresee appropriating these funds for its hemp program. Additionally, a change in state law is necessary to modify these fees and the Montana Legislature will not meet again until 2021 (absent a special session).
COMMENT #6: Many of the commenters indicated that most or more of the hemp program costs are associated with Category C seeds and recommended Category C producers pay a higher fee.
RESPONSE #6: While the department disputes Category C costs being more or most of the hemp program costs, it recognizes Category C growers require more testing than Category A or B growers. All Category C hemp will be tested each year. Therefore, the department amended its fee schedule to reflect the additional time staff will spend assuring compliance. Category C growers must pay a $250 testing surcharge prior to issuance of their full grower license. An additional $250 fee is required for each Category C variety officially sampled. Category A and Category B growers are not subject to the same testing schedule or surcharge fee, but are required to have a functional, regulatory agency in place in order to grow, process, and/or transport hemp in compliance with the law. As such, all growers are required to pay the $400 planting fee.
COMMENT #7: Multiple commenters inquired about an exception for non-commercial hemp growers, especially those who are producing for home use.
RESPONSE #7: According to state law for Industrial Hemp – Licensing (80-18-103, MCA), the department must provide license requirements for any individuals growing hemp for commercial purposes. The federal government (USDA) has not created a regulatory framework for non-commercial growth. While the department understands the proposed fee and regulatory structure is not conducive for a garden or personal-use hemp production, it is not possible to provide this oversight under the current federal law without charging the proposed fees. Individuals wishing to grow hemp for their own personal medical needs may receive guidance from the Montana Medical Marijuana Program, operated by DPHHS, by calling (406) 444-0596.
COMMENT #8: Several commenters requested an exception be made or fees be lowered for small acreage growers.
RESPONSE #8: The department requires more state-level information about the economics and agronomics of hemp farming to offer an exemption to current requirements for growing hemp. Small operations often require similar staff services as large operations. Rather than acreage impacting department inspection processes, the department expects the number of varieties and/or high-risk varieties grown will have a larger impact on the time and effort staff will spend inspecting hemp plants. If federal testing regulations are established to include a framework for small acreage growers, the department is certainly willing to consider changing the rules.
COMMENT #9: Several commenters requested an alternative fee structure be considered for co-ops.
RESPONSE #9: It is not typical for the department to distinguish regulatory requirements based on the legal entity engaged in farming, whether it be a co-op, limited liability company, partnership, corporation, or private farm. The department cannot viably identify a rational basis for exempting growers from regulatory requirements, but intends to work directly with co-ops, such as the Bitterroot Hemp Cooperative, to consider whether practical regulatory savings may be incorporated into cooperative farming practices to reduce fees in future years.
COMMENT #10: Several commenters requested the proposed location/plot fee be removed and replaced with a graduated acreage fee system or flat fee.
RESPONSE #10: The department agrees with the notion to reform the fee structure. Defining a growing location is challenging. The Montana Hemp Advisory Committee discussed obstacles for applying location fees at its meeting on April 3, 2019. The department amended the fee structure to reflect seed risk categories (as seen in Response #6) to reduce unnecessary complexities and provide a fair system for growers.
COMMENT #11: A few commenters asked if hemp processors could be made to carry part of the regulatory burden since processors will benefit from growers.
RESPONSE #11: The department is currently considering regulations for hemp processors in Montana. However, regulations for processors are outside the scope of the rules proposed in MAR Notice No. 4-19-255.
COMMENT #12: Multiple commenters requested the department consider allowing a local testing and sampling "lab" which would require lower fees.
RESPONSE #12: More information, and potentially federal approval, is necessary for the department to determine whether local sampling and testing labs would significantly affect fees. The department is willing to discuss the suggested local sampling and testing lab with commenters which may influence fee structures in the future.
COMMENT #13: A few commenters expressed support for the proposed fees which will sufficiently fund the hemp program.
RESPONSE #13: The department concurs that the fees adequately support its Montana Hemp Program for the 2019 growing season.
/s/ Cort Jensen /s/ Ben Thomas
Cort Jensen Ben Thomas
Rule Reviewer Director
Certified to the Secretary of State April 30, 2019.