[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                   AN EXAMINATION OF THE USDA HEMP 
                           PRODUCTION PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
               BIOTECHNOLOGY, HORTICULTURE, AND RESEARCH

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 28, 2022

                               __________

                           Serial No. 117-37
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov

                                __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
49-637 PDF                  WASHINGTON : 2022                     
          
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                        COMMITTEE ON AGRICULTURE

                     DAVID SCOTT, Georgia, Chairman

JIM COSTA, California                GLENN THOMPSON, Pennsylvania, 
JAMES P. McGOVERN, Massachusetts     Ranking Minority Member
ALMA S. ADAMS, North Carolina, Vice  AUSTIN SCOTT, Georgia
Chair                                ERIC A. ``RICK'' CRAWFORD, 
ABIGAIL DAVIS SPANBERGER, Virginia   Arkansas
JAHANA HAYES, Connecticut            SCOTT DesJARLAIS, Tennessee
SHONTEL M. BROWN, Ohio               VICKY HARTZLER, Missouri
BOBBY L. RUSH, Illinois              DOUG LaMALFA, California
CHELLIE PINGREE, Maine               RODNEY DAVIS, Illinois
GREGORIO KILILI CAMACHO SABLAN,      RICK W. ALLEN, Georgia
Northern Mariana Islands             DAVID ROUZER, North Carolina
ANN M. KUSTER, New Hampshire         TRENT KELLY, Mississippi
CHERI BUSTOS, Illinois               DON BACON, Nebraska
SEAN PATRICK MALONEY, New York       DUSTY JOHNSON, South Dakota
STACEY E. PLASKETT, Virgin Islands   JAMES R. BAIRD, Indiana
TOM O'HALLERAN, Arizona              CHRIS JACOBS, New York
SALUD O. CARBAJAL, California        TROY BALDERSON, Ohio
RO KHANNA, California                MICHAEL CLOUD, Texas
AL LAWSON, Jr., Florida              TRACEY MANN, Kansas
J. LUIS CORREA, California           RANDY FEENSTRA, Iowa
ANGIE CRAIG, Minnesota               MARY E. MILLER, Illinois
JOSH HARDER, California              BARRY MOORE, Alabama
CYNTHIA AXNE, Iowa                   KAT CAMMACK, Florida
KIM SCHRIER, Washington              MICHELLE FISCHBACH, Minnesota
JIMMY PANETTA, California            MAYRA FLORES, Texas
SANFORD D. BISHOP, Jr., Georgia      ------
MARCY KAPTUR, Ohio
SHARICE DAVIDS, Kansas

                                 ______

                      Anne Simmons, Staff Director

                 Parish Braden, Minority Staff Director

                                 ______

       Subcommittee on Biotechnology, Horticulture, and Research

               STACEY E. PLASKETT, Virgin Islands, Chair

SHONTEL M. BROWN, Ohio               JAMES R. BAIRD, Indiana, Ranking 
KIM SCHRIER, Washington              Minority Member
JIMMY PANETTA, California            AUSTIN SCOTT, Georgia
CHELLIE PINGREE, Maine               ERIC A. ``RICK'' CRAWFORD, 
SEAN PATRICK MALONEY, New York       Arkansas
SALUD O. CARBAJAL, California        RODNEY DAVIS, Illinois
AL LAWSON, Jr., Florida              DON BACON, Nebraska
JOSH HARDER, California              CHRIS JACOBS, New York
J. LUIS CORREA, California           TROY BALDERSON, Ohio
------                               MICHELLE FISCHBACH, Minnesota
                                     MAYRA FLORES, Texas
                                     ------

              Malikha Daniels, Subcommittee Staff Director

                                  (ii)
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Baird, Hon. James R., a Representative in Congress from Indiana, 
  opening statement..............................................     3
    Submitted joint statement on behalf of Robert ``Bob'' Pearce, 
      Ph.D., Professor of Agronomy, Department of Plant and Soil 
      Sciences; and Tyler B. Mark, Ph.D., Assistant Professor, 
      Department of Agricultural Economics, University of 
      Kentucky...................................................   141
Brown, Hon. Shontel M., a Representative in Congress from Ohio, 
  prepared statement.............................................     4
Plaskett, Hon. Stacey E., a Delegate in Congress from Virgin 
  Islands, opening statement.....................................     1
    Prepared statement...........................................     2
Thompson, Hon. Glenn, a Representative in Congress from 
  Pennsylvania, opening statement................................   127

                               Witnesses

Phipps, Ph.D., Brandy E., Assistant Professor, Department of 
  Agricultural and Life Sciences, Central State University, 
  Wilberforce, OH................................................     5
    Prepared statement...........................................     6
Grignon, Marcus, Executive Director, Hempstead Project Heart, 
  Green Bay, WI..................................................    11
    Prepared statement...........................................    12
    Supplementary material.......................................   144
Wang, Eric T., Chief Executive Officer and Managing Director, 
  Ecofibre, Ltd.; Vice President for Sustainability, U.S. Hemp 
  Roundtable, Lexington, KY......................................    30
    Prepared statement...........................................    32
Quarles, Ph.D., Hon., Ryan F., Commissioner, Kentucky Department 
  of Agriculture, Frankfort, KY..................................    33
    Prepared statement...........................................    34
Greenberg, Kate, Commissioner, Colorado Department of 
  Agriculture, Broomfield, CO....................................    44
    Prepared statement...........................................    46
    Submitted questions..........................................   146

 
           AN EXAMINATION OF THE USDA HEMP PRODUCTION PROGRAM

                              ----------                              


                        THURSDAY, JULY 28, 2022

                  House of Representatives,
 Subcommittee on Biotechnology, Horticulture, and Research,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Stacey 
E. Plaskett [Chair of the Subcommittee] presiding.
    Members present: Representatives Plaskett, Brown, Schrier, 
Pingree, Carbajal, Lawson, Harder, Baird, and Thompson (ex 
officio).
    Staff present: Lyron Blum-Evitts, Ellis Collier, Malikha 
Daniels, Amar Nair, Ricki Schroeder, Patricia Straughn, Erin 
Wilson, and Dana Sandman.

  OPENING STATEMENT OF HON. STACEY E. PLASKETT, A DELEGATE IN 
                  CONGRESS FROM VIRGIN ISLANDS

    The Chair. This hearing of the Subcommittee on 
Biotechnology, Horticulture, and Research entitled, An 
Examination of the USDA Hemp Production Program, will come to 
order.
    Welcome, and thank you for joining today's hearing. After 
brief opening remarks, Members will receive testimony from our 
witnesses today, and then the hearing will open for 
questioning. I want to thank my colleagues and our witnesses 
for joining me today as we host this important discussion on 
hemp and the USDA Hemp Production Program.
    Today, we will hear from a panel of experts, including 
producers, researchers, Tribal members, and State Agriculture 
Commissioners, who will provide an overview of the hemp 
industry and insights towards the 2023 Farm Bill.
    Until recently, the hemp industry was outlawed due to 
restrictions put in place in the Marijuana Tax Act of 1937 
(Pub. L. 75-238). And hemp was treated no differently than 
marijuana under the Controlled Substances Act (Pub. L. 91-513). 
In 2014, the farm bill removed longstanding Federal 
restrictions on the cultivation and production of hemp, 
allowing more State Departments of Agriculture and institutions 
of higher learning to produce this crop as part of a pilot 
program for research purposes.
    In the 2018 Farm Bill, Congress authorized commercial 
production of hemp and directed USDA to establish the U.S. 
Domestic Hemp Production Program, giving USDA the 
responsibility of cultivating and approving plans submitted to 
states, Territories, or Tribal authorities who wish to regulate 
hemp production.
    In January of 2021, USDA issued its final ruling on 
regulating the production of hemp in the United States. 
Feedback from public comments, as well as lessons learned from 
previous growing seasons, helped influence regulations 
established on the interim final rule published in October of 
2019.
    USDA continues to conduct research and outreach to help 
support the burgeoning hemp sector. In my home district of the 
U.S. Virgin Islands, small and local hemp producers have 
already taken advantage of the program to provide a new source 
of revenue for their farms and additional jobs to their 
community. With the guidance of the USDA, the Virgin Islands 
has the potential to begin a new economic era that will benefit 
the government, local farmers, and local business 
entrepreneurs.
    The production of hemp has created value for producers and 
consumers, over $800 million in 2021, with over 55,000 acres of 
hemp planted. While markets for hemp products such as fiber, 
grain, and flour are developing, they are still volatile and 
uncertain. To support farmers and producers in the ongoing 
development of this reemerging sector, it is crucial that USDA 
continue to work to support and expand hemp production and the 
hemp industry.
    As we look towards the next farm bill, we can continue to 
address ongoing issues and provide our farmers, producers, 
processors, and agricultural researchers with the resources 
they need. This hearing is an opportunity for us to hear what 
we can do to ensure the continued growth and development of 
this resurging crop.
    [The prepared statement of Ms. Plaskett follows:]

 Prepared Statement of Hon. Stacey E. Plaskett, a Delegate in Congress 
                          from Virgin Islands
    Good morning and thank you to my colleagues and our witnesses for 
joining me today as we host this important discussion on hemp and the 
USDA Hemp Production Program. Today, we will hear from a panel of 
experts including producers, researchers, Tribal members, and State 
Agriculture Directors and Commissioners who will provide an overview of 
the hemp industry and insight toward the 2023 Farm Bill.
    Until recently, the hemp industry was outlawed due to restrictions 
put in place by the Marijuana Tax Act of 1937, and hemp was treated no 
differently than marijuana under the Controlled Substances Act.
    In 2014, the farm bill removed long-standing Federal restrictions 
on the cultivation and production of hemp, allowing state departments 
of agriculture and institutions of higher learning to produce this crop 
as part of a pilot program for research purposes.
    In the 2018 Farm Bill, Congress authorized commercial production of 
hemp and directed USDA to establish the U.S. Domestic Hemp Production 
Program, giving USDA the responsibility of evaluating and approving 
plans submitted by states, Territories, or Tribal authorities who wish 
to regulate hemp production.
    In January of 2021, USDA issued its final ruling on regulating the 
production of hemp in the United States. Feedback from public comments, 
as well as lessons learned from previous growing seasons, helped 
influence previous regulations established under the interim final rule 
published in October 2019.
    USDA continues to conduct education and outreach to help support 
the burgeoning hemp sector. In my home district of the U.S. Virgin 
Islands, small and local hemp producers have already taken advantage of 
the program to provide a new source of revenue for their farms and 
additional jobs to their community. With the guidance of the USDA, the 
Virgin Islands has the potential to begin a new economic era that will 
benefit the government, our local farmers, and local business 
entrepreneurs through economic and growth opportunities.
    The production of hemp has created value for producers and 
consumers of over $800 million in 2021, with over 55,000 acres of hemp 
planted. While markets for hemp products, such as fiber, grain, and 
flower are developing, they are still volatile and uncertain. To 
support farmers, producers, and the ongoing development of this re-
emerging sector, it is crucial that USDA continues its work to support 
and expand hemp production and the hemp industry.
    As we look toward the next farm bill, we can continue to address 
ongoing issues and provide our farmers, producers, processors, and 
agricultural researchers with the resources they need. This hearing is 
an opportunity for us to hear what we can do to ensure the continued 
growth and development of this resurging crop.

    The Chair. I would now like to welcome the distinguished 
Ranking Member, the gentleman from Indiana, Mr. Baird, for any 
opening remarks he would like to give.

 OPENING STATEMENT OF HON. JAMES R. BAIRD, A REPRESENTATIVE IN 
                     CONGRESS FROM INDIANA

    Mr. Baird. Well, good morning. And I want to thank you, 
Chair Plaskett, for holding this session and this hearing, and 
I really appreciate the witnesses that are here today and you 
giving your time to really help us understand what is going on 
in the hemp industry and to update us.
    I also think it is noteworthy to mention that this is 
really the first hearing that the House Committee on 
Agriculture has held on hemp ever.
    The Chair. Yes.
    Mr. Baird. So, mind you, the 2014 Farm Bill authorized the 
Hemp Research Pilot Program, and then the 2018 Farm Bill 
subsequently legalized hemp production at the Federal level. 
And to say this is important is an understatement. So I am 
pleased we have a well-rounded stakeholder panel here today 
with representatives from the hemp industry, including two 
state regulators, a Tribal representative, a researcher, and a 
company that manufactures hemp products.
    That said, I do believe it is a missed opportunity that we 
don't hear from the Federal agencies that we have tasked, and 
they are tasked, with implementing provisions related to hemp 
today. So, Madam Chair, I remain hopeful that we can have an 
opportunity to hear from both the USDA and the FDA at one of 
our future meetings.
    As the hemp industry rapidly expanded following the passage 
of the 2018 Farm Bill, a wave of innovation followed. And as 
researchers and companies started identifying uses for hemp 
fiber, including building materials, insulation, animal 
bedding, concrete, and even car parts, this is one of my areas 
of interest, and I look forward to hearing more about that 
today.
    This rapid expansion of the hemp industry also led to 
increased interest and research around the use of hemp in 
animal feed. Given my background in animal science and 
monogastric nutrition, I look forward to hearing more about 
this research, including whether it has been tested and what is 
on the horizon for that kind of a product.
    And even though the legalization of hemp has spurred 
innovation in the use of hemp fiber and grain, we are seeing 
much of the hemp grown in the United States used to manufacture 
hemp-derived CBD. Since the passage of the 2018 Farm Bill, 
there has been no regulatory framework from the Food and Drug 
Administration for CBD products, leading to some uncertainty 
for producers, for manufacturers, retailers and as well as 
consumers.
    While we are certain to hear about successes in the hemp 
industry, it is important to note that we have many challenges, 
leading to a significant decline in the number of hemp acres 
planted since 2019. And as we discuss potential areas for 
change in the 2023 Farm Bill, it is critical that we 
comprehensively understand these challenges to ensure our 
policies benefit producers and consumers alike.
    Again, I would like to thank the witnesses for taking the 
time to be with us here today, and I look forward to hearing 
more about the work they are doing within the hemp industry. 
And with that, I yield back.
    The Chair. Thank you so much to the Ranking Member of the 
Subcommittee for your tireless efforts to support farmers and 
to be such an incredible colleague on this Subcommittee.
    The chair would request that other Members submit their 
opening statements for the record so witnesses may begin their 
testimony and ensure that there is ample time for questioning.
    [The prepared statement of Ms. Brown follows:]

   Prepared Statement of Hon. Shontel M. Brown, a Representative in 
                           Congress from Ohio
    Thank you Chair Plaskett.
    I am pleased we are joined today by Central State University 
Assistant Professor Dr. Brandy E. Phipps, whose research in my home 
State of Ohio has informed farmers and researchers on the benefits of 
hemp cultivation.
    Dr. Phipps is currently utilizing 20+ years of comprehensive 
research experience to identify ways hemp might provide the aquaculture 
industry with a cost-effective, sustainable alternative to fish oil and 
meal.
    We thank her for her time today and her work to better discern 
industrial hemp cultivation.

    The Chair. I am pleased to welcome five outstanding 
witnesses to the Subcommittee today. Our witnesses bring to our 
hearing a wide range of experience and expertise, and I thank 
you for joining. Our first witness will be Dr. Brandy Phipps, 
Ph.D., Assistant Professor, Department of Agricultural and Life 
Sciences, Central State University, Cedarville, Ohio. Our 
second witness today is Mr. Marcus Grignon, the Executive 
Director of the Hempstead Project Heart in Green Bay, 
Wisconsin. Third witness is Mr. Eric Wang, the Chief Executive 
Officer of Ecofibre. He is testifying today on behalf of the 
U.S. Hemp Roundtable. Also, Dr. Ryan F. Quarles, who is the 
Commissioner of Kentucky Department of Agriculture. And our 
fifth and final witness is Ms. Kate Greenberg, who is the 
Commissioner of the Colorado Department of Agriculture.
    Welcome to you all today. We will now proceed to hearing 
your testimony. You will each will have 5 minutes, and the 
timer should be visible to you and will count down to zero, at 
which point your time has expired.
    Dr. Phipps, please begin when you are ready.

        STATEMENT OF BRANDY E. PHIPPS, Ph.D., ASSISTANT 
   PROFESSOR, DEPARTMENT OF AGRICULTURAL AND LIFE SCIENCES, 
           CENTRAL STATE UNIVERSITY, WILBERFORCE, OH

    Dr. Phipps. Chair Plaskett, thank you for the invitation 
and opportunity to speak to the Biotechnology, Horticulture, 
and Research Subcommittee of the House Committee on 
Agriculture.
    Central State University, where I am faculty is in Ohio 
District 10 represented by Congressperson Mike Turner. Central 
State is a public historically Black college and university and 
an 1890 land-grant institution. As such, I want to acknowledge 
the two Ohio Representatives of this Subcommittee, 
Representatives Brown and Balderson, and Chairperson Scott of 
the House Committee on Agriculture, who has been a consistent 
champion of the 1890 land-grant institutions.
    Chair Plaskett and the Members of this Subcommittee, I want 
to thank you for continuing to include the 1890 voice in the 
work that you do in this Committee. And finally, I would like 
to acknowledge the professional staff of this Committee who 
have been excellent to work with this past week.
    I am Brandy Phipps, Assistant Professor in the Department 
of Agricultural and Life Sciences and a researcher in the Food, 
Nutrition, and Health project of the Agriculture Research and 
Development Program at Central State University. My background 
is in biomedical and nutritional sciences, and my work is in 
what others have coined sustainable nutrition science or the 
intersection of food systems transformation, sustainability, 
nutrition, and health equity. I tend to partner with other 
researchers and community leaders across disciplines to find 
holistic solutions to complex problems related to human health 
and quality of life. For example, how do we equitably feed a 
growing population in ways that protect natural resources and 
contribute to a sustainable and a resilient economy?
    To that end, my work with hemp fits nicely within those 
goals, and I have focused primarily on its nutritional and 
nutraceutical value for humans. This includes an ongoing $1.3 
million contract with the U.S. Food and Drug Administration 
with Dr. Craig Schluttenhofer, where we evaluate the chemical 
constituents of smoked and vaped hemp products. I also serve as 
project director for a $10 million, 5 year sustainable 
agriculture systems project funded by the U.S. Department of 
Agriculture's NIFA and referred to as the SUSHI Project.
    With the continued rise of chronic diet-related conditions 
like cardiovascular disease and type II diabetes in the United 
States, strategies to produce and increase the intake of heart-
healthy foods such as hemp grain and fish are critical to slow 
the rise of chronic disease in our country. Concurrently, in 
order to become a stable component of the agricultural economy, 
the nascent U.S. hemp market needs diversification and a robust 
establishment of the grain sector. The SUSHI Project addresses 
both needs as it investigates the use of hemp grain as a feed 
ingredient for aquaculture systems.
    Hemp grain has the potential to be an excellent domestic 
feed ingredient for many types of livestock. It is nutrient-
dense, with seeds either consumed whole or dehulled as hearts. 
Hemp hearts have a healthy balance of omega-6 to omega-3 fatty 
acids, which are known as heart-healthy and easily digestible 
protein, and it is one of the few plant protein sources with 
sufficient levels of all the essential amino acids that humans 
need.
    In Europe, hemp grain is already approved for use in animal 
feeds. And in the U.S., the hearts, protein, and seed oil have 
been established as generally regarded as safe, or GRAS, for 
human consumption. Exploring ways in which we can open up 
additional markets in the hemp sector, including establishing 
hemp as a safe feed ingredient, could provide new grain markets 
for the hemp sector and sustainable feed. Importantly, studies 
indicate that incorporation of hemp into feeds may provide key 
improvements to the nutritional profile of those animal 
products, thereby enhancing human health.
    In addition to what I present here today and what has been 
submitted in my written testimony, Dr. Schluttenhofer and I 
recently published, Perspectives of Industrial Hemp 
Cultivation, a chapter in the book, Industrial Hemp: Food and 
Nutraceutical Applications, which overviews the status of the 
hemp industry in the U.S. and across the globe.
    Thank you again for the opportunity to participate in this 
important discussion.
    [The prepared statement of Dr. Phipps follows:]

  Prepared Statement of Brandy E. Phipps, Ph.D., Assistant Professor, 
Department of Agricultural and Life Sciences, Central State University, 
                            Wilberforce, OH
    Chair Plaskett, thank you for the invitation and opportunity to 
speak to the Biotechnology, Horticulture, and Research Subcommittee of 
the House Committee on Agriculture. Central State University (CSU), 
where I am faculty, is in Ohio District 10, represented by 
Congressperson Mike Turner. CSU is a public Historically Black College/
University (HBCU) and an 1890 Land-Grant Institution. I want to 
acknowledge the two Ohio Representatives on this Subcommittee, 
Representatives Brown and Balderson and Chairperson Scott of the House 
Committee on Agriculture who has been a consistent champion for the 
1890 Land-Grant Institutions.
    I am an Assistant Professor in the Department of Agricultural and 
Life Sciences and a researcher in the Food, Nutrition, and Health 
project of the Agriculture Research and Development Program at Central 
State University. My background is in Biomedical and Nutrition 
Sciences, so my work with hemp has primarily focused on its nutritional 
and nutraceutical value for humans. This includes an ongoing $1.3 
million contract with the U.S. Food and Drug Administration (FDA) with 
Dr. Craig Schluttenhofer evaluating the chemical constituents of smoked 
and vaped hemp products and serving as Project Director for a $10 
million, 5 year Sustainable Agricultural Systems project, funded by the 
U.S. Department of Agriculture's National Institutes of Food and 
Agriculture and referred to as the SUSHI project (Sustainable Use of a 
Safe Hemp Ingredient). The SUSHI project investigates the use of hemp 
as an animal feed ingredient to improve human health and economic 
prosperity--promoting the production of sustainable, safe, affordable, 
and accessible sources of high-value, nutrient-dense foods--focusing on 
rural, low-income, and underrepresented minorities (URM). This project 
has team members from all three types of Land-Grant Institutions:

   Central State University, Lead Institution (1890 Land-Grant 
        Institution):

     Brandy E. Phipps, Ph.D.--Biomedical and Nutrition 
            Sciences and Community-Centered Food Sovereignty

     Craig Schluttenhofer, Ph.D.--Agronomy, Biochemistry, 
            Breeding, Genetics, and Processing of Hemp

     KrishnaKumar Nedunuri, Ph.D.--Water Resources 
            Management and Environmental Engineering

   Kentucky State University (1890 Land-Grant Institution):

     Waldemar Rossi, Ph.D.--Fish Nutrition and Aquaculture

   College of Menominee Nation (1994 Land-Grant Institution):

     Brian Kowalkowski, M.S.--Community Data Analysis, 
            Cooperative Extension/Outreach, and Tribal Government 
            Liaison and Grant Management

   University of Kentucky (1862 Land-Grant Institution):

     Tyler Mark, Ph.D.--Agriculture Production Economics 
            and Hemp Economics

   University of Delaware (1862 Land-Grant Institution):

     Brandon McFadden, Ph.D.--Applied Economics and 
            Statistics and Consumer Demand and Preferences for Hemp

   Mississippi State University (1862 Land-Grant Institution):

     Seong Yun, Ph.D.--Resource and Environmental Economics
Figure 1. Project summary graphic representing inputs and long-term 
        outcomes
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>
        
    While currently in the early stages, the SUSHI project is expected 
to (1) support the use of hemp as a safe feed ingredient, leading to 
approval as an economically and environmentally sustainable fish 
feedstuff; (2) expand domestic markets for hemp and trout; (3) increase 
workforce diversity in agriculture; and (4) improve economics and 
public health of Menominee Nation through increased local production of 
fish and produce. The project's extension and education products will 
serve as models enhancing intertribal research and extension 
relationships and impacting the national health and economic stability 
of Native Americans and other URM. Overall, the project outcomes will 
contribute to the USDA goal of transforming the food and agricultural 
system to increase domestic agricultural production by 50% and reduce 
environmental footprint by 40% by 2050 while improving the lives of 
rural, low-income, and URM.
    The Scientific Report of the 2020 Dietary Guidelines Advisory 
Committee (2020 Committee) reported that six in ten Americans have 
diet-related chronic conditions (CC), with four in ten having two or 
more CC.[1] In 2016, cardiovascular disease (CVD) and type 2 
diabetes (T2D) cost America $555B and $327B, respectively, with costs 
expected to more than double by 2035.[2, 3] Lower-income and 
URM households are disproportionally affected by CC and food 
insecurity,[4, 5] highlighting the importance of targeted 
research and outreach. One strategy for decreasing the risk of CVD, 
T2D, and some cancers includes replacing saturated fats with 
polyunsaturated fatty acids (PUFA), often referred to as ``heart-
healthy fats''.[6-12] Strategies to increase the intake of 
heart-healthy foods--such as hemp grain and fish--are critical to slow 
the rise of chronic disease in the U.S. Furthermore, targeted nutrition 
outreach is needed to ensure that the most vulnerable populations have 
equitable access to healthy, nutrient-dense foods.
    As you know, the passage of the Agriculture Improvement Act of 2018 
removed hemp [Cannabis sativa with <0.3% D9-tetrahydrocannabinol (THC)] 
from the list of controlled substances. Hemp is used for fiber, food, 
and medicine.[13, 14] Hemp grain is an excellent source of 
protein and PUFA [15] for human consumption. In 2019, 94% of 
U.S. growers produced metabolite hemp; only 10% and 11% grew for grain 
and fiber, respectively (values exceed 100% due to producers with 
multiple crop types).[16] In 2020, there were 16,000 acres 
of hemp grain production in the U.S.[17] To become a stable 
component of the agricultural economy, the nascent U.S. hemp market 
needs diversification and a robust establishment of the grain sector.
    Hemp seed/grain has the potential to be an excellent domestic feed 
ingredient for many types of livestock. It is nutrient-dense, with 
roughly 25% protein, 35% oil, 25% carbohydrates, 10% moisture, and 5% 
minerals.[15, 18] Seeds are consumed whole or dehulled 
(hearts). Hearts have a healthy balance of omega-6 to omega-3 fatty 
acids (2.5:1) [15, 19] and easily digestible protein 
[19-23] with sufficient essential amino acid 
levels.[15] In Europe, hemp grain is used in animal feeds. A 
2011 European Food Safety Authority study evaluated the use of hemp 
grain, seed cake, seed oil, and whole plant flour in animal 
feeds.[24] Most THC localizes to the seed coat (hull), with 
seeds containing less than 12 mg/kg [24] and hearts 0.5 mg/
kg.[25] Cannabidiol (CBD) and other cannabinoids are likely 
restricted to the seed coat. Cleaning and removal of hulls provide a 
product with low levels of cannabinoids. The committee concluded that 
hemp seed products with 510mg THC/kg were safe based on risks. One 
potential concern of hemp in feed is consumer ingestion of cannabinoid 
residual in the animal tissues. Estimated daily tolerance intake for 
THC is 0.0004 mg/kg body weight (0.024 mg for a 60kg 
adult).[24] Other countries allow up to 0.0007 mg THC/kg 
body weight (up to 0.042 mg for a 60 kg adult) per day. In 2018, the 
Food and Drug Administration (FDA) approved hemp hearts (H.H.), hemp 
seed oil (HSO), and hemp protein (H.P.) with 510 mg THC/kg as Generally 
Recognized as Safe (GRAS).[26] Based on expected maximum 
consumption, with a content of 0.3 mg/kg, 0.6 mg/kg, and 6 mg/kg of THC 
in H.H., H.P., and HSO, respectively, the cumulative expected daily 
intake was 62.3 mg of THC for persons aged 2 and older. Establishing 
hemp as a safe feed ingredient could provide new grain markets for the 
hemp sector and an economical and environmentally sustainable feed to 
produce heart-healthy foods.
    How much cannabinoid residue from hemp grain and derived products 
(H.H., HSO, and H.P.) transfers to feeds and animals remains unclear. 
Uncertainty leads to safety concerns and hinders the approval for use 
in feeds. The SUSHI project is conducting (i) feeding trials using hemp 
grain ingredients in trout and (ii) nutrient and cannabinoid analyses 
of hemp grain, hemp feed ingredients, fish feed, and the edible 
portions of fish fed hemp-containing feed to determine the safety and 
efficacy of using hemp feed ingredients in a trout aquaculture system. 
In addition, the SUSHI economics team is performing market research, 
production economic assessments, and valuation of socio-environmental 
net benefits for the sustainability of the suggested system. To 
increase diversity in the agricultural workforce, our extension/
education team is (i) developing certificate programs in hemp 
production and aquaponics, (ii) scholarships to Native Americans to 
complete bachelor's degrees in Agri-STEM, and (iii) providing start-up 
funds for new aquaponics producers. The project also provides outreach 
and education about hemp, aquaponics, and nutrition to consumers to 
increase consumption of healthy, nutrient-dense foods, including hemp 
grain, fish, and produce.
    The long-term objectives of the SUSHI project are to:

  1.  Provide a sustainable source of fish livestock with an enhanced 
            nutritional value--contributing to the nation's health, 
            especially URM.

  2.  Create niche markets for hemp and aquaculture, increase 
            production opportunities for farmers, create jobs, and 
            enhance the economy--increasing agriculture profitability 
            in economically and environmentally sustainable ways.

  3.  Develop a pipeline of Black and Indigenous and lay workforce with 
            the appropriate technical and professional skills to 
            fulfill employment needs in STEM, nutrition, water resource 
            management, and sustainable agriculture.

    The SUSHI project is comprehensive, integrative, and 
transdisciplinary in addressing concerns in the hemp, aquaculture, 
nutrition, and agricultural workforce sectors. Strategic relationships 
have been established across industries to ensure that the outputs are 
relevant and adapt to changing needs. Continued efforts to impact the 
hemp grain and fiber sectors should consider similar approaches to what 
is described here to promote sustainable growth of the domestic hemp 
market.
    The SUSHI project has established partnerships with all stakeholder 
groups impacted by our work. We meet regularly with an external 
stakeholder advisory board. Their feedback and guidance ensure that our 
work remains relevant to stakeholder needs. As a result of these 
connections, we are aware of some of the significant concerns within 
the hemp grain sector. The concerns listed here do not necessarily 
reflect the views of me, the SUSHI team, or Central State University. 
Expressed stakeholder concerns include but are not limited to:

   Access to capital to build the supply chain. For example, 
        one entity that processes hemp grain into multiple food and 
        other products was unable to apply for the USDA Food Supply 
        Chain Guaranteed Loan Program because a percentage of the 
        products were used in applications in addition to the food 
        supply (e.g., oils are food and can be used in cosmetics; 
        sweeteners are food and used in industrial applications). 
        Narrow definitions for these programs currently hinder access 
        to capital for grain processors. This prevents the expansion of 
        infrastructure needed to increase the production of grain 
        products necessary to meet market demands. Strategies to 
        increase access to capital for grain and fiber processors are 
        required.

   The burden of THC-testing for non-metabolite hemp crops. 
        Currently, the rules and regulations for THC-testing and 
        compliance treat fiber and grain (industrial hemp) the same way 
        as cannabinoid/floral/metabolite hemp. The hemp industry wants 
        hemp grain and fiber crops to be regulated like other 
        commodities (e.g., soy, corn, and wheat), as hemp will likely 
        be integrated into rotations with row crops. Hemp grain must be 
        tested for mycotoxins, heavy metals, allergens, etc., like all 
        grains used for food. Still, farmers have the additional burden 
        of testing the non-grain parts of hemp to ensure THC compliance 
        when it has little relevance to the GRAS-approved grain 
        product. A review of current THC-testing rules for grain and 
        fiber hemp crops is needed.

   Cost and unwieldiness of the feed approval process. 
        Currently, each ingredient produced from hemp grain must be 
        individually approved for each animal species and class. For 
        example, if hemp grain protein is approved for use in Growing/
        Starter Layers (chicken), another application must be submitted 
        for Finisher Layers, Laying Layers, and Breeder Layers. Hemp 
        seed oil or whole hemp hearts would need additional 
        applications for each group.[27] Industry 
        representatives have expressed that hemp grain for animal feed 
        should have been approved at the same time that it was approved 
        as GRAS for human consumption. Others have expressed that the 
        regulations are more burdensome for hemp grain products than 
        other feed ingredients because non-metabolite hemp is treated 
        as a drug unlike other grains. Approving hemp grain as a feed 
        ingredient would open new markets and expand current markets by 
        providing an outlet for hemp grain grown for human consumption 
        that does not meet food grade standards. An infusion of money 
        into the feed approval system (FDA-CVM, AAFCO) is needed to 
        improve the process for hemp grain feed approval.

   Lack of consumer awareness regarding the nutrient benefits 
        of hemp grain and products. A long prohibition and association 
        with marijuana have instilled a deep and lasting confusion 
        about hemp within the mind of U.S. consumers. Engagement with 
        the public demonstrates that a portion of the U.S. population 
        still fails to understand the difference between hemp and 
        marijuana. Some of those familiar with the crop lack 
        information about the positive benefits of hemp grain and 
        products. Such association restricts market 
        opportunities.[28] U.S. consumers need supplemental 
        education about the nutritional benefits of hemp grain and 
        products.

   Lack of incentives for hemp growers to partner with domestic 
        processors/producers. Hemp growers continue to struggle to find 
        buyers for their crops. While there are a limited number of 
        clearinghouses for hemp processors and growers, representatives 
        from both groups have noted that more work is needed in this 
        area. Developing systems to connect prospective growers with 
        processors would reduce this barrier.

   Lack of incentives to develop hemp cultivars adapted to 
        production in the U.S. Based on U.S. variety trials conducted 
        across the U.S., only certain parts of the country can 
        successfully utilize high-yielding cultivars developed 
        internationally. For example, Canadian hemp varieties often 
        perform well in northern states but typically under-perform in 
        Midwest or South. The lack of varieties developed for various 
        regions hinders specific sectors of the country from expanding 
        the grain and fiber hemp industries. Crops adapted to produce 
        higher overall yields, and higher quantities of certain 
        nutrients (e.g., specific fatty acids or amino acids) would 
        further expand market options and lower overall production 
        costs. A challenge for breeding regionally adapted crops is THC 
        limits. THC levels of important lines may exceed legal limits 
        during the breeding scheme, thereby restricting the development 
        of those genetics. Being allowed to handle germplasm containing 
        higher levels of THC (e.g., 1%) would mitigate legal compliance 
        concerns while breeding to include new traits. The final 
        variety released could still be required to meet a lower THC 
        threshold (e.g., 0.3%) for sale to hemp growers. Allowing hemp 
        breeders to work with germplasm having higher THC levels would 
        enable the development of elite varieties adapted for specific 
        regions.

    There is a need to stimulate the nascent domestic hemp production 
to make it a sustainable part of the U.S. agricultural economy. An 
increase in hemp grain production could positively impact various 
sectors, including hemp, livestock, manufacturing, and human nutrition 
and health.
    Through personal experiences, research knowledge, and stakeholder 
engagement, the SUSHI project team recognizes the complex challenges 
facing the hemp industry and is confronting those challenges to provide 
solutions to move the industry forward through this project and others 
in which the team members hold positions. For this testimony, project 
team members, Drs. Mark, McFadden, and Schluttenhofer provided valuable 
insights into the U.S. hemp industry's challenges while identifying 
robust and lasting solutions. Limitations faced by the hemp industry 
can be reduced by (i) increasing access to capital for processors, (ii) 
reviewing current THC-testing rules, (iii) infusing money into the feed 
approval system, (iv) educating consumers about the nutritional 
benefits of hemp grain and products, (v) developing systems to connect 
current and potential growers with processors and (vi) allowing hemp 
breeders to work with higher THC-containing germplasm. Considering and 
implementing these proposed solutions would enhance the industry's 
short- and long-term success. I, and my SUSHI team, look forward to 
continuing to support this Committee with the information necessary to 
make the hemp industry a lasting pillar of the U.S. agricultural 
economy.


 
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 Ponzoni, Ida Melania Brambilla, Giovanna Battelli and Remo Reggiani.
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 Matthaus. 2004. Oil Content, Tocopherol Composition and Fatty Acid
 Patterns of the Seeds of 51 Cannabis Sativa L. Genotypes. Euphytica
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    [23] Chuan-He Tang, Zi Ten, Xian-Sheng Wang and Xiao-Quan Yang.
 2006. Physicochemical and Functional Properties of Hemp (Cannabis
 Sativa L.) Protein Isolate. Journal of Agricultural and Food Chemistry
 54:23 8945-8950. doi:10.1021/jf0619176.
    [24] EFSA Panel On Additives and Products or Substances Used in
 Animal Feed. 2011. Scientific Opinion on the Safety of Hemp (Cannabis
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    [25] Samir A. Ross, Zlatko Mehmedic, Timothy P. Murphy and Mahmoud
 A. Elsohly. 2000. GC-MS Analysis of the Total D9-Thc Content of Both
 Drug- and Fiber-Type Cannabis Seeds. Journal of Analytical Toxicology
 24:8 715-717.
    [26] Marc Sanchez. 2018. The Safety and the Generally Recognized as
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    [27] Association of American Feed Control Officers (2022). The
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 University of Delaware. Hemp Research D College of Agriculture &
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 applied-economics-and-statistics/affiliated-centers/hemp-demand-
 research/.
 


    The Chair. Thank you very much for that.
    Mr. Grignon, please begin when you are ready.

  STATEMENT OF MARCUS GRIGNON, EXECUTIVE DIRECTOR, HEMPSTEAD 
                  PROJECT HEART, GREEN BAY, WI

    Mr. Grignon. Posoh mawaw Niwak, nekatow manawich kikitem. 
Hello, everyone. I am going to speak. My name is Marcus 
Grignon, and I am the Executive Director of Hempstead Project 
Heart, a nonprofit organization dedicated to redeveloping 
thriving hemp economies that connect Tribal, urban, and rural 
communities throughout the United States. Hempstead Project 
Heart is a member of the Rural Coalition, the Peace Development 
Fund, and the National Hemp Association's Standing Committee of 
Hemp Organizations. I have come before you today to testify on 
the USDA Hemp Production Program. I am also here for the 
American hemp pioneers who pushed our country towards 
acceptance: Alex White Plume, Chris Boucher, Jack Herer, 
Barbara Filippone, Lawrence Serbin, and Richard Rose.
    Hemp has a conflicting past in our country. From the 
founding of our nation and lead up to the passage of the 
Controlled Substances Act, hemp was considered a cash crop and 
useful for our military during World War II. After passage of 
the Controlled Substances Act, hemp became defined as a drug 
and non-useful, both of which is untrue. The best way I have 
educated the American people over the last 6 years on the 
difference between hemp and marijuana is an analogy of the 
pepper family. With peppers, you have habanero, chipotle, ghost 
pepper, jalapeno. These peppers are what I would call your high 
grade marijuana, whereas green, yellow, and red bell peppers is 
what I would call your hemp. Both peppers are part of the same 
family but distinctly different.
    The historical perspective of hemp played a large role in 
building our country during the early years of our democracy. 
Many states such as Pennsylvania, Kentucky, Virginia, and 
Wisconsin, to name a few, have rich histories of hemp playing a 
vital role in their economies. From 1902 to 1944, the USDA 
studied hemp extensively as a solution to our country's fiber 
shortage. Lyster Dewey led this research for USDA. Dewey, with 
the help of Dr. Andrew Wright and Senator Alexander Wiley, 
created the 20th century American hemp industry. Through their 
research, they uncovered \3/4\ of the land in the United States 
can grow hemp. Hemp grows well with crop rotations. Hemp's long 
taproot penetrates the soil and loosens the undersoil layers. 
Drying kilns for hemp fiber should not exceed 150 Fahrenheit. 
There is a wealth of knowledge on how to produce and process 
hemp from these records at the National Agricultural Library.
    My path as an American hemp farmer is not linear. I began 
my journey as a hemp researcher in 2015 for my Tribal nation, 
the Menominee Indian Tribe of Wisconsin and the College of 
Menominee Nation, an institution of higher education. We grew 
hemp on our homelands for research purposes to spur economic 
development for our people under section 7606 of the 2014 Farm 
Bill and under the guidance of the Department of Justice's 
Wilkensen memorandum. Unfortunately, we were unsuccessful due 
to Federal overreach by the Drug Enforcement Agency's raid on 
our hemp crop in October 2015. Under the auspices of a 
marijuana raid on Tribal lands, the DEA took our hemp crop at 
harvest time that had seed with a 1 year acclimation to the 
Great Lakes region. Even our topsoil was seized by a bulldozer. 
We never received the test results from DEA to prove our hemp 
had tested over the legal limit.
    After the 2015 growing season, I dedicated myself to be an 
education advocate and push for hemp to be re-legalized in 
Wisconsin and in the United States through Hempstead Project 
Heart. As part of a coalition of Americans, we push hemp to be 
legal again and were successful in Wisconsin in 2017. In 2018, 
our coalition focused on the farm bill to revise section 7606, 
making hemp fully legal in the United States and to uphold 
Tribal sovereignty for the 574 Tribes within our country to 
grow hemp without Federal interference. We were successful, and 
for the Committee Members I testify before today I say 
Waewaenen. Thank you for your support.
    As the 2023 Farm Bill is upon us, I want to advocate to 
strengthen the hemp production provisions from the 2018 Farm 
Bill. There needs to be a separation between the definition and 
regulation of industrial hemp from cannabinoid and floral hemp. 
These crops are easily differentiated with a visual inspection. 
The industry advocates for a grain and fiber exemption from 
testing and background checks for producers. There is also 
legislation that we will introduce soon called the Industrial 
Hemp Exemption Act of 2022.
    Bank regulations need revision to ease current restrictions 
for hemp operations. It is difficult to find a bank that will 
take business accounts connected to hemp production and 
processing, not to mention insurance companies. There needs to 
be a USDA stamp of approval for hemp being shipped between the 
various jurisdictions in the United States. This will help with 
any issues that arise with interstate commerce. While these 
suggestions do not cover all the needed changes, these top 
three will enhance the American hemp industry, ease burdensome 
regulations for farmers, and create more demand for hemp-made 
materials.
    And I believe my time is up.
    [The prepared statement of Mr. Grignon follows:]

  Prepared Statement of Marcus Grignon, Executive Director, Hempstead 
                      Project Heart, Green Bay, WI
    Posoh mawaw Niwak, nekatow manawich kikitem (Hello everyone, I am 
going to speak). My name is Marcus Grignon, and I am the Executive 
Director of Hempstead Project Heart, a nonprofit organization dedicated 
to redeveloping thriving hemp economies that connect Tribal, urban, and 
rural communities throughout the United States. Hempstead Project Heart 
is a member of the Rural Coalition, the Peace Development Fund, and the 
National Hemp Association's Standing Committee of Hemp Organizations. 
I've come before you today to testify on the USDA Hemp Production 
Program. I am also here for the American pioneers who pushed our 
country towards acceptance of hemp: Alex White Plume, Chris Boucher, 
Jack Herer, Barbara Filippone, and Richard Rose.
    Hemp has a conflicting past in our country. From the founding of 
our nation and lead up to the passage of the Controlled Substances Act, 
hemp was considered a cash crop and useful for our military during 
World War II. After passage of the Controlled Substances Act, hemp 
became defined as a drug and non-useful. Both of which is untrue. The 
best way I've educated the American people over the last 6 years on the 
difference between hemp and marijuana is an analogy of the pepper 
family. With peppers you have habanero, chipotle, ghost pepper, 
jalapeno--these peppers is what I would call your ``high-grade 
marijuana.'' Whereas green, yellow, and red bell peppers is what I 
would call your ``hemp.'' Both peppers are part of the same family, but 
distinctly different.
    The historical perspective of hemp played a large role in building 
our country during the early years of our democracy. Many states such 
as Pennsylvania, Kentucky, Virginia, and Wisconsin to name a few have 
rich histories of hemp playing a vital role in their economies. From 
1902 to 1944, the USDA studied hemp extensively as a solution to our 
country's fiber shortage. Lyster Dewey led this research for USDA. 
Dewey with the help of Dr. Andrew Wright and Senator Alexander Wiley 
created the 20th century American hemp industry. Through their 
research, they uncovered: (1) \3/4\ of the land in the United States 
can grow hemp; (2) Hemp grows well with crop rotations; (3) Hemp's long 
tap root penetrates the soil and loosens the undersoil layers; (4) 
Drying kilns for hemp fiber should not exceed 150 Fahrenheit. There is 
a wealth of knowledge on how to produce and process hemp from these 
records at the National Agricultural Library.
    My path as an American hemp farmer is not linear. I began my 
journey as a hemp researcher in 2015 for my Tribal nation, the 
Menominee Indian Tribe of Wisconsin, and the College of Menominee 
Nation, an institution of higher education. We grew hemp on our 
homelands for research purposes to spur economic development for our 
people under section 7606 of the 2014 Farm Bill and under guidance of 
the Department of Justice's Wilkensen Memorandum. Unfortunately, we 
were unsuccessful due to Federal overreach by the Drug Enforcement 
Agency's (DEA) raid on our hemp crop in October 2015. Under the 
auspices of a marijuana raid on Tribal lands, the DEA took our hemp 
crop at harvest time that had seed with 1 year acclimation to the Great 
Lakes region. Even our topsoil was seized by a bulldozer. We never 
received test results from DEA to prove our hemp had tested over the 
legal limit.
    After the 2015 growing season, I dedicated myself to be an 
education advocate and push for hemp to be re-legalized in Wisconsin 
and the United States through Hempstead Project Heart. As part of a 
coalition of Americans, we pushed for hemp to be legal again and were 
successful in Wisconsin in 2017. In 2018, our coalition focused on the 
2018 Farm Bill to revise section 7606, make hemp fully legal in the 
United States, and uphold Tribal sovereignty for the 574 Tribal nations 
within our country to grow hemp without Federal interference. We were 
successful and for the Committee Members I testify before today, I say 
Waewaenen (thank you) for your support.
    The summer of 2019, hemp came back to the Menominee Reservation. 
Our research focused on integrated pest management in hemp production. 
We were able to identify various pests and pollinators during the 
growing season. It is truly amazing to observe the growing cycle of 
hemp and watch the tree frogs, bees, aphids, lady bugs, and Japanese 
beetles show up at different times. This research in 2019 laid the 
groundwork for our current research on the effects of Japanese beetles 
on hemp production through the USDA Sustainable Agriculture, Research, 
and Education program.
    In 2020, the Native American Agriculture Fund, a foundation created 
by the Keepseagle settlement, awarded the College of Menominee Nation 
and Hempstead Project Heart a grant to develop a hemp fiber feasibility 
study and begin to acclimate a hemp fiber variety in the Great Lakes 
region. We are in our third and final year of research for this grant. 
The Chairman of the Menominee Indian Tribe of Wisconsin, Ron Corn Sr., 
supports Hempstead Project Heart's efforts to spur hemp research, 
production, and product development on the Menominee Reservation.
    As the 2023 Farm Bill is upon us, I want to advocate to strengthen 
the hemp production provisions from the 2018 Farm Bill. (1) There needs 
to be separation between the definition and regulation of industrial 
hemp from cannabinoid or floral hemp. These crops are easily 
differentiated with a visual inspection. The industry advocates for a 
grain and fiber exemption from testing and background checks for the 
producer; (2) bank regulations need revision to ease current 
restrictions for hemp operations. It is difficult to find a bank that 
will take business accounts connected to hemp production and 
processing; (3) There needs to be a USDA stamp of approval for hemp 
being shipped between the various jurisdictions in the United States. 
This will help with any issues that arise with interstate commerce. 
While these suggestions do not cover all the needed changes, these top 
three will enhance the American hemp industry, ease burdensome 
regulations for farmers, and create more demand for hemp made 
materials.
    The reemergence of the hemp industry is a renewal of our American 
traditions. Our country prospered on the production of hemp, and we can 
do it again. Today, many Americans from all walks of life are at the 
forefront of rebuilding the American hemp industry. Barbara Filippone 
and Summer Star Haeske of Envirotextiles, a successful USDA Bio-
Preferred company that works on various hemp fiber products and 
supplies the fashion industry with high quality hemp textiles. Aaron 
Rydell and Greg Wilson of HempWood, a hemp building materials company 
that specializes in the first HempWood flooring. Mike McGuire of 
Western Fiber, who built a hemp processing plant by retrofitting a 
cotton gin. Ken Anderson and Colin Felton of Bast Fiber Products 
created composite decking made from hemp fiber. All these innovative 
American entrepreneurs need the support of Congress to grow the hemp 
industry in our country. We look forward to stronger hemp provisions in 
the 2023 Farm Bill.
    As I wrap up my testimony today, I want to leave you all with a 
historical perspective by Lyster Dewey. In 1939, Dewey wrote in a 
report to the Chief of the Bureau of Plant Industry, ``The future of 
the hemp industry in this country seems to depend largely on the 
development of strains/varieties of hemp free from marijuana.'' Dewey 
knew in 1939 America would need to develop their own hemp varieties to 
grow the industry and not depend on international seed supplies. The 
2023 Farm Bill is our opportunity to ease restrictions, spur economic 
development in our communities, and innovate the products we need to 
fill the gaps in our supply chains. I ask Congress to strengthen the 
hemp provisions in the 2023 Farm Bill to open the door for creativity 
and innovation to propel the American hemp industry into the 21st 
century.
    Waewaenen (Thank you) for your time and yield the floor.
    
                               Appendix A
                               
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Proposal for Industrial Hemp Grain and Fiber Exemption
Cannabinoid Hemp Framework Maintained
www.HempExemption.com

    Why are the current regulations problematic for grain and fiber 
industrial hemp?

   Unreasonable financial burden and risk to farmers

   Unnecessary burden on Departments of Agriculture

   Additional costs hinder industrial hemp's ability to compete 
        with other commodity crops

   Confusion with industries including banking, transportation, 
        insurance, and advertising, discourages investment in critical 
        infrastructure

   End-use products hold long-standing exemption under 
        Controlled Substances Act

    What is the solution?

    A separation between the definition and regulation of industrial 
hemp from cannabinoid or floral hemp. These crops are easily 
differentiated with a visual inspection.
Grain and Fiber Industrial Hemp--Exemption Framework
    Field crop grown using standard agricultural practices and the 
harvested material is only grain and/or fiber.

    Maintain the current regulatory framework for cannabinoid hemp 
production with the following new framework for industrial hemp:

   2018 Farm Bill licensing with added designation for only 
        grain/fiber production & harvest (including GPS coordinates of 
        land on which hemp is produced)

   Signed declaration that producer will only harvest grain/
        fiber and will not harvest or sell floral material or extract 
        any resin from crop (Note: full use of hemp seed/grain 
        authorized)

   No background check required

   Required visual inspection (i.e., in-person, virtual, aerial 
        with drones, or unmanned aircraft)

   No sampling or testing for uniform production consistent 
        with designation

   If visual inspection reveals inconsistent crop production 
        with designation, documented verification required (i.e., seed/
        variety receipts, sales contract, planting report), and the 
        Department of Agriculture reserves the right to require harvest 
        inspection

   Intentional violations: crop destruction, fine/civil 
        penalty, restricted from program participation for 5 years

    Why a grain and fiber exemption and not a universal certified seed 
exemption?

   Certified seed alone creates an inevitable loophole for 
        illegal cannabis cultivation with no verification of 
        cannabinoid crops

   Existing certified varietals are not performance-tested for 
        every climate zone of the U.S.

   Impedes a free-market approach and encourages monopolies

 
 
 
Courtney N. Moran.       Morgan Tweet             Erica Stark
 LL.M.
Chief Legislative        Chief Operating Officer  Executive Director
 Strategist
Agricultural Hemp        IND HEMP                 National Hemp
 Solutions                                         Association
courtney@agriculturalhe  [email protected]       erica@nationalhempasso
 mosolutions.com                                   ciation.org
888-388-4367             406-622-5680             202-706-3911
 

                               Appendix B
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

                               Appendix C
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

                               Appendix D
[3 o-of-a19]

[Copy revised in Fiber Plants and submitted for publication as 
mimeograph circular Tuesday Nov. 28, 1923.]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    The Chair. Yes, it is. Thank you very much.
    Mr. Wang, please begin when you are ready.

STATEMENT OF ERIC T. WANG, CHIEF EXECUTIVE OFFICER AND MANAGING 
                DIRECTOR, ECOFIBRE, LTD.; VICE 
PRESIDENT FOR SUSTAINABILITY, U.S. HEMP ROUNDTABLE, LEXINGTON, 
                               KY

    Mr. Wang. Thank you. Madam Chair, Members of the Committee, 
I am very grateful for the opportunity to testify to you today 
about the emerging U.S. hemp industry, its challenges and its 
many opportunities that can be achieved through your assistance 
in the 2023 Farm Bill. Today, I am testifying as the CEO of 
Ecofibre and also on behalf of the U.S. Hemp Roundtable, the 
industry's leading national advocacy organization for which I 
serve as the Vice President of Sustainability.
    Ecofibre is a diversified industrial hemp company with 
operations in Georgetown, Kentucky; Greensboro, North Carolina; 
and Sydney, Australia. We have vertically integrated business 
operations across three divisions, and these three divisions 
include hemp grain for food, the use of the hemp flower for 
CBD, and the use of the hemp stalk for high performance 
industrial uses. We have been in operation in Australia since 
1999 and in the U.S. since 2015, following the start of the 
Hemp Pilot Program, which was in the 2014 Farm Bill.
    Over the past 20 years, Ecofibre has developed one of the 
largest and most diverse hemp genetics collections, and in the 
United States for the 2022 and the upcoming 2023 growing 
season, we will be providing hemp genetics to growers and 
universities to support 24,000 acres of industrial hemp for 
commercial and research purposes. This growing will take place 
across 19 states in the U.S.
    While Ecofibre is a publicly traded company on the 
Australian Stock Exchange, most of our operations and, more 
importantly, over 90 percent of our capital has been invested 
in our operations in Kentucky and North Carolina. I have 
disproportionately invested into the U.S. due to the tremendous 
potential of the industrial hemp market, but more importantly, 
the strong bipartisan support that I have seen for developing a 
new highly sustainable agricultural crop for U.S. farmers.
    Second, I have seen significant support for introducing new 
U.S. manufacturing industries to take advantage of the 
multitude of uses for industrial hemp.
    And finally, there is an opportunity for a net-zero carbon 
solution via industrial hemp, which is considered to be one of 
the most carbon-negative agricultural or forestry crops 
available. Given that most things we produce and do in the 
world today are actually carbon-positive, industrial hemp 
allows us in a good way to actually think negative.
    While there is tremendous opportunity, there are some 
challenges that the industry does face as it develops and 
matures. In passing the 2018 Farm Bill, Congress made it very 
clear of its intent to support production and sale of hemp and 
hemp derivatives such as CBD. As a result of the 2018 Farm 
Bill, thousands of U.S. growers planted hemp in response, with 
farming for CBD actually representing most of all hemp acreage 
at that time.
    However, public statements by FDA officials stating that it 
is unlawful to sell ingestible hemp-derived CBD products have 
taken their toll on the industry. CBD commerce and investment 
has been chilled due to continued inaction at the Federal 
level, which has impaired economic opportunity for American 
farmers and processors. However, farmers are not the only ones 
who have been negatively impacted by this regulatory 
uncertainty. Consumers have also been impacted. Bad actors sell 
products without appropriate safeguards and mislead consumers 
with false label claims. Furthermore, some struggling farmers 
and businesses more recently have pivoted to market-
intoxicating products such as Delta-8 THC, which has rightfully 
prompted the FDA and CDC warnings that they pose significant 
consumer health and safety risks, particularly for minors.
    A clear regulatory pathway for CBD would not only relieve 
the economic pressure that is leading to this product shift, 
but it will also help ensure that products do not contain 
intoxicating hemp ingredients. At a recent May hearing, FDA 
Commissioner Califf testified to his disappointment in the lack 
of agency action on CBD and expressed his interest in 
developing a regulatory path. But he stated the FDA's 
authorities are limited under the current law.
    As you develop 2023 Farm Bill, I ask you to provide the FDA 
with that authority by including language such as that found in 
H.R. 841, a bill that has 41 bipartisan cosponsors that would 
regulate CBD and other intoxicating hemp derivatives such as 
dietary supplements. I hope you will also consider including 
provisions from Representative Chellie Pingree's Hemp 
Advancement Act of 2022 (H.R. 6645), which, among other 
important things, would take necessary steps to limit the hemp 
product pathway to only non-intoxicating compounds.
    So in closing, I would like to thank this Committee for its 
time today, and I believe that regulatory clarity for CBD will 
help create the positive momentum required to see the U.S. once 
again become the international leader in industrial hemp. Thank 
you.
    [The prepared statement of Mr. Wang follows:]

    Prepared Statement of Eric T. Wang, Chief Executive Officer and 
 Managing Director, Ecofibre, Ltd.; Vice President for Sustainability, 
                  U.S. Hemp Roundtable, Lexington, KY
    [Madam Chair], Members of the Committee, I am very grateful for the 
opportunity to testify to you today about the emerging U.S. hemp 
industry, its challenges, and its many opportunities that can be 
achieved through your assistance with the 2023 U.S. Farm Bill. I am 
testifying as the CEO of Ecofibre and on behalf of the U.S. Hemp 
Roundtable, the hemp industry's national advocacy organization, for 
which I serve as Vice President for Sustainability.
    Ecofibre is a diversified industrial hemp company with operations 
in Georgetown, KY, Greensboro, NC and Sydney, Australia. We have 
vertically integrated operations across three business divisions that 
include hemp grain for food, hemp flower for CBD and the hemp stalk for 
high-performance industrial uses. We have been in operation in 
Australia since 1999 and in the U.S. since 2015 following the start of 
the hemp pilot program in the 2014 Farm Bill.
    Over the past 20 years Ecofibre has developed one of the largest 
and most diverse hemp genetics collections. In the United States for 
the 2022-23 growing season, we are providing hemp genetics to growers 
and Universities to support 24,000 acres of industrial hemp for 
commercial and research purposes. This growing is taking place in 19 
states.
    While Ecofibre is publicly traded on the Australian Stock Exchange, 
most of our operations and more importantly over 90% of our capital has 
been invested in our U.S. operations in KY and NC.
    I have disproportionally invested into the U.S. due to the 
tremendous potential of the industrial hemp market but more importantly 
the strong bipartisan support that I have seen for developing a new 
highly-sustainable agricultural crop of U.S. farmers, introducing new 
U.S. manufacturing industries to take advantage of the multitude of 
uses for industrial hemp, and finally a net-zero carbon solution via 
industrial hemp which is considered to be one of the most carbon-
negative agricultural or forestry crops available. Given most things 
that we produce and do in the world today are carbon positive, 
industrial hemp allows us, in a good way, to Think Negative.
    While there is tremendous opportunity, there are some challenges 
that the industry does face as it develops and matures. In passing the 
2018 Farm Bill, Congress made clear its intent to support the 
production and sale of hemp and hemp derivatives such as CBD. Thousands 
of U.S. growers planted hemp in response, with farming for CBD 
representing most of all hemp acreage. However, public statements by 
FDA officials stating that it is unlawful to sell ingestible hemp-
derived CBD products have taken their toll on the industry. CBD 
commerce and investment have been chilled due to continued inaction at 
the Federal level, impairing economic opportunity for American farmers.
    Farmers are not the only ones who are being negatively impacted by 
this regulatory uncertainty. Consumers are also impacted. Bad actors 
are selling products without appropriate safeguards and misleading 
consumers with false label claims. Further, some struggling farmers and 
businesses have pivoted to market intoxicating products such as Delta-8 
THC, prompting FDA and CDC warnings that they pose significant consumer 
health and safety risks, particularly for minors. A clear regulatory 
pathway for CBD would not only relieve the economic pressure that is 
leading to this product shift, but it would also help ensure products 
do not contain intoxicating hemp ingredients.
    At a May hearing, FDA Commissioner Robert Califf testified to his 
disappointment in the lack of agency action on CBD, and expressed his 
interest in developing a regulatory path, but stated that FDA's 
authorities are limited under the current law. As you develop the 2023 
Farm Bill, I ask you to provide FDA with that authority by including 
language such as found in H.R. 841, a bill with 41 bipartisan 
cosponsors that would regulate CBD and other non-intoxicating hemp 
derivatives as dietary supplements.
    I hope you will also consider including provisions from Rep. 
Chellie Pingree's Hemp Advancement Act, which among other important 
things, would take necessary steps to limit the hemp product pathway to 
only non-intoxicating compounds.
    I would like to thank this Committee for its time today and I 
believe that regulatory clarity for CBD will help create the positive 
momentum required to see the U.S. once again become the international 
leader in industrial hemp.

Eric Wang,
CEO, Ecofibre,
VP for Sustainability, U.S. Hemp Roundtable.

    The Chair. Thank you.
    I would now invite Mr. Quarles to begin when you are ready.

           STATEMENT OF HON. RYAN F. QUARLES, Ph.D., 
             COMMISSIONER, KENTUCKY DEPARTMENT OF 
                   AGRICULTURE, FRANKFORT, KY

    Dr. Quarles. Thank you, Chair Plaskett and Ranking Member 
Baird, for the opportunity to address you today. My name is 
Ryan Quarles, and I serve as the Kentucky Commissioner of 
Agriculture first elected in 2015 and reelected to this office 
in 2019. It is an honor to serve our employees, our 76,000 farm 
families, and the 200,000 Kentuckians that engage in 
agriculture every day.
    From 2020 to 2021, I also served as President of the 
National Association of State Departments of Agriculture, which 
gave me the opportunity to learn not just about hemp but other 
agricultural issues that help benefit Kentucky and American 
agriculture.
    As you may know, Kentucky is one of the first states that 
focused on bringing hemp back. Our history of hemp dates back 
to a very famous Kentucky hemp farmer, Henry Clay, who went on 
to serve as Speaker of the United States House of 
Representatives. Hemp was first grown in Kentucky in 1775, and 
to this day, many farm families have a deep personal connection 
to hemp. My great grandfather grew hemp on the banks of the 
Kentucky River, while my grandfather fought in World War II as 
a Marine.
    When taking office in 2016, we took full advantage of the 
2014 Farm Bill's authorization for state departments of 
agriculture to research this crop underneath section 7606. And 
I am proud to say that we accomplished that goal. Kentucky's 
legislative and regulatory framework is widely recognized today 
as one of the best in the nation. We are grateful that 
Kentucky's hemp licensing program and data collected through 
the University of Kentucky and other colleges and universities 
were frequently cited in the final rule that USDA promulgated 
in January of 2021.
    Today, Kentucky entered its ninth year of growing hemp, 
again legally. And here are a few products that we make. Number 
one, as cited earlier, Victory Hemp Foods, hemp hearts, which 
are sold legally in grocery stores across America. We have 
another company named HempWood that is selling hardwood floors 
made out of hemp, as well as Ecofibre, who you just heard from 
with Eric Wang. We also have floral products primarily centered 
around CBD products that are being sold across the United 
States in pharmacies and Tractor Supply Company. This is in 
addition to dozens of small family-owned hemp companies 
marketing CBD across the country.
    Today, we are focused on challenging our hemp companies to 
set up roots in Kentucky. Like many other states, we saw a 
rapid expansion in the number of acreage grown through 2015 
through 2019, which was followed by an equally rapid decline 
beginning with the 2020 growth season. One reason for this 
decline was that production increased after the 2018 Farm Bill 
legalized hemp, and the amount of hemp grown far outpaced 
demand. So here in 2022 we are still growing hemp in Kentucky, 
but with smaller acreage. Some hemp-based companies in Kentucky 
are doing quite well like Ecofibre. They are innovating and 
continuing to create new ways to market their products.
    Now, if you were to ask me what is the biggest issue facing 
hemp today, it would be this: a lack of direction from the FDA. 
Without clear direction from the FDA regarding products 
containing hemp-derived CBD, large retailers will not carry CBD 
products, and many business leaders are reluctant to move 
forward with the development and manufacturing of these 
products.
    The FDA needs to provide regulatory pathways for products 
containing CBD. The FDA needs to act now. If the FDA gave us 
direction, more private-sector investment in hemp products 
would occur, and many well-known consumer brands will have 
tremendous interest in hemp products. We are waiting on the FDA 
to do their job. It is worth noting that we are now almost a 
decade into growing hemp legally again in the United States, 
and we still don't have proper guidance from the FDA. 
Meanwhile, we continue our research with the University of 
Kentucky, Murray State University, Western Kentucky University 
with over a dozen academic research projects going on right 
now.
    And look, I know we have a long way to go. I am proud of 
the Hemp Licensing Program that we have built here in Kentucky. 
We have laid the groundwork for the Commonwealth to be the 
epicenter of hemp production in the United States like it once 
was historically. I want to publicly thank our Members of the 
Kentucky Congressional delegation and all those who helped get 
hemp where it is at today. In particular, I would like to thank 
Kentucky's own Doris Hamilton, probably the best known and the 
best respected state hemp regulatory personnel in the United 
States.
    Thank you for the opportunity to testify before your 
Committee today, and I will do my best to answer any questions 
you may have. Thank you.
    [The prepared statement of Dr. Quarles follows:]

   Prepared Statement of Hon. Ryan F. Quarles, Ph.D., Commissioner, 
           Kentucky Department of Agriculture, Frankfort, KY
    Good morning and thank you Chair Plaskett and Ranking Member Baird 
for the opportunity to speak today. My name is Ryan Quarles and I serve 
as Kentucky's Commissioner of Agriculture. I was elected to this office 
in 2015 and re-elected in 2019. As Commissioner, it is my honor to lead 
the 218 employees of the Kentucky Department of Agriculture in serving 
the Commonwealth's 76,000 farm families and the tens of thousands of 
Kentuckians who work in agriculture and agriculture-related industries.
    From 2020 to 2021, I served as president of the National 
Association of State Departments of Agriculture (NASDA). NASDA is a 
nonpartisan, nonprofit association that represents the elected and 
appointed commissioners, secretaries, and directors of the departments 
of agriculture in all fifty states and four U.S. territories. NASDA 
grows and enhances American agriculture through policy, partnerships, 
and public engagement. My experience as a leader in NASDA gave me an 
opportunity to collaborate with, and learn from, my counterparts in 
other states in ways that I believe were beneficial to the people of 
Kentucky.
    Since Congress first authorized the states to conduct agricultural 
pilot programs in the 2014 Farm Bill, Kentucky has been a leader. And 
indeed, hemp is a crop that connects Kentucky's past to its future. My 
great-grandfather grew hemp on the banks of the Kentucky River in 
support of the Second World War effort while my grandfather was serving 
as a Marine in the Pacific theater. When I took office in 2016, I 
directed my staff to undertake a top-to-bottom review of Kentucky's 
hemp program, which was then in its infancy, and to recommend reforms 
that would enable Kentucky to become the epicenter for hemp production 
in America. I wanted to take full advantage of the 2014 Farm Bill's 
authorization for state departments of agriculture to conduct hemp 
research pilot programs by designing a hemp program that would 
encourage farmers to grow hemp, and encourage entrepreneurs to build 
businesses to process hemp into marketable products, right here in the 
Commonwealth. In short, my strategic objective was to use the 2014 Farm 
Bill's ``research pilot program'' to position Kentucky's farmers and 
processors to compete and win the race to build a robust hemp industry.
    I'm proud to say that we accomplished that goal. By the time USDA 
began its work to develop the administrative regulations that would be 
necessary to implement the statutory changes in the 2018 Farm Bill, 
Kentucky's legislative and regulatory framework was widely recognized 
as one of the best in the nation. We were gratified to see Kentucky's 
hemp licensing program, and data collected by our partners at the 
University of Kentucky, cited frequently throughout the final rule that 
USDA promulgated in January 2021. And the fact that USDA's final rule 
in many ways conformed to the structure of Kentucky's existing hemp 
program suggests that USDA's policy approach was built with Kentucky's 
hemp licensing program in mind. That was gratifying to us, not least 
because the Federal regulatory framework did not require us to 
implement drastic changes that would have been disruptive to the 
community of farmers and entrepreneurs who were already working here.
    This summer Kentucky's hemp program is in its ninth year. Like 
other states, we observed a rapid expansion of acreages from 2015 
through 2019, followed by an equally rapid decline beginning with the 
2020 growing season. One reason for this decline was that production in 
the previous years, particularly the 2019 growing season, far outpaced 
demand. Many farmers ended that year with a hemp harvest for which 
there was no buyer, even those who started the year with a signed 
contract. There remains a surplus of harvested hemp from that year. 
Here is a table depicting Kentucky's experience, in numerical terms, 
from 2014 to present:

                                                     Kentucky Department of Agriculture Hemp Program
                                                                     Annual Overview
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         KY
 Production    University    Processor/    Growers    Counties    Approved    Planted   Harvested   % Grain   % Fiber      % CBD/      % Grain  % Seed &
    Year        Projects      Handlers                with Hemp     Acres      Acres      Acres    or Seeds             Cannabinoids    & CBD     Fiber
--------------------------------------------------------------------------------------------------------------------------------------------------------
      2014             7             9          20          14          --         33         --        47%       32%         21%
      2015             8            29          99          41       1,742        922        500        47%        6%         47%
      2016            17            45         137          60       4,600      2,300      2,000        34%        6%         60%
      2017            17            49         204          71      12,800      3,200      2.300        36%        5%         27%          32%
      2018            14            72         210          73      16,100      6,700      6,000        18%        4%       61.5%          14%      2.5%
      2019            12           200         978         102      60,000     26,500     24,900         2%        4%         92%            0        2%
      2020            12           178         970         113      32,000      5,000      4,500         4%        4%         92%            0         0
      2021            17           140         450          99      11,500      1,800      1,700         2%        7%         91%            0         0
 June 2022            13            93         240          90       5,530        TBD        TBD        TBD       TBD         TBD          TBD       TBD
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In addition to the overproduction I mentioned, the hemp industry 
has been severely hampered by the slowness of the Federal Food and Drug 
Administration to create a regulatory pathway for hemp-derived 
cannabinoids, particularly cannabidiol (CBD). Without clear direction 
from FDA regarding products containing hemp-derived CBD, large 
retailers will not carry the products and many business leaders are 
reluctant to move forward with the development and manufacture of CBD-
related products. That reluctance, in turn, has dampened industry 
demand for harvested hemp material.
    By contrast, we have been pleased with USDA's prompt and thoughtful 
approach to hemp policy. As I mentioned previously, we were pleased 
that USDA took such close interest in Kentucky's existing hemp program 
while the Federal administrative regulation was being developed. Since 
then, we have enjoyed a respectful and mutually supportive relationship 
with the hemp staff at USDA.
    We have observed some challenges that warrant continued attention. 
Under the final rule, USDA's Farm Service Agency (FSA) is tasked with 
the responsibility for assigning the unique lot numbers for each 
contiguous planting of a single variety of hemp. We believe that FSA's 
local staff members need more training to learn how to properly record 
hemp plantings, especially when the need arises to assign unique sub-
field numbers to account for the different varieties of hemp being 
planted within a single field. Additional training is also needed for 
accurate reporting of indoor hemp production. Currently, we see that 
when a producer plants multiple varieties in a single field or indoor 
facility, the lot number is often assigned incorrectly. Moreover, once 
a lot number has been assigned by FSA, those numbers are not reliably 
transferring electronically to the USDA-AMS Hemp Program's software, 
Hemp eManagement Platform (HeMP). Without the appropriate lot numbers 
in the USDA HeMP system, states and laboratories are unable to properly 
identify lots or report THC testing results back to USDA. In time, we 
are confident that this problem will be resolved.
    Looking ahead, we have some suggestions for improvements to hemp 
policy at the Federal level that would improve matters in Kentucky and 
other states. For one, we believe that laboratories need not be DEA-
registered, but they should be required to attain ISO 17025 
accreditation, with total THC on a dry weight basis as part of their 
scope, prior to offering THC testing services for compliance purposes.
    Should Congress consider revising the Federal definition of hemp 
plants, we urge it to raise the THC threshold from 0.3% to 1.0%. At the 
same time, it would be appropriate for the new 1.0% limit to include 
not only delta-9 THC, but every other THC isomer which could have an 
intoxicating effect on consumers, including without limitation 
synthetically created delta-8, delta-10, delta-7, HHC, and others. 
Embracing a ``total THC'' standard instead of a ``delta-9 THC only'' 
standard will establish a threshold which better reflects the 
material's true intoxicating potential.
    In addition, Congress should consider adopting a separate 
definition for consumer-ready hemp products. The current law's 
definition is focused on the chemical compounds within the hemp plant 
at the time of its harvest in the field or greenhouse; it is not a 
useful yardstick for measuring the intoxicating potential of consumer 
products that are intended for human consumption such as gummies, 
liquids, vapes, or ``smokeables.'' For consumer products, we believe a 
separate legal standard is needed. And that product standard needs to 
focus on quantities, not percent concentration by weight.
    To illustrate, a candy bar weighs about 1.76 ounces, which converts 
to 50,000 milligrams (mg). If that same candy bar's THC concentration 
was 0.3%, it would contain 150 mg of THC. By comparison, a typical 
``adult-use'' THC candy bar made with marijuana contains only 100 mg of 
THC and is recommended to be consumed in four or five time-separated 
doses. Some literature recommends that chronic pain patients should 
start with a 2.5 mg dose of THC and consume no more than 40 mg of THC 
each day-considerably less than the 150-mg candy bar that could be made 
from hemp-derived THC and yet remain below a 0.3% THC concentration 
limit.
    For this reason, if Congress's goal is to eliminate or at least 
mitigate the intoxicating effects of consumable products made from 
hemp, we believe that it makes little sense to regulate a consumer 
product's THC content in percentage or concentration terms. The better 
approach would be to limit THC content in terms of quantity, like 
milligrams, with a numerical cap in milligrams that is sufficiently 
modest as to eliminate or at least mitigate its intoxicating effects.
    In Kentucky and other states, there is considerable confusion about 
whether existing Federal law's definition of hemp serves to legalize 
synthetic compounds that were made in a laboratory. I am referring to 
delta-8 THC products as well as many other newer products, many of 
which contain synthetic THC levels and byproducts in levels that are 
harmful to consumers' health, but also other synthetic compounds such 
as such as delta-10 THC, THC-O, HHC, and others which we expect to 
proliferate in the coming months and years unless Congress draws a 
clear line separating natural hemp products (containing only those 
chemical compounds which were extracted from the hemp plant) from 
synthetic products (which contain intoxicating chemicals created in a 
laboratory). A good starting point would be a revised definition which 
retains the word ``extracts'' but eliminates the word ``derivatives''--
because that word has been at the center of litigation in Kentucky and 
other jurisdictions.
    There has been some discussion about whether it would be advisable 
to exclude fiber and grain hemp crops from the regulatory and testing 
requirements of the Federal hemp production framework. It is true that 
most certified grain and fiber seed varieties have proven to be THC-
compliant and stable, but there is no guarantee that every future fiber 
and grain crop will be produced from compliant varieties. Indeed, there 
are some fiber and grain varieties which are not compliant. Here in 
Kentucky we have tested and subsequently prohibited some of those 
varieties from our program due to excessive THC content. For that 
reason we believe all hemp, regardless of its intended application, 
must be subject to THC testing.
    Looking to the future, we expect that in the coming years we will 
see modest increases in the number of acres planted, at least until FDA 
provides the regulatory pathways for products containing CBD and other 
non-intoxicating cannabinoids. I remain proud of the hemp licensing 
program we have built here in Kentucky and believe that we have laid 
the groundwork for the Commonwealth to emerge as a lasting center of 
hemp production in the United States. I want to thank the Members of 
Kentucky's Congressional delegation for their sustained interest in 
this crop and the steps they have taken to foster Kentucky's hemp 
industries. Senator McConnell in particular has been a tremendous 
partner during my tenure as Kentucky's Agriculture Commissioner, and I 
want to thank him and his staff for their partnership in advancing 
Federal hemp policy in a way that is beneficial to Kentucky and the 
nation.
    Thank you for the opportunity to appear today. I will do my best to 
answer any questions you may have for me.
                               Attachment
Hemp, Kentucky, and the Law
KY. J. Equine, Agric., & Nat. Resources L. [Vol. 12 No. 2 2019-2020, p. 
        311-324]
Ryan Quarles *
---------------------------------------------------------------------------
    * Ryan Quarles, Commissioner of Agriculture of Kentucky. Prior to 
serving as Commissioner, he served as a State Representative and 
studied at Harvard Law School and graduated from University of Kentucky 
College of Law. He received his doctorate from Vanderbilt University.
---------------------------------------------------------------------------
Introduction
    On March 26, 1810, fresh off of a bloody duel, Henry Clay, 
Kentucky's native son, hemp farmer, and future Speaker of the United 
States House of Representatives, stood on the floor of Congress for one 
of his very first speeches.\1\ Clay vigorously advocated that the 
United States Navy give preference to American made hemp sails and 
rope.\2\ Threatened by foreign markets, Clay sought to boost domestic 
hemp prices to provide a cash crop for the farmers of central 
Kentucky.\3\ As fate would have it, precisely 208 years later to the 
day United States Senate Majority Leader Mitch McConnell stood on the 
grounds of the Kentucky Department of Agriculture (``KDA'') and made 
international headlines by announcing his plans to legalize hemp for 
the first time in over seventy years of dormancy.\4\ Like Clay, he too 
sought to fight foreign hemp markets and give the farmers of his home 
state an alternative cash crop that once thrived in Kentucky.\5\
---------------------------------------------------------------------------
    \1\ Henry Clay, The Papers of Henry Clay, Volume 1: The Rising 
Statesman, 1797-1814 459 (James F. Hopkins, et al. eds., 1959).
    \2\ Id.
    \3\ See id. at 460.
    \4\ Mike Debonis, Mitch McConnell renews push to legalize 
industrial hemp, The Wash. Post (March 26, 2018, 2:30 p.m.), https://
www.washingtonpost.com/news/powerpost/wp/2018/03/26/mitch-mcconnell-
renews-push-to-legalize-industrial-hemp/ [https://perma.cc/TLK3-FYCR].
    \5\ See generally id. (discussing Mitch McConnell's desire to help 
hemp cultivate in his home state of Kentucky).
---------------------------------------------------------------------------
    Rarely do two leaders of each chamber of Congress intersect on 
policy 2 centuries apart, much less on the exact same crop. But, that 
is the story of hemp: a crop full of contradictions, complexities, and 
myths which span from colonial times to the 21st century.\6\ Since 
becoming a Commonwealth in 1792, Kentucky has been defined by its rich 
farming heritage and is known throughout the world for its agricultural 
products such as thoroughbred race horses, tobacco, Kentucky Fried 
Chicken, bourbon, and yes, hemp.\7\
---------------------------------------------------------------------------
    \6\ See generally James F. Hopkins, A History of the Hemp Industry 
in Kentucky (1998) (examining the long history of hemp starting in the 
colonial times up until the 21st century).
    \7\ James C. Klotter & Freda C. Klotter, A Concise History of 
Kentucky 1-2 (2008).
---------------------------------------------------------------------------
    Kentucky's history is entwined with the history of hemp.\8\ When 
Archibald McNeill first recorded growing the crop outside of Danville 
in 1775, it was quickly determined that Kentucky's rich soil and 
climate made for perfect growing conditions, just as it had for 
tobacco.\9\ Many Kentucky farmers, including my great-grandfather, grew 
hemp for rope during World War II.\10\ In fact, the U.S. Department of 
Agriculture (``USDA'') produced a promotional video in 1942 encouraging 
farmers to grow hemp.\11\ In it, a patriotic narrator describes how 
``in Kentucky, much of the seed hemp acreage is on river bottom lands . 
. . along the Kentucky River gorge.'' \12\ With more than 26,000 acres 
of hemp harvested in Kentucky in 2019,\13\ it's clear that hemp is a 
crop that connects our past to our future.\14\
---------------------------------------------------------------------------
    \8\ See Hopkins, supra note 6.
    \9\ Id. at 69.
    \10\ See generally id. (discussing the need for rope during World 
War II and how it was made from hemp grown by Kentucky farmers).
    \11\ Hemp for Victory (U.S. Dep't. of Agric. 1942).
    \12\ Id.
    \13\ Katie Pratt, Despite trade concerns, Kentucky agricultural 
receipts hold steady for third year, net incomes up, Northern Kentucky 
Tribune (Dec. 8, 2019), https://www.nkytribune.com/2019/12/despite-
trade-concerns-kentucky-agricultural-receipts-hold-steady-for-third-
year-net-incomes-up/ [https://perma.cc/U7F5-3X6Y].
    \14\ See Klotter & Klotter, supra note 7.
---------------------------------------------------------------------------
    Hemp is frequently in the news, especially following the passage of 
the 2018 Farm Bill, which included The Hemp Farming Act of 2018.\15\ As 
one can imagine, ``legal issues abound when discussing the laws and 
regulations governing cannabis cultivation and marketing in the United 
States.'' \16\ To give an overview of the laws, history, and future of 
Kentucky's hemp program, this Comment begins by legally defining hemp 
in Section I. Section II examines the return of hemp to Kentucky 
through the Kentucky Department of Agriculture's hemp program and the 
Federal Government's regulatory oversight of the hemp industry. Section 
III discusses the response to the obstacles that resulted from the 
administrative transition in the Office of the Kentucky Agriculture 
Commissioner. Section IV explores Kentucky's progress in expanding the 
program to benefit farmers and businesses since 2016. Finally, Section 
V concludes by exploring what the future entails for hemp.
---------------------------------------------------------------------------
    \15\ Hemp Farming Act of 2018, H.R. 5485, 115th Cong. (2018).
    \16\ Ryan Quarles, Hemp: Connecting Kentucky's Past with its 
Future, 1 J. of Agric. Hemp Res. 1, 2 (2019).
---------------------------------------------------------------------------
I. Hemp's Legal Origin and Definition
    Before diving into the laws and competing frameworks which guide 
hemp production, one must first know the single most important law 
concerning the crop: its definition. Unlike any other crop grown in the 
United States, hemp is defined through an [A]ct of Congress rather than 
by farmers, agronomists, crop researchers, or biologists.\17\ This was 
not always the case. Hemp cultivation thrived in Kentucky from 1775 
through 1937 untethered, untangled and unimpaired by Federal law until 
the late 1930's.\18\ During this golden age, production surged in the 
central Kentucky region for historical uses ranging from paper, 
clothing, textiles, rope making, and even livestock feed.\19\ As 
steamboats replaced traditional sailing ships and the invention of 
competing fibers such as nylon, the demand for hemp waned during the 
Great Depression to historic lows.\20\
---------------------------------------------------------------------------
    \17\ Renee Johnson, Cong. Research Serv., Defining Hemp: A Fact 
Sheet 1 (2019).
    \18\ Hopkins, supra note 6.
    \19\ Id.
    \20\ Id. at 193.
---------------------------------------------------------------------------
    On the heels of dozens of states adopting the Uniform State 
Narcotics Act,\21\ and, for reasons not entirely clear and still 
subject to cannabis folklore, Congress passed the Marihuana Tax Act of 
1937,\22\ effectively ending hemp production in America.\23\ Without 
distinguishing between hemp and marijuana, the new law's cost-
prohibitive tax not only rendered hemp cultivation unprofitable, but it 
also gave Federal prosecutors a right of action to prosecute those 
cultivating for illicit use.\24\ It was not until an acute demand for 
rope by the United States Navy after the outbreak of World War II did 
the need for hemp cultivation necessitate a brief carve out exemption 
from the tax.\25\ Administered by the USDA and spurred by the ``Hemp 
For Victory'' campaign, thousands of tax exempt licenses to grow hemp 
were given to increase production.\26\ Many of these licenses went to 
Kentucky farmers.\27\
---------------------------------------------------------------------------
    \21\ Uniform State Narcotic Drug Act, 21 U.S.C.  1201-1204 (1934) 
repealed by Anti-Drug Abuse Act of 1988, 102 Stat. 4181.
    \22\ Marihuana Tax Act of 1937, Pub. L. No. 75-238, 50 Stat. 551, 
overturned by Leary v. United States 395 U.S. 6 (1969) and repealed by 
Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. 
No. 91-513, 84 Stat. 1236, 1292 (1970).
    \23\ Hopkins, supra note 6.
    \24\ Marihuana Tax Act of 1937, Pub. L. No. 75-238,  4-6, 50 
Stat. 551, overturned by Leary v. United States 395 U.S. 6 (1969) and 
repealed by Comprehensive Drug Abuse Prevention and Control Act of 
1970, Pub. L. No. 91-513, 84 Stat. 1236, 1292 (1970).
    \25\ Hopkins, supra note 6.
    \26\ Hemp History, Hemp Industries Ass'n., https://www.thehia.org/
hisotry [https://perma.cc/E4FJ-VBZZ].
    \27\ Id.
---------------------------------------------------------------------------
    Congress did not revisit the legal definition of hemp again until 
1970, after the striking down of the Marihuana Tax Act of 1937 through 
Leary v. United States.\28\ In response, Congress passed the 
Comprehensive Drug Abuse Prevention and Control Act of 1970, which 
officially classified hemp as a Schedule 1 narcotic, indistinguishable 
from marijuana.\29\ However, hemp research did not cease 
internationally and by August 1976, the first known modern definition 
of hemp emerged as ``a concentration of 0.3 [percent] Delta-9-THC (dry 
weight basis) in young, vigorous leaves of relatively mature plants as 
a guide to discriminating two classes of plants.'' \30\ Admittedly an 
arbitrary distinction, the 0.3 percent THC (Tetrahydrocannabinol, the 
psychoactive compound found in cannabis) threshold soon became an 
internationally adopted measurement separating hemp from its illicit 
cousin.\31\ In the 2014 Farm Bill,\32\ Congress adopted a very similar 
definition of hemp to mean ``the plant Cannabis sativa L. and any part 
of such plant, whether growing or not, with a delta-9 
tetrahydrocannabinol concentration of not more than 0.3 percent on a 
dry weight basis.'' \33\ No other crop is known to have such a 
complicated history and legally constructed definition, which both adds 
to the lure and complexity of hemp's reintroduction.\34\
---------------------------------------------------------------------------
    \28\ Leary v. United States, 395 U.S. 6 (1969).
    \29\ Comprehensive Drug Abuse Prevention and Control Act of 1970, 
21 U.S.C.  801 (1970).
    \30\ Ernest Small & Arthur Cronquist, A Practical and Natural 
Taxonomy for Cannabis, 25 Taxon 405, 408 (1976).
    \31\ Johnson, supra note 17.
    \32\ Agricultural Act of 2014, Pub. L. No. 113-79, 128 Stat. 649 
(codified at 7 U.S.C.  5940).
    \33\ Id. at  7606.
    \34\ See Johnson, supra note 17.
---------------------------------------------------------------------------
II. The Hemp Comeback Begins: 2013-2014
A. Kentucky Senate Bill 50
    The modern hemp revitalization journey began with various state 
legislative bills which sought to reintroduce the crop through a state 
regulatory framework, pending approval from the Federal Government.\35\ 
After several attempts, the 2013 General Assembly enacted KY Senate 
Bill 50, the product of considerable negotiations between the two 
legislative chambers.\36\ The Senate's initial version of the bill 
would have vested primary responsibility for the hemp program's design 
and development in the Kentucky Department of Agriculture with 
oversight from the Commissioner of Agriculture.\37\
---------------------------------------------------------------------------
    \35\ Rich Mundell & D.W. Williams, An Introduction to Industrial 
Hemp & Hemp Agronomy, Ky. Coll. of Agric., Food, & Env't., July 2018), 
at 1, http://www2.ca.uky.edu/agcomm/pubs/ID/ID250/ID250.pdf [https://
perma.cc/ZAN7-AA5D].
    \36\ S.B. 50, 2013 Gen. Assemb., Reg. Sess. (Ky. 2013).
    \37\ See S.B. 50, 2013 Gen. Assemb., Reg. Sess. (2013).
---------------------------------------------------------------------------
    After securing Senate passage by a vote of 31-6 on February 14, 
2013, the bill went to the House of Representatives.\38\ By means of a 
House floor amendment, the House of Representatives changed S.B. 50 to 
remove much of the Department of Agriculture's discretionary authority 
envisioned in the Senate's version.\39\ Instead, greater powers were 
placed in the hands of the Kentucky Industrial Hemp Commission and the 
Kentucky State Police.\40\ The House's amendment placed the authority 
to promulgate administrative regulations (i.e., to design the hemp 
program's structure), and to issue grower's licenses, in the hands of 
the Commission.\41\ Criminal background checks would be performed by 
the Kentucky State Police; any applicant with a felony drug conviction 
within the previous 10 years would not be eligible for licensure.\42\ 
The House floor amendment also created a state-law definition of 
``hemp'' that was expressly pegged to whatever tetrahydrocannabinol 
(``THC'') levels Congress relied upon in its definition of 
``marijuana'' in the Federal Controlled Substances Act, 21 U.S.C. 801 
et seq.\43\
---------------------------------------------------------------------------
    \38\ Id.
    \39\ See id.
    \40\ See id.
    \41\ See id.
    \42\ See id.
    \43\ See id.
---------------------------------------------------------------------------
    On March 26, 2013 (203 years to the day after Henry Clay's speech), 
S.B. 50, as amended by the House, was approved by a vote of 88 to 4, 
including my vote of support as a former legislator.\44\ Twelve days 
later, on April 7, 2013 the bill became law.\45\ In so doing, the 
Kentucky Legislature had exercised the extent of its authority to 
facilitate hemp farming experimentation.\46\ Without action from 
Congress, however, the longstanding Federal prohibition against the 
cultivation of cannabis would keep things at a standstill.
---------------------------------------------------------------------------
    \44\ KY. General S.B. 50, 2013 Gen. Assemb., Regular Session (Reg. 
Sess. (Ky. 2013).
    \45\ Id.
    \46\ Id.
---------------------------------------------------------------------------
B. Federal Oversight Issues
    In early 2014, Congress included within the Agricultural 
Improvement Act (the ``Farm Bill'') a two-page section that created an 
opportunity for state-level ``agricultural pilot programs'' to study 
the ``growth, cultivation, or marketing'' of hemp.\47\ Led by Senator 
McConnell and Kentucky's Congressional delegation, the 2014 Farm Bill 
allowed farmers to cultivate hemp, ``a crop whose history was as old as 
the Commonwealth itself.'' \48\
---------------------------------------------------------------------------
    \47\ See 7 U.S.C.S.  5940 (LexisNexis 2014).
    \48\ Quarles, supra note 16, at 1.
---------------------------------------------------------------------------
    The ``pilot program'' concept Congress adopted with the 2014 Farm 
Bill had important implications for how Kentucky's hemp program would 
develop.\49\ There were at least two notable components. The first was 
Congress's new definition of hemp as ``the plant Cannabis sativa L. and 
any part of such plant, whether growing or not, with a delta-9 
tetrahydrocannabinol concentration of not more than 0.3 percent on a 
dry weight basis.'' \50\
---------------------------------------------------------------------------
    \49\ See 7 U.S.C.S.  5940. (LexisNexis 2014).
    \50\ Id. at  5940(a)(2).
---------------------------------------------------------------------------
    Second, unlike the ``program of licensure'' for individual farmers 
that the 2013 General Assembly had authorized with S.B. 50, Congress 
did not create a Federal system of licensure for private citizens.\51\ 
Indeed, Congress authorized only ``agricultural pilot programs'' 
conducted by a state department of agriculture and institutions of 
higher education.\52\
---------------------------------------------------------------------------
    \51\ See id. at  5940.
    \52\ See id. at  5940(a)(1).
---------------------------------------------------------------------------
    Soon after President Obama signed the 2014 Farm Bill into law, the 
most urgent challenge was seed acquisition. Where would KDA and its 
program participants obtain the planting materials they needed? In 
early May, KDA learned that a quantity of hemp seeds were being 
detained by U.S. Customs and Border Protection agents at the United 
Parcel Service cargo facility in Louisville.\53\ With the planting 
season already underway, KDA swiftly filed suit in U.S. District Court 
for the Western District to obtain the seeds.\54\ The dispute ended 
with an agreement that the hemp seeds would be allowed entry by a DEA 
import permit.\55\
---------------------------------------------------------------------------
    \53\ Press Release, Ky. Dep't. of Agric., Industrial Hemp Seeds 
Arrive in Frankfort, Ready for Pilot Research Programs (May 23, 2014), 
https://www.kyagr.com/Kentucky-AGNEWS/press-releases/Industrial-hemp-
seeds-arrive-in-Frankfort-ready-for-pilot-research-programs.html 
[https://perma.cc/LB8R-YARJ].
    \54\ See Janet Patton, Kentucky Agriculture Department, DEA reach 
deal on Hemp Seeds; Planting Could Come hemp seeds; planting could come 
soon, Herald Leader (May 21, 2014, 1:40 PM), https://www.kentucky.com/
news/business/article44489994.html [https://perma.cc/J538-QLP6].
    \55\ See Press Release, Ky. Dep't. of Agric., State Ag. Department, 
Federal Government Reach Accord on Importation of Hemp Seeds (Aug. 14, 
2014), https://www.kyagr.com/Kentucky-AGNEWS/press-releases/State-ag-
department-federal-government-reach-accord-on-importation-of-hemp-
seeds.html [https://perma.cc/DDK6-94Y3].
---------------------------------------------------------------------------
    By the end of May 2014, KDA had signed a ``memorandum of 
understanding'' with a number of farmers wishing to grow hemp within a 
principal-agent relationship with KDA. KDA also coordinated with 
representatives of several public universities in Kentucky.
C. The Success of Hemp
    The first planting season was limited in scope because of delays in 
seed acquisition and the challenges inherent in working with a new 
crop.\56\ Of the 33 acres that were planted in 2014, there was moderate 
success.\57\
---------------------------------------------------------------------------
    \56\ See Industrial Hemp Research Pilot Program Overview, KY. 
Dep't. of Agric., https://www.kyagr.com/marketing/hemp-overview.html# 
[https://perma.cc/73ZR-PVD4].
    \57\ Id.
---------------------------------------------------------------------------
    The second year saw more success. In 2015, 922 acres were planted, 
with more than 500 acres harvested.\58\ One notable development from 
the 2015 growing season was the emergence of a new application of the 
plant--extracting certain chemical compounds, known as cannabinoids, 
from the floral part of the plant--alongside the traditional components 
of fiber and grain.\59\ One of those cannabinoids was cannabidiol 
(``CBD''), a chemical compound that was said to hold great promise in 
health and wellness products.\60\ To the surprise of many, almost half 
of the acreage planted in 2015 was attributed to farmers growing hemp 
for CBD rather than grain or fiber.\61\ Whether CBD and other 
cannabinoids would prove commercially viable--and what CBD's legal 
status was under Federal law--remained unclear.
---------------------------------------------------------------------------
    \58\ Id.
    \59\ See U. KY. C. Agric., UK Industrial Hemp Research Progressing 
in Second Year, Ky. Dep't. of Agric., https://www.kyagr.com/Kentucky-
AGNEWS/2015/UK-industrial-hemp-research-progressing-in-second-year.html 
[https://perma.cc/M4PU-SMCV].
    \60\ Id.
    \61\ Id.
---------------------------------------------------------------------------
III. Challenges at the Start of a New Administration
    When I took office as Agriculture Commissioner in 2016, Kentucky's 
hemp program remained in its infancy.\62\ Even then, it was evident 
that changes were needed.\63\ Although S.B. 50 placed responsibility 
for hemp program oversight and management on the Industrial Hemp 
Commission, its 26-member board had not convened for a meeting since 
May 2014.\64\ With no staff support, the Commission was unable to carry 
out its duties, which meant that responsibility fell to KDA and its 
employees to keep the program running throughout the latter half of 
2014 and all of 2015.\65\
---------------------------------------------------------------------------
    \62\ Quarles, supra note 16, at 2.
    \63\ Id.
    \64\ See 2013 Ky. Acts 14,  3.
    \65\ See id.
---------------------------------------------------------------------------
    Kentucky's hemp program needed change to operate effectively and to 
better serve the growing number of farmers and entrepreneurs interested 
in hemp.\66\ In 2016, the Kentucky Department of Agriculture reviewed 
the hemp program and worked with staff to refine methods already in 
place.\67\
---------------------------------------------------------------------------
    \66\ Quarles, supra note 16, at 2.
    \67\ Id.
---------------------------------------------------------------------------
    As Commissioner of Agriculture, the goal was to create a healthy 
and productive hemp program that would make Kentucky the center of hemp 
production.\68\ While other states were reluctant to adopt hemp, the 
KDA aimed to ``use the first-mover advantage'' to better serve farmers 
and researchers in the state.\69\ The idea was to prepare the state for 
future Federal approval of hemp, allowing Kentucky to be more 
attractive to commercial investments around the world and give Kentucky 
farmers a potential alternative crop.\70\
---------------------------------------------------------------------------
    \68\ Id.
    \69\ Id.
    \70\ Id.
---------------------------------------------------------------------------
A. A Plan for Kentucky
    Three principles guided the KDA team's work. First, it was 
imperative to build a strong, trusting, and mutually supportive 
relationship with the Kentucky State Police and other law enforcement 
agencies. Second, the KDA needed to find ways to reduce the paperwork 
and administrative burdens that were required of program participants 
and KDA's own employees. Third, the KDA needed to empower our growers 
and processors. Above all, I wanted the organization to commit to a 
mindset of continuous process-improvement as we aspired to be the best 
program in America.
    The first step was to create a clear written document that farmers 
and entrepreneurs could read to understand the ``rules of the road.'' 
Because S.B. 50 had vested authority to promulgate administrative 
regulations in the now-dormant Industrial Hemp Commission, which had 
not met in years, KDA itself could not promulgate regulations without 
first seeking a change in law from the General Assembly.\71\ In 
anticipation of that step, KDA's staff dedicated hundreds of hours to 
hammering out a detailed policy guide that could fill the gap in the 
meantime. The product of the deliberations was a 25-page 2017 Policy 
Guide, which set the parameters for the upcoming year's growing season 
and served as a transparent prototype for future administrative 
regulations.\72\ For the first time, a member of the public could read, 
in black-and-white text, what the rules of the road would be.\73\
---------------------------------------------------------------------------
    \71\ See 2013 Ky. Acts 134.
    \72\ 302 Ky. Admin. Regs.  50:030 (Ky. Dep't. of Agric., 2018) 
(the 2017 Policy Guide was subsequently promulgated as a regulation).
    \73\ See id.
---------------------------------------------------------------------------
    The next step was to ask the General Assembly for some help in 
revising Kentucky's legislative framework. Senate Bill 50 was not 
working for at least three major reasons.\74\ The first reason was the 
structural misalignment between state law and Federal law.\75\ While 
the 2013 General Assembly had enacted S.B. 50 with the expectation that 
Congress would adopt a system of individualized licensure of 
farmers,\76\ the 2014 Farm Bill's ``agricultural pilot programs'' had 
restricted participation to state departments of agriculture and 
universities.\77\
---------------------------------------------------------------------------
    \74\ See S.B. 50, 2013 Gen. Assemb., Reg. Sess. (Ky. 2013).
    \75\ See id.; see also Quarles, supra note 16, at 2.
    \76\ See S.B. 50, 2013 Gen. Assemb., Reg. Sess. (Ky. 2013).
    \77\ 7 U.S.C.S.  5940 (LexisNexis 2014).
---------------------------------------------------------------------------
    The second reason arose from structural deficiencies within Senate 
Bill 50.\78\ For instance, that the Industrial Hemp Commission had not 
held a meeting since May 2014, in part because it was a major 
undertaking simply to achieve a simple-majority quorum of its 26 
members.\79\ Additionally, because the Commission had no full-time 
staff support, it had proven almost impossible for that body to 
maintain any continuity of effort over time. Responsibilities that 
should have been assigned to an executive-branch agency with full-time 
employees, such as the promulgation of administrative regulations, had 
instead been placed in the Commission's hands.\80\
---------------------------------------------------------------------------
    \78\ See S.B. 50, 2013 Gen. Assemb., Reg. Sess. (Ky. 2013); see 
also Quarles, supra note 16, at 2.
    \79\ Quarles, supra note 16, at 2.
    \80\ Id. at 2-3.
---------------------------------------------------------------------------
    The third reason S.B. 50 was deficient was that it did not answer 
important public-policy questions.\81\ These included concerns about 
the handling of hemp after harvest, the retention of floral materials 
by the public, and possession of products, especially live plants and 
seeds, by those not included in the pilot program.\82\ None of these 
questions were answered by S.B. 50.
---------------------------------------------------------------------------
    \81\ See S.B. 50, 2013 Gen. Assemb., Reg. Sess. (Ky. 2013); see 
also id. at 3.
    \82\ Quarles, supra note 16, at 3.
---------------------------------------------------------------------------
IV. Legislative Changes Lead to Explosive Growth
    At the KDA's request, the 2017 General Assembly passed Senate Bill 
218 which resulted in widespread changes to the hemp program.\83\ The 
enactment of S.B. 218 allowed the hemp program to grow in ways that 
would not have been possible without legislative support.\84\ The bill 
contained several important features that emerged from the 2016 review, 
including the transfer of powers from the Industrial Hemp Commission to 
the KDA.\85\ This change allowed the KDA to create administrative 
regulations and brought about a new advisory board, the Industrial Hemp 
Advisory Board.\86\ The board was purely advisory in nature and allowed 
KDA to receive input from those in the industry.\87\ The bill created a 
clear distinction between those needing licensing.\88\ This separates 
those who grow, handle, or process the plants, seeds, leaf materials 
and floral material from those that buy a finished product or own an 
already harvested material.\89\
---------------------------------------------------------------------------
    \83\ See 2017 Ky. Acts 45,  1-14.
    \84\ Quarles, supra note 16, at 3.
    \85\ See Ky. Rev. Stat.  260.862 (2017).
    \86\ See id.; see Ky. Rev. Stat.  260.860 (2017).
    \87\ See Ky. Rev. Stat.  260.860 (2017).
    \88\ See Ky. Rev. Stat.  260.858(3) (2017).
    \89\ Id.
---------------------------------------------------------------------------
    Soon after the Governor signed S.B. 218 into law, KDA went to work 
to formulate the administrative regulations that would give program 
participants an even clearer view of how the licensure program would 
work.\90\ This work culminated in the promulgation of a separate guide 
for licensed growers, licensed processors, and affiliated university 
researchers.\91\
---------------------------------------------------------------------------
    \90\ See S.B. 218, Regular Session (2017 Gen. Assemb., Reg. Sess. 
(Ky. 2017).
    \91\ See 302 Ky. Admin. Regs.  50:020 (Ky. Dep't. of Agric., 
2018); 302 Ky. Admin. Regs.  50:030 (Ky. Dep't. of Agric., 2018); 302 
Ky. Admin. Regs.  50:040 (Ky. Dep't. of Agric., 2018).
---------------------------------------------------------------------------
    Thanks to the framework provided by statutory and regulatory 
guidelines, the state successfully increased hemp production. In 2018, 
Kentucky farmers planted 6,700 acres of hemp, more than double what was 
previously planted.\92\ The number of licensed processors increased 
from 210 in 2018 to almost 1,000 in 2019, with the number of planted 
acreage also likely to double.\93\
---------------------------------------------------------------------------
    \92\ Kentucky Hemp Industry's Economic Impact Showed Explosive hemp 
industry's economic impact showed explosive growth in 2018, Sentinel-
Echo (Mar. 22, 2019), https://www.sentinel-echo.com/community/kentucky-
hemp-industry-s-economic-impact-showed-explosive-growth-in/
article_85ce450d-61e1-5c65-8d4a-fe3229362357.html [https://perma.cc/
BTQ3-RH99].
    \93\ Id.
---------------------------------------------------------------------------
    The resulting economic impact numbers spoke volumes.\94\ Gross 
product sales grew from $16.7 million in 2017 to $57.7 million in 
2018.\95\ Payments to farmers also increased to $17.5 million in 2018, 
nearly double the $7.5 million recorded in 2017.\96\ Full time jobs 
more than tripled in that time frame as well, growing from eighty-one 
to 281 positions.\97\ More than $100 million has been invested by 
Kentucky processors.\98\ Sales of Kentucky hemp products reached $193.4 
million in 2019.\99\ Despite these economic numbers, there exists major 
growing pains in the industry that could affect the stability of 
emerging hemp markets in the coming years.
---------------------------------------------------------------------------
    \94\ Quarles, supra note 16, at 3.
    \95\ Sentinel-Echo, supra note 92.
    \96\ Quarles, supra note 16, at 3.
    \97\ Industrial Hemp Research Pilot Program Overview, supra note 
56; Doris Hamilton, Industrial Hemp Research Pilot Program, Ky. Dep't. 
of Agric. (Oct. 11, 2018), https://www.kyagr.com/marketing/program_id/
70/documents/HEMP_2019HempApplicantMeeting10-11-18_000.pdf [https://
perma.cc/GT2U-Z8HS].
    \98\ See Kentucky Hemp Industry's Economic Impact, supra note 92; 
see also Hemp processing in U.S. state of Kentucky sees flurry of 
investment, Hemp Today (Aug. 1, 2019), https://hemptoday.net/kentucky-
hemp-investment/ [https://perma.cc/R6EL-M82T].
    \99\ Grace Schneider, More than 150 Kentucky Farmers Holding Last 
Year's Hemp Crop After Disastrous Last Season, Courier Journal (June 1, 
2020 7:04 a.m.), https://www.courier-journal.com/story/news/local/2020/
06/01/kentucky-hemp-farmers-steer-clear-after-2019-tumult/5282812002/ 
[https://perma.cc/9JMG-8X5P].
---------------------------------------------------------------------------
V. Another Big Step Forward
    In March 2018, Senate Majority Leader Mitch McConnell, in a joint 
press conference with KDA, introduced the Hemp Farming Act of 
2018.\100\ This bill was later included in the 2018 Farm Bill.\101\
---------------------------------------------------------------------------
    \100\ See Senator McConnell and Commissioner Quarles Announce Hemp 
Legislation, Ky. Dep't. of Agric. (Mar. 26, 2018), https://
www.kyagr.com/KYAg-News/2018/Senator-McConnell-and-Commissioner-
Quarles-Announce-Hemp-Legislation.html [https://perma.cc/67MA-NNCT].
    \101\ Harold B. Hilborn, 2018 Farm Bill Legalizes Hemp, but 
Obstacles to Sale of CBD Products Remain, Nat'l L. Rev. (Mar. 5, 2019), 
https://www.natlawreview.com/article/2018-farm-bill-legalizes-hemp-
obstacles-to-sale-cbd-products-remain [https://perma.cc/PTR8-5XKG]
---------------------------------------------------------------------------
A. The 2018 Farm Bill
    The 2018 Farm Bill, championed by Leader McConnell, allows 
Kentucky's hemp industry to expand because it makes important changes 
to Federal law.\102\ First, the bill removes hemp from the Controlled 
Substances Act of 1970.\103\ Second, it allows hemp farmers to 
participate in USDA research programs and to receive Federal crop 
insurance.\104\ Third, states may not interfere with interstate 
shipments.\105\
---------------------------------------------------------------------------
    \102\ See Agriculture Improvement Act of 2018, Pub. L. No. 115-334 
 12619 (2018).
    \103\ See id.  12619.
    \104\ See id.  7129, 7501, 11102 at 4795, 4819, 4919-20.
    \105\ See id.  10114 at 4920.
---------------------------------------------------------------------------
    The farm bill took a ``cooperative federalism'' approach and 
allowed individual state's departments of agriculture to regulate hemp 
in their jurisdictions.\106\ States submitted a focused plan specially 
focused on each state's needs.\107\ The state must meet a federally 
mandated minimal criteria, including sampling and testing programs, but 
can otherwise regulate hemp to serve the state's best interest.\108\
---------------------------------------------------------------------------
    \106\ See id.  297(B), at 4909-12.
    \107\ See id.
    \108\ See id.  10113 at 4908 (creating a new Section 297B, ``State 
and Tribal Plans'').
---------------------------------------------------------------------------
Conclusion
    Fortunately for Kentucky's farmers and processors, the existing 
hemp program already meets the Federal requirements, which means that 
our program can continue without significant disruptions. It also meant 
that I was able to attend the White House signing ceremony in December 
2019 and present Kentucky's State Plan, the very first in the nation, 
to USDA Secretary Sonny Perdue just moments after President Trump 
signed the bill into law.\109\ To date, numerous states have modeled 
their hemp programs on the framework we have built here in 
Kentucky.\110\
---------------------------------------------------------------------------
    \109\ Tom Latek, KY leaders join Trump at Farm Bill signing, 
legalizing industrial hemp, Kentucky Today (Dec. 20, 2018, 6:19 p.m.), 
http://kentuckytoday.com/stories/ky-leaders-join-trump-at-farm-bill-
signing-legalizing-industrial-hemp,16857 [https://perma.cc/ZNP6-4W9U].
    \110\ Tanner Hesterberg, State officials burn nearly $20,000 in 
hemp that failed standard, WKYT (Apr 133, 2017 3:20 p.m.) https://
www.wkyt.com/content/news/State-officials-to-burn-nearly-20000-in-hemp-
that-barely-failed-standard-419334524.html [https://perma.cc/D4VA-
PKSH].
---------------------------------------------------------------------------
    Recently, even more legal complexities have emerged as the USDA 
published an interim final rule (``IFR'') to guide the implementation 
of the hemp provisions of the 2018 Farm Bill.\111\ As state departments 
of agriculture navigate this rule, challenges still exist within the 
hemp industry: inevitable FDA oversight, EPA crop technology approvals, 
hesitation by banks to lend with legal hemp companies, variations in 
THC testing protocols, and even confusion about interstate commerce of 
hemp. It seems as though just as much work is left to be done now as 
did the 70-year effort to legalize hemp. It is my vision that one day 
hemp will be treated much the same way other agricultural commodities 
are in the United States. Regardless, Kentucky will develop a long-term 
hemp market once the dust settles on the legalese which has impeded its 
growth for almost a century.
---------------------------------------------------------------------------
    \111\ See 7 CFR  990 (2020).
---------------------------------------------------------------------------
    Despite these growing pains, ``Kentucky continues to lead the way 
with hemp, just as it did when my great-grandfather grew it generations 
ago on the banks of the Kentucky River.'' \112\
---------------------------------------------------------------------------
    \112\ Quarles, supra note 16, at 4.

    The Chair. Thank you very much, Doctor.
    And now for our final witness, Ms. Greenberg, please begin 
when you are ready.

          STATEMENT OF KATE GREENBERG, COMMISSIONER, 
       COLORADO DEPARTMENT OF AGRICULTURE, BROOMFIELD, CO

    Ms. Greenberg. Thank you, Chair Plaskett, for the 
invitation to testify before you today. My name is Kate 
Greenberg. I serve as the Colorado Commissioner of Agriculture 
and was appointed to this role by Governor Jared Polis in 2018. 
As Commissioner, I have the privilege of leading the Colorado 
Department of Ag and our more than 300 employees dedicated to 
supporting the nearly 40,000 farm and ranch families and almost 
200,000 workers across Colorado.
    Agriculture is one of the top drivers of our economy and 
workforce, and it is essential to who we are as a state. We 
have bold goals at the Department of Ag to build the future of 
agriculture, including building economic and supply chain 
resilience, advancing voluntary stewardship, supporting future 
generations, and furthering animal health and welfare. The hemp 
industry plays an important role in all of these goals.
    Colorado has been fostering the growth of the hemp industry 
for the better part of a decade. These efforts are exemplified 
through the Colorado Hemp Advancement and Management Plan, or 
CHAMP for short. The CHAMP initiative, which we launched in 
2019, was a collaborative effort involving more than 200 
stakeholders, state agencies, local and Tribal governments, and 
industry experts. The CHAMP report, which is provided in my 
written testimony, contains key deliverables addressing the 
regulation of hemp across the entire supply chain, from 
research and development to manufacturing and banking and 
insurance. It also informed the formation of the Colorado State 
Hemp Plan, which was approved by USDA and implemented on 
January 1st of this year.
    Like most states, following the 2018 Farm Bill, registered 
hemp acreage in Colorado increased sharply to 87,408 acres in 
2019. This was a dramatic uptick from the 1,800 registered 
acres in 2014. Since 2019, however, we have seen a dramatic 
decrease, as many states have, down to just under 3,700 
registered acres.
    There are many factors contributing to the current drop in 
acreage. Overproduction in 2019 led to a rapid saturation of 
the market, a market at that point which was solely reliant on 
CBD. In addition, while the 2018 Farm Bill and USDA Final Rule 
opened up new opportunities for hemp production, they also 
placed additional burdens on producers. These burdens, 
including much higher sampling and testing fees, background 
checks, and duplicative FSA acreage reporting may also be 
contributing factors to this current decline. In a recent 
survey, many producers also stated that increasing the hemp THC 
limit to one percent would encourage further production.
    Since the full implementation of our state plan in January 
of this year, Colorado has also taken on additional 
responsibilities. We have expanded our testing from 30 percent 
to 100 percent of all hemp lots. We have approved 18 
performance-based sampling plans, including research and 
disposal plans. Additionally, we have also trained and 
certified 16 authorized samplers throughout the state.
    Currently in Colorado, as in many other states, 100 percent 
of regulatory program costs are paid by producers through 
registration fees. We are facing similar challenges as other 
states that have turned their programs back to USDA and making 
our program financially sustainable, particularly in a 
fluctuating environment.
    USDA staff have been very responsive to our concerns, as we 
have requested greater flexibility from them through the 
rulemaking process, and we very much value their partnership. 
However, there are certain ways in which Congress can provide 
support to Federal agencies to allow for greater flexibility 
and improve our state-run hemp programs. Specifically, we have 
five recommendations for this Committee to consider. The first 
one is to remove the DEA requirements for testing labs. Our 
state-of-the-art laboratory began the process of obtaining DEA 
certification in 2019. However, as of this hearing, we still 
await their approval. This unnecessary burden can be removed by 
the help of Congress.
    Number two, allow the use of certified seed as an 
alternative to the strict testing requirement. We believe there 
is much to learn in this regard, and Colorado is a willing 
partner to explore what is possible.
    Number three, remove background check requirements. Hemp 
should be treated like the agricultural commodity it is, and 
producers should not be treated as potential criminals for the 
production of illegal hemp crop.
    Number four, establish a Federal grant program to support 
state hemp programs. A grant program would help states continue 
to manage our own hemp programs while taking some of the burden 
off of USDA.
    And last, number five, support Federal agencies, 
particularly the FDA, in accelerating the regulatory process to 
allow the use of hemp as feed.
    In Colorado, we commit every day to helping build a 
vibrant, resilient future for Colorado agriculture, consumers, 
and the natural world. I believe there is a promising future 
for hemp within American agriculture's safe, diverse and 
abundant production. In order to achieve that future, we need a 
stable and sound regulatory environment that will foster 
diverse market opportunities, sustainable growth, and 
meaningful investments in natural resource stewardship for the 
greater good of the industry and future generations.
    Thank you for your time today.
    [The prepared statement of Ms. Greenberg follows:]

Prepared Statement of Kate Greenberg, Commissioner, Colorado Department 
                     of Agriculture, Broomfield, CO
    In 2014, Colorado became the first state to administer a hemp 
program. In 2021, after many years of leadership and development in 
this space, Colorado continued our efforts to advance the hemp industry 
with the culmination of the Colorado Hemp Advancement and Management 
Plan (CHAMP). The CHAMP initiative, launched in 2019, was a 
collaborative, multi-month effort involving more than 200 stakeholders 
that included the Colorado Department of Agriculture (CDA), the 
Governor's Office, Department of Public Health and Environment, 
Department of Revenue, Department of Regulatory Agencies, Office of 
Economic Development and International Trade (OEDIT), Department of 
Public Safety, Colorado Commission of Indian Affairs, Department of 
Higher Education, local governments and industry experts. The CHAMP 
Report\1\ (see attachment) was published on March 26, 2021, and 
contained 21 key deliverables addressing the regulation of hemp across 
the entire supply chain, including research and development, seed 
stock, cultivation, testing, transportation, processing, manufacturing, 
marketing, and banking and insurance.
---------------------------------------------------------------------------
    \1\ https://drive.google.com/file/d/1m2J4bNRcn9SPg0-2hZtJrcE6-
aBlBrKv/view?usp=sharing.
---------------------------------------------------------------------------
    Additionally, the Colorado Hemp Program regularly engages 
stakeholders regarding the State Hemp Plan and rulemaking, holding four 
quarterly Hemp Advisory Committee \2\ (HAC) Meetings and two annual 
Hemp Symposia.\3\ The HAC is a ten member committee composed of 
stakeholders, which has helped build the regulatory program in 
Colorado. The Hemp Program distributes quarterly newsletters, email 
blasts, and website information to hemp registrants and industry, 
including grant opportunities and industry and regulatory updates. 
CDA's Markets Division has surveyed the industry and is regularly 
connecting hemp-related businesses while promoting domestic and 
international trade. The Markets Division also regularly communicates 
with the Global Business Development team at OEDIT and the Governor's 
Office regarding ongoing priorities related to progressing this up-and-
coming industry.
---------------------------------------------------------------------------
    \2\ https://ag.colorado.gov/plants/hemp/general-information/hemp-
advisory-committees.
    \3\ https://ag.colorado.gov/plants/industrial-hemp/general-
information/hemp-symposia.
---------------------------------------------------------------------------
    The hemp industry plays an important role in advancing Colorado's 
and CDA's goals of building economic and supply chain resilience, 
advancing voluntary stewardship, supporting the next generation in 
agriculture, and furthering animal health and welfare. Hemp has the 
potential to create new economic opportunities for farmers who are 
dealing with a changing climate and increasingly arid land. Our young 
farmers and ranchers are constantly seeking new ways to support their 
bottom line and the environment at the same time. The hemp industry has 
the potential to advance CDA's priorities if we listen to our producers 
and implement sensible regulations.
    Following the 2018 Farm Bill, registered hemp acreage in Colorado 
increased sharply to 87,408 acres in 2019 from 1,800 acres in 2014. 
Beginning in 2020, hemp acreage dramatically decreased to the current 
3,698 registered acres in 2022. The recent decline in acreage is 
largely due to the 2019 surplus production that has not yet been 
depleted. Other factors include the economic disruptions caused by 
COVID-19, additional states producing hemp post-2018 Farm Bill, and the 
fact that infrastructure for food and fiber production from hemp has 
largely not been developed.
    Seventy percent of the hemp grown in Colorado through 2019 was for 
cannabinoid extraction, followed by 25% seed and grain, and 5% fiber 
and other industrial uses. Following 2019, cannabinoid extraction has 
decreased to 60%, with seed and grain remaining close to 25%, and fiber 
and other industrial uses (paper, plastics, hemp wood, and hempcrete) 
have risen to 15%. Surveyed hemp producers have cited the lack of a 
hemp market outside of cannabinoid production and not having the 
resources to convert to fiber production as primary barriers to 
entering new markets.
    Since full implementation of the State Plan on January 1, 2022, CDA 
has had to adapt our program in numerous ways to meet the new 
requirements in the USDA Final Rule. CDA has expanded from 30% to 100% 
testing of all hemp lots, and approved 18 performance-based sampling 
plans, including research and disposal plans. Additionally, CDA ensures 
hemp producers register acreage with the USDA Farm Service Agency 
(FSA); completes monthly Federal reporting requirements; and has 
trained and certified 16 authorized samplers throughout the state to 
achieve 100% sampling of all lots. As a result, the enforcement and 
legal responsibilities for CDA have increased in order to provide 
customer service to support registrants, certified labs, and sampling 
agents with new requirements.
    The 2018 Farm Bill placed many significant burdens on hemp 
producers, including much higher sampling and testing fees, completing 
required background checks, and FSA acreage reporting, which is 
duplicative in nature because it is already reported to the USDA 
through state reporting. Currently in Colorado, as in many other 
states, 100% of regulatory program costs are paid by producers through 
registration fees. Colorado is facing similar challenges as the states 
that have turned their programs over to the USDA in terms of making our 
program financially sustainable. This has included the challenges of 
fixed minimum regulatory costs with highly fluctuating registration 
numbers.
    In July 2022, 74 hemp producers responded to a CDA Survey to assist 
the CDA Hemp Program in better understanding and supporting Colorado's 
hemp registrants. Some of the challenges identified by Colorado 
producers include registration and other fees, over-regulation, and the 
need to increase the allowable THC limit from 0.3% to 1.0%. Registrants 
also responded that more regulatory flexibility should be given to 
crops grown for fiber, seed, food, and feed.
    In comments provided on the USDA's Interim Final Rule on January 
29, 2020, and October 8, 2020, CDA requested that USDA provide 
flexibility as well as remove some of the requirements from the Final 
Rule. USDA staff have been very responsive to our concerns and requests 
for flexibility when they have the authority to do so. We greatly 
appreciate their partnership in this work. However, there are certain 
statutory changes that would provide the USDA greater flexibility and 
improve state-run hemp programs. Our recommended changes are:

  1.  Remove DEA requirements for testing labs.

        The USDA's Final Rule requirement for hemp testing laboratories 
            to be DEA registered should be removed as it is time-
            consuming, inefficient, and unnecessary. The requirement is 
            too cumbersome and takes too long to implement. As soon as 
            the IFR was promulgated in October 2019, CDA initiated the 
            process of obtaining DEA certification for its state-of-
            the-art laboratory. Even though the CDA laboratory had been 
            performing testing and analysis of cannabis samples in 
            support of Colorado's cannabis-related regulatory programs 
            for many years, up until this hearing, CDA still awaits DEA 
            approval. Based on our experience in seeking approval at 
            the state laboratory, we worry it may take years for other 
            laboratories to obtain DEA certification, which will create 
            a testing capacity problem in Colorado.

  2.  Allow the use of certified seed as an alternative to the strict 
            testing requirement.

        Plant varieties are developed by plant breeders and are 
            protected by the Federal and State Plant Variety Protection 
            Act and Regulations. These varieties are known to have 
            Distinct, Uniform, and Stable characters and are multiplied 
            and marketed as certified seeds under the protection of the 
            Federal and State Seed Act. As hemp varieties are developed 
            with acceptable THC levels, the same system that has served 
            other plants should serve to protect and certify the 
            identity of hemp. A grower who uses certified hemp 
            varieties should not be regularly tested for THC since THC 
            compliance is certified with a seed certification system. 
            This will significantly reduce the cost of operations and 
            encourage farmers to adopt stable genetics that produce 
            consistency in the industry, helping several facets of the 
            industry simultaneously--both farmers and those engaged in 
            seed and genetic development.

  3.  Remove background check requirement.

        The 2018 Farm Bill has paved the way for hemp to be grown as an 
            agricultural commodity. Farmers have the opportunity to 
            benefit from its multiple potential uses and enable 
            diversity in their choice of crop. Over the last 7 months 
            of implementing the USDA program, we received consistent 
            pushback from farmers and growers over the background 
            requirement. The requirement added cost, required time 
            until we receive results, and added an extra process of 
            notifications putting strain on already small program 
            resources. Additionally, the background provision prevents 
            those that have completed their rehabilitation from 
            participating in growing a legal agricultural commodity.

  4.  Establish a Federal grant program to support the state's hemp 
            program.

        As a result of requirements in the 2018 Farm Bill and the 
            USDA's Final Rule, the hemp industry is highly regulated 
            with intensive data collection, background checks, land 
            registration, sampling, testing, inspection, enforcement, 
            and reporting requirements. A majority of state programs, 
            including CDA's program, are cash funded, meaning we depend 
            on the revenue collected from registration fees to provide 
            the services. Hemp registration is at its lowest level 
            since the program's creation, generating significantly less 
            revenue and making our ability to continue to run the 
            program into the future more tenuous. As of this hearing, 
            several states have closed their program. With the current 
            registration trends, more states are likely to close their 
            programs due to loss of revenue, putting more pressure on 
            USDA to take over the regulation in those states and 
            threatening the sustainability of the program. The USDA 
            should be charged with establishing a program to 
            financially support states that have implemented hemp 
            regulatory programs much the same way the USDA does for 
            other Federal requirements implemented by the states. 
            States like Colorado are implementing Federal requirements 
            and taking this regulatory burden off of the USDA without 
            financial compensation.

  5.  Accelerate the regulatory process to allow the use of Hemp as 
            feed.

        Scientific research has shown hemp to have promising 
            nutritional benefits to livestock and pet animals. Studies 
            are still ongoing to demonstrate the safety and efficacy of 
            hemp as a feed ingredient. Colorado stakeholders have 
            worked for years to demonstrate safety and effectiveness 
            through collaborative research and numerous discussions on 
            how to develop a national path forward to safe and legal 
            approval. Providing Federal support for research is 
            necessary to ensure that the industry can demonstrate the 
            safety and effectiveness of hemp as quickly as possible 
            through the FDA's rigorous review process. FDA approval of 
            hemp as feed will immediately open significant new market 
            opportunities for hemp producers as well as provide a new, 
            sustainable source of animal feed to large feed and pet 
            food manufacturers.

    Colorado is a leader in the hemp industry because our agricultural 
producers are entrepreneurial, and those dedicated to supporting the 
industry are driven to see it succeed. Stakeholders from across the 
industry and state government came together to develop the key 
deliverables in the CHAMP Report with the goal of promoting the health 
and safety of the hemp industry for farmers, processors, and consumers. 
The State of Colorado is doing everything we can to support our hemp 
producers and invest in a vibrant, resilient future for Colorado 
agriculture; however, Colorado's vision for our hemp industry cannot be 
realized without changes in Federal statutes and regulations.
                               Attachment
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Colorado Hemp Advancement & Management Plan C.H.A.M.P.
March 26, 2021

Colorado Governor Jared Polis, Department of Agriculture, Department of 
Public Health & Environment, Department of Regulatory Agencies, Office 
of Economic Development & International Trade

Prepared by: CHAMP Stakeholders, Colorado State University, MPG 
Consulting, Roenbaugh Schwalb

Facilitated by: Government Performance Solutions
Table of Contents
Executive Summary

    Objective Statement
    Governance and Process
    Industry Analysis
    Key Stakeholders
    Market-Level Principles and Policy Recommendations
    Future Research and Policy Development

Section 1. Industry Analysis and Key Stakeholders

    Introduction
    Regulatory Context
    Objective Statement
    Governance and Process
    Industry Analysis
    Key Stakeholders

          Governor's Office
          Colorado Department of Agriculture
          Colorado Department of Public Health & Environment
          Office of Economic Development and International Trade
          Office of the Attorney General
          Colorado Department of Public Safety
          Institutions of Higher Education
          Colorado Department of Regulatory Agencies
          Colorado Department of Natural Resources--Division of Water 
        Resources
          Colorado Department of Revenue--Marijuana Enforcement 
        Division (MED)
          Federally Recognized Indian Tribes
          Local Government
          Colorado Industry Associations and Other Nonprofits

Section 2. Stakeholder Recommendations

    Recommendation Summary
    Market-Level Principles Across the Supply Chain

          Principle 1: Promote Economic Development Across the Supply 
        Chain
          Principle 2: Chain of Custody & Information Sharing Systems 
        Will Drive an Expanding Hemp Industry
          Principle 3: Focus on THC Control
          Principle 4: Recognize the Importance of Federal 
        Compatibility While Also Advocating for Reasonable Regulations
          Principle 5: Recognize the Importance of Intergovernmental 
        Coordination
          Principle 6: Promote Access to Finance and Insurance Services 
        Across the Supply Chain
          Principle 7: Promote Equity, Diversity, and Inclusion Across 
        the Supply Chain

    Stakeholder Recommended Deliverables
    R&D and Seed Recommendations

          1. Certified Seed and Clone Program
          2. Reduce Cross-Pollination Through Information Sharing
          3. Expand Genetic Research and Establish Plant Breeding 
        Regulations

    Cultivation Recommendations

          4. Create an Innovative and Flexible Colorado State Hemp Plan 
        that Aligns with Federal Regulations
          5. Verify Registrants Have Access to a Legal Water Supply
          6. Establish a Center of Excellence
          7. Non-Compliant Plant Material
          8. Coordination of State and Local Regulatory Authority

    Testing Recommendations

          9. Field Sampling and Sampling Agent Certification
          10. Hemp Laboratory Certification Program

    Transportation Recommendations

          11. Electronic Traceability System
          12. Transportation Protocol

    Processing Recommendations

          13. Processor Registration and Inspection
          14. Processor and Manufacturer Standards

    Manufacturing Recommendations

          15. Manufacturer Registration and Inspection

    Marketing Recommendations

          16. Glossary of Terms
          17. Marketing and Labeling Guidance
          18. Quality Assurance Certification Program
          19. State Procurement of Industrial Hemp Products

    Finance and Insurance

          20. Develop Guidance & Best Practices
          21. Expanded Data Availability

    Future Research & Policy Development

Appendices

    Appendix A. CHAMP Stakeholders and Participants
    Appendix B. Detailed Industry Analysis

          Background
          Market Content
          Hemp Cultivation in Colorado
          Future Opportunities
Executive Summary
    In response to Congress passing the Agriculture Improvement Act of 
2018 (the 2018 Farm Bill), the anticipated publication by USDA of 
enabling regulations for the cultivation of industrial hemp, and 
Governor Jared Polis's stated priority for Colorado to remain a driving 
force in hemp production, the Colorado Department of Agriculture formed 
a statewide partnership known as the Colorado Hemp Advancement and 
Management Plan (CHAMP) in June 2019.
    The CHAMP initiative represents a broad stakeholder effort that 
includes representatives from the Colorado Department of Agriculture 
(CDA), the Governor's Office, Colorado Department of Public Health and 
Environment (CDPHE), Department of Revenue (DOR), Department of 
Regulatory Agencies (DORA), Office of Economic Development and 
International Trade (OEDIT), Department of Public Safety (DPS), the 
Department of Education (CDE), the Ute Mountain Ute Tribe, the Southern 
Ute Indian Tribe, local governments, state institutions of higher 
learning, and industry experts. A list of all CHAMP stakeholders and 
participants is included in Appendix A.
    Through the CHAMP process, stakeholders crafted economic 
advancement principles for the entire hemp supply chain, including 
research and development, seed, cultivation, testing, transportation, 
processing, manufacturing, marketing, and finance and insurance. The 
CHAMP initiative ensured that a wide range of stakeholders, including 
members of the public, had the opportunity to comment on and 
participate in shaping a variety of hemp-related policies the State of 
Colorado should strive to implement.
    The goals of this collaborative process were to develop a robust 
and functional hemp supply chain; to create new, sustainable, and 
inclusive employment and entrepreneurial opportunities; and to expand 
markets for Colorado agricultural communities. At the time of this 
report many questions and concerns remain on what the final Federal 
regulations will look like. Moreover, the impact of COVID-19 is 
currently a key factor in the development of the hemp industry as well 
as the state's ability to implement the stakeholder recommendations. As 
such, this report represents a snapshot in time, defining the general 
direction stakeholders felt Colorado should pursue in the future. 
Colorado will nevertheless continue to adjust to meet the challenges in 
this new industry.
Figure 1. Hemp Supply Chain
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

Objective Statement
    The CHAMP initiative aims to promote the health and safety of the 
hemp industry for farmers, processors, and consumers. In doing so, 
Colorado hopes to set a national example for how to establish an 
advanced hemp industry. The state will achieve this objective through 
balanced regulatory policies with a focus on economic and workforce 
development, inclusion, education, R&D, finance, and entrepreneurship. 
This report is created from the CHAMP stakeholder process, which 
reflects a general consensus reached among stakeholders in the 
industry, state and local government, federally recognized Indian 
Tribes, and higher education institutions on the steps needed to 
advance the hemp industry. Each recommendation was debated in an open 
forum, providing an opportunity for all participants to voice support 
or dissent and discuss as a group. In this way, the report provides a 
blueprint for actions needed to create and sustain a thriving hemp 
industry in Colorado.
Governance and Process
    The CHAMP initiative is a collaborative endeavor that spans 
multiple agencies, federally recognized Indian Tribes, local 
governments, and industry representatives. A board of directors 
provided high-level guidance for the initiative. Several other 
governing groups, including an executive committee, provided targeted 
guidance and reviewed draft materials.
    Eight stakeholder groups, each representing a distinct link in the 
hemp industry supply chain, met to discuss in greater detail the 
challenges and opportunities facing the industry. In total, 202 
stakeholders participated in the effort, meeting three times from July 
through December 2019. Stakeholder groups included 25-30 
representatives from each area of the hemp supply chain, together with 
representatives from the legal, financial services, and insurance 
industries. The eight stakeholder groups developed the policy 
recommendations included in Section 2 of this report.
Industry Analysis
    Hemp is an emerging specialty crop that has received considerable 
attention from agricultural producers, consumers, manufacturing 
businesses, and policymakers both internationally and in the State of 
Colorado. Hemp cultivation may provide an alternative enterprise to 
improve grower profitability and a potential engine of economic 
development and business creation, all while contributing to the 
sustainability of Colorado's natural resources as a substitute crop. 
Hemp can be manufactured and processed into numerous industrial and 
commercial goods for which there is national and international demand. 
Hemp applications range from building materials and textiles to food 
ingredients and wellness products.
    About 13 percent of all hemp acres registered and planted in 2019 
in the United States were in Colorado, the most of any U.S. state. Hemp 
acreage increased substantially over the past 3 years in Colorado and 
the U.S. in response to reformations to its legal status, creating an 
increase in biomass supplies at the producer level. However, hemp 
acreage decreased substantially in 2020 in Colorado and across the 
country. CDA records provide information on the number of registrations 
and the registered land area between 2014 and late July 2020. Between 
2014 and 2019, the number of registrants and registrations grew each 
year, resulting in about a ten-fold increase during that period. As of 
late July 2020, however, the number of registrants and registrations 
dropped between 40 and 45 percent below their comparable 2019 totals, 
respectively.
Figure 2. Colorado Hemp Registrants and Registrations, 2014-July 2020
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

          Source: Colorado Department of Agriculture.

    Many growers enjoyed solid returns in the 2014-2018 period of pilot 
programs organized under the Agricultural Act of 2014 (2014 Farm Bill). 
A relative scarcity of raw material and domestically produced flower 
available to supply the rapidly expanding cannabidiol (CBD) market 
helped to maintain wholesale prices for hemp and hemp products well 
above break-even levels. Starting in 2019, however, there was a sharp 
increase in production accompanied by a price collapse in the commodity 
market driven by both supply and demand. On the supply side, expansion 
of hemp production to new states and a dramatic expansion of planted 
acreage over a short period of time made hemp biomass relatively more 
abundant than it had been before. A lack of extraction and processing 
capacity, coupled with slower-than-expected consumer demand for CBD and 
other hemp products, yielded an environment in which hemp supply 
exceeded 2019 processing capacity or demand.
    Colorado is poised to benefit, however, as the supply chain grows 
and matures. For this growth in demand to occur, the industry must be 
proactive about early-stage issues like standardization, unproven use 
cases and efficacy, and the accuracy of dosing for consumable products. 
Moreover, it is imperative that Colorado explores all potential 
opportunities and supports a supply chain that relies upon industrial 
hemp for use in textiles, polymers, and construction inputs.
    Colorado can continue to lead in hemp innovation by facilitating 
and maintaining a favorable regulatory environment for research and 
development. The recommendations outlined in this CHAMP document 
demonstrate that the Colorado hemp industry continues to position 
itself as a production and manufacturing leader.
    To achieve leading status, research and development will be needed 
in several areas including (1) plant genetics; (2) effective uses for a 
variety of hemp industrial applications; (3) consumer uses and 
preferences for cannabinoid products; and (4) scalable and safe 
manufacturing practices.
Key Stakeholders
    The following are key agencies and institutions involved in 
advancing and regulating hemp in Colorado.

                Figure 3. Agency and Institution Summary
------------------------------------------------------------------------
                                         Role in Hemp Advancement and
       Agency or Organization                     Regulation
------------------------------------------------------------------------
Governor's Office                     Support, coalition building and
                                       resource investment
                                      Vision--providing a roadmap to an
                                       agricultural and industrial
                                       economic engine
                                      Experience--Governor Polis offered
                                       key hemp research provision in
                                       the 2014 Farm Bill, while serving
                                       in U.S. House of Representatives.
Department of Agriculture             Registration--Cultivation
                                       registration and management of
                                       electronic registration system.
                                      Field Sampling/Testing--Conduct
                                       and certify field sampling and
                                       THC testing.
                                      Certification Support--Provide THC
                                       testing in support of the seed
                                       certification program.
                                      Market Development--Provide
                                       general support to expand the
                                       growth of the hemp through the
                                       Markets Division.
Department of Public Health and       Lab Certification and testing for
 Environment                           third-party THC testing labs.
                                      Processor and manufacturer
                                       licensing, inspection and process
                                       validation.
                                      Marketing and labeling standards,
                                       including identity statement,
                                       ingredient list, batch tracking
                                       and other information.
Office of Economic Development and    Promote hemp as a high-value
 International Trade                   agricultural commodity and a next-
                                       generation industry.
                                      Employ economic development tools
                                       and incentives where appropriate.
Office of the Attorney General        Develop hemp policy in concert
                                       with state agencies.
                                      Address legal issues surrounding
                                       hemp with Federal Government.
Department of Public Safety           Enforce state hemp laws.
                                      Facilitate and support CDA
                                       implementing background checks.
                                      Work with local municipal, Tribal,
                                       and county law enforcement
                                       agencies to meet public safety
                                       needs.
                                      Coordinate with other law
                                       enforcement agencies to address
                                       inter- and intrastate
                                       transportation issues.
Higher Education Institutions         Colorado State University,
                                       University of Colorado, Adams
                                       State University, Fort Lewis
                                       College, CSU-Pueblo Institute of
                                       Cannabis Research, and Colorado
                                       Mesa University.
                                      Education outreach initiative for
                                       farmers, consumers, and the
                                       public through CSU.
                                      Cooperative extension service
                                       provides expertise on
                                       agriculture, water, business
                                       management.
                                      The Hemp Center of Excellence will
                                       centralize and advance hemp
                                       research, education, and grants.
Department of Regulatory Agencies     Liaison to the insurance industry
                                       to ensure proper coverages are
                                       available to hemp businesses.
                                      Financial services education for
                                       proper debt and other financing
                                       is available to the hemp
                                       industry.
                                      Assist financial institutions to
                                       extend services to the hemp
                                       industry.
Department of Natural Resources       Monitor hemp cultivation and
                                       processing operations to confirm
                                       legal water source and ensure
                                       proper water treatment prior to
                                       release.
Department of Revenue                 Certain hemp products are sold at
                                       regulated marijuana retail
                                       stores.
                                      Certain hemp products can be used
                                       as an ingredient for regulated
                                       marijuana products.
Ute Mountain and Southern Ute Tribes  Tribes are actively monitoring the
                                       hemp market and may develop a
                                       management plan, and production
                                       and/or processing enterprises.
Local Government                      Local governments may issue local
                                       occupancy permits that will be a
                                       condition of state permits where
                                       applicable.
                                      Zoning and land use ordinances for
                                       locating indoor growing,
                                       processing, and manufacturing
                                       facilities.
                                      Code enforcement, for fire safety,
                                       odor control, building safety,
                                       and other requirements.
Colorado Industry and Nonprofit       COHIA propels the hemp industry
 Organizations                         forward in Colorado through
                                       information, public policy work,
                                       and market development.
                                      Hemp Feed Coalition's objective is
                                       the Federal recognition of hemp
                                       as an animal feed ingredient.
                                      CSGA is the official seed
                                       certification agency and
                                       certifies hemp seed.
                                      Rocky Mountain Farmers Union is an
                                       advocate for family farmers and
                                       ranchers, rural communities, and
                                       consumers.
                                      Colorado Farm Bureau provides
                                       advocacy and various services to
                                       the agriculture community in
                                       Colorado.
                                      Colorado Bankers Association
                                       assist Colorado bankers
                                       understand the hemp industry and
                                       regulatory obstacles.
------------------------------------------------------------------------

Market-Level Principles and Policy Recommendations
    There were several recurring principles that emerged from the 
multiple stakeholder groups, documented below. These principles will 
are noted throughout the recommendations, and a holistic approach to 
each is essential in ensuring a successful hemp regulatory program.

          Principle 1: Promote economic development across the supply 
        chain
          Principle 2: Chain of custody and information sharing will 
        drive an expanding hemp industry
          Principle 3: Focus on THC Control
          Principle 4: Recognize the importance of Federal 
        compatibility while also advocating for reasonable regulations
          Principle 5: Recognize the importance in intergovernmental 
        coordination
          Principle 6: Promote access to finance and insurance services 
        across the supply chain
          Principle 7: Promote equity, diversity and inclusion across 
        the supply chain

    Identification of key recommended deliverables through the 
stakeholder process was the driving focus of the CHAMP initiative. The 
following stakeholder recommendations represent sensible and forward-
looking deliverables intended to bolster Colorado's hemp industry. 
However, it is important to note that implementation is conditional on 
the market need, Federal regulatory environment, procurement of 
resources, including increased staff and funding, as well the passage 
of legislation and production of rules and regulations. Dynamic changes 
are still occurring for the hemp industry, particularly regarding 
market conditions and Federal regulations. Moreover, the [COVID]-19 
pandemic will most likely have an adverse impact on funding, staffing, 
and other resources.
    While these recommendations represent a general consensus of the 
stakeholders, including the agencies that will implement the 
deliverables, some of these recommendations may be difficult to 
implement, require adjustments, or may be delayed based on the factors 
mentioned above.

                    Figure 4. Recommendation Summary
------------------------------------------------------------------------
           Supply                Existing/New
  No.    Chain Area    Title       Program       Agencies      Summary
------------------------------------------------------------------------
1.       R&D and     Hemp Seed  Existing       CDA, CSU,     Support
          Seed        & Clone    program with   CSGA, AOSCA   research
                      Certific   enhancement/                 and
                      ation      expansion                    developmen
                      Program                                 t to
                                                              provide
                                                              stable
                                                              hemp
                                                              genetics
                                                              and
                                                              increased
                                                              availabili
                                                              ty of
                                                              varieties
                                                              that will
                                                              consistent
                                                              ly meet
                                                              THC
                                                              compliance
                                                              regulation
                                                              s.
                                                              Continue
                                                              to allow
                                                              the use of
                                                              open
                                                              source
                                                              seeds in
                                                              Colorado.
2.       R&D and     Cross-     New program    CDA, Center   Allow CDA
          Seed        pollinat                  of            to provide
                      ion                       Excellence,   limited
                      Informat                  Colorado      informatio
                      ion                       universitie   n on the
                                                s             presence
                                                              of hemp
                                                              farms to
                                                              other
                                                              nearby
                                                              hemp
                                                              producers
                                                              to help
                                                              minimize
                                                              cross-
                                                              pollinatio
                                                              n.
                                                              Research
                                                              ways to
                                                              mitigate
                                                              cross-
                                                              pollinatio
                                                              n issues
                                                              (Center of
                                                              Excellence
                                                              and
                                                              educationa
                                                              l
                                                              institutio
                                                              ns).
3.       R&D and     Plant      New program    CDA,          Establish a
          Seed        Breeding                  Colorado      separate
                      and                       universitie   registrati
                      Genetic                   s, Center     on program
                      Research                  of            specific
                      Regulati                  Excellence,   to hemp
                      ons                       CSGA          plant
                                                              breeding
                                                              and
                                                              genetic
                                                              research
                                                              to improve
                                                              the
                                                              quality
                                                              and
                                                              uniformity
                                                              of seed
                                                              genetics
                                                              and supply
                                                              for the
                                                              state's
                                                              producers.
4.       Cultivatio  USDA       New program    CDA, CDPHE    Align state
          n           State                                   hemp
                      Plan                                    regulatory
                      Alignmen                                practice
                      t                                       with USDA
                                                              requiremen
                                                              ts to
                                                              ensure
                                                              uninterrup
                                                              ted
                                                              operations
                                                              . Advocate
                                                              for
                                                              appropriat
                                                              e changes
                                                              to Federal
                                                              law as
                                                              needed to
                                                              promote
                                                              growth and
                                                              investment
                                                              in the
                                                              Colorado
                                                              hemp
                                                              industry.
5.       Cultivatio  Legal      New program    DNR, CDA      Update CDA
          n           Water                                   registrati
                      Supply                                  on process
                                                              to develop
                                                              a
                                                              procedure
                                                              and
                                                              guidelines
                                                              to
                                                              collaborat
                                                              e with
                                                              DNR. DNR
                                                              will
                                                              ensure
                                                              registrant
                                                              s have
                                                              legal
                                                              access to
                                                              water for
                                                              cultivatio
                                                              n.
6.       Cultivatio  Center of  New program    CDA, CDPHE,   Develop a
          n           Excellen                  Colorado      public-
                      ce                        universitie   private
                                                s, OEDIT,     partnershi
                                                Tribal        p between
                                                governments   academic
                                                              institutio
                                                              ns,
                                                              industry,
                                                              state
                                                              agencies,
                                                              and
                                                              private
                                                              stakeholde
                                                              rs to
                                                              establish
                                                              a Colorado
                                                              Hemp
                                                              Center of
                                                              Excellence
                                                              to
                                                              accelerate
                                                              developmen
                                                              t and
                                                              research
                                                              and
                                                              education
                                                              in hemp
                                                              cultivatio
                                                              n,
                                                              science,
                                                              and
                                                              technology
                                                              .
7.       Cultivatio  Non-       Existing       CDA, CDPHE,   Follow USDA
          n           Complian   program with   Tribal        rules for
                      t Plant    enhancement/   governments   sampling,
                      Material   expansion                    testing,
                                                              and non-
                                                              compliant
                                                              plant
                                                              material
                                                              disposal.
                                                              Advocate
                                                              for ways
                                                              to test
                                                              and
                                                              dispose of
                                                              non-
                                                              compliant
                                                              plant
                                                              material
                                                              that
                                                              retain
                                                              value in
                                                              the supply
                                                              chain,
                                                              including
                                                              post-
                                                              harvest
                                                              testing,
                                                              industrial
                                                              uses, and
                                                              remediatio
                                                              n
                                                              procedures
                                                              . Ensure
                                                              disposal
                                                              regulation
                                                              s are
                                                              operable
                                                              and not
                                                              overly
                                                              burdensome
                                                              for the
                                                              state or
                                                              hemp
                                                              producers.
8.       Cultivatio  Coordinat  Existing       CDA, CDPHE,   Provide
          n           ion of     program with   Tribal and    hemp
                      State      enhancement/   local         registrati
                      and        expansion      governments   on
                      Local                     , law         informatio
                      Regulato                  enforcement   n to other
                      ry                        agencies      state and
                      Authorit                                local
                      y                                       government
                                                              agencies,
                                                              under a
                                                              privacy
                                                              restrictio
                                                              n, to
                                                              facilitate
                                                              other
                                                              jurisdicti
                                                              ons'
                                                              inspection
                                                              s, permit
                                                              approvals
                                                              and
                                                              enforcemen
                                                              t actions
                                                              as
                                                              directed
                                                              by Federal
                                                              law.
9.       Testing     Field      Existing       CDA           Review and
                      Sampling   program with                 improve
                      and        enhancement/                 guidance
                      Sampling   expansion                    on
                      Agent                                   sampling
                      Certific                                and
                      ation                                   testing
                                                              hemp grown
                                                              in
                                                              Colorado
                                                              for THC
                                                              content
                                                              according
                                                              to USDA
                                                              requiremen
                                                              ts and
                                                              establish
                                                              a
                                                              certificat
                                                              ion
                                                              program to
                                                              allow
                                                              third
                                                              parties to
                                                              collect
                                                              samples in
                                                              the field
                                                              for
                                                              regulatory
                                                              use.
10.      Testing     Hemp Lab   Existing       CDPHE, CDA    Develop a
                      Certific   program with                 certificat
                      ation      enhancement/                 ion
                      Program    expansion                    program
                                                              that
                                                              provides
                                                              guidance
                                                              to private
                                                              analytical
                                                              laboratori
                                                              es on
                                                              certificat
                                                              ion
                                                              requiremen
                                                              ts,
                                                              appropriat
                                                              e
                                                              analytical
                                                              methods,
                                                              and
                                                              general
                                                              testing
                                                              procedures
                                                              .
11.      Transporta  Electroni  New program    CDA, CDPHE,   Implement
          tion        c                         Tribal and    an ETS to
                      Traceabi                  local         support an
                      lity                      governments   uninterrup
                      System                    , law         ted chain
                                                enforcement   of custody
                                                              for hemp
                                                              products
                                                              from
                                                              harvest to
                                                              commercial
                                                              sale and
                                                              to provide
                                                              secure and
                                                              verifiable
                                                              informatio
                                                              n to
                                                              various
                                                              stakeholde
                                                              rs.
12.      Transporta  Transport  Existing       CDA, CDPHE,   Develop
          tion        ation      program with   Tribal and    guidance
                      Protocol   enhancement/   local         and best
                                 expansion      governments   practices
                                                , law         for
                                                enforcement   transporti
                                                              ng hemp
                                                              and hemp
                                                              products
                                                              within
                                                              Colorado,
                                                              including
                                                              proper
                                                              documentat
                                                              ion and
                                                              recordkeep
                                                              ing.
13.      Processing  Processor  Existing       CDPHE, CDA    Continue
                      Registra   program                      the
                      tion and                                integratio
                      Inspecti                                n of hemp
                      on                                      into the
                                                              current
                                                              Food and
                                                              Supplement
                                                              Manufactur
                                                              er
                                                              Program.
                                                              Further
                                                              define
                                                              licensed
                                                              activities
                                                              as needed
                                                              and
                                                              provide a
                                                              means for
                                                              the state
                                                              to
                                                              register
                                                              and
                                                              regulate
                                                              hemp
                                                              processors
                                                              and
                                                              manufactur
                                                              ers in
                                                              Colorado.
                                                              This is an
                                                              existing,
                                                              active
                                                              program.
14.      Processing/ Processor  Existing       CDPHE, CDA    Clarify and
          Manufactu   and        program                      develop
          ring        Manufact                                state
                      urer                                    regulatory
                      Standard                                requiremen
                      s                                       ts and
                                                              appropriat
                                                              e policy
                                                              and
                                                              guidance
                                                              for
                                                              processing
                                                              and
                                                              manufactur
                                                              ing
                                                              practices
                                                              related to
                                                              hemp
                                                              products
                                                              for human
                                                              consumptio
                                                              n.
15.      Manufactur  Manufactu  Existing       CDPHE, CDA    Continue
          ing         rer        program                      the
                      Registra                                integratio
                      tion and                                n of hemp
                      Inspecti                                into the
                      on                                      current
                                                              food and
                                                              dietary
                                                              supplement
                                                              manufactur
                                                              er
                                                              program.
                                                              Further
                                                              define
                                                              licensed
                                                              activities
                                                              as needed
                                                              and
                                                              provide a
                                                              means for
                                                              the state
                                                              to
                                                              register
                                                              and
                                                              regulate
                                                              hemp
                                                              processors
                                                              and
                                                              manufactur
                                                              ers in
                                                              Colorado.
                                                              This is an
                                                              existing,
                                                              active
                                                              program.
16.      Marketing   Glossary   New program    CDPHE, CDA    Provide a
                      of Terms                                list of
                                                              terms and
                                                              definition
                                                              s for
                                                              different
                                                              stages in
                                                              the supply
                                                              chain to
                                                              create a
                                                              universal
                                                              understand
                                                              ing of the
                                                              terminolog
                                                              y used for
                                                              hemp
                                                              production
                                                              ,
                                                              marketing,
                                                              and other
                                                              purposes.
17.      Marketing   Marketing  Existing       CDPHE, CDA    Establish
                      and        program                      guidance
                      Labeling                                for
                      Guidance                                retailer
                                                              and
                                                              manufactur
                                                              er
                                                              marketing
                                                              and
                                                              labeling
                                                              which
                                                              harmonize
                                                              with
                                                              national
                                                              and
                                                              internatio
                                                              nal
                                                              standards,
                                                              when
                                                              appropriat
                                                              e, for
                                                              consumable
                                                              hemp
                                                              products.
18.      Marketing   Quality    New program    CDA, CDPHE    Form a
                      Assuranc                                quality
                      e                                       assurance
                      Certific                                program
                      ation                                   such as a
                      Program                                 ``Good
                                                              Hemp
                                                              Program''
                                                              that
                                                              defines
                                                              that
                                                              establishe
                                                              s the
                                                              minimum
                                                              standards
                                                              which
                                                              Colorado
                                                              producers/
                                                              manufactur
                                                              ers must
                                                              meet to
                                                              qualify
                                                              for
                                                              special
                                                              certificat
                                                              ion/
                                                              designatio
                                                              n, the
                                                              fees from
                                                              which will
                                                              fund hemp
                                                              research
                                                              and
                                                              promotion.
19.      Marketing   State      New program    Statewide     Encourage
                      Procurem                                state
                      ent of                                  procuremen
                      Industri                                t of
                      al Hemp                                 industrial
                      Products                                hemp
                                                              products.
20.      Finance &   Guidance   Existing       DORA          Provide
          Insurance   & Best     program                      guidance
                      Practice                                and best
                      s                                       practices
                                                              to
                                                              financial
                                                              services
                                                              institutio
                                                              ns and
                                                              insurance
                                                              carriers
                                                              to
                                                              facilitate
                                                              increased
                                                              access to
                                                              financial
                                                              services
                                                              for
                                                              Colorado
                                                              hemp
                                                              businesses
                                                              .
21.      All         Expanded   New program    DORA, CDA,    Provide
                      Data                      CDPHE,        aggregated
                      Availabi                  OEDIT         registrati
                      lity                                    on and
                                                              other
                                                              informatio
                                                              n to
                                                              financial
                                                              institutio
                                                              ns and
                                                              insurance
                                                              carriers
                                                              to help
                                                              expedite
                                                              access to
                                                              services.
------------------------------------------------------------------------

                                                              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>
                                                              
Future Research and Policy Development
    The following regulatory issues were identified during the 
stakeholder meetings and subsequent proceedings as issues or subjects 
that required further research and policy development.

   Feminized seed and clone certification. Convene a 
        stakeholder process to develop guidance and determine the 
        feasibility of a feminized seed certification program and for 
        the operational model and facilities for a clonal certification 
        program. This program will involve CSGA and CDA.

   Cross-pollination. Research distance, pollen viability, 
        size, and other factors that determine risk for hemp cross-
        pollination.

   Retaining value in the supply chain. Use existing regulatory 
        avenues for non-compliant plant material including advocating 
        for exemption of mature stalks and seeds from destruction. In 
        addition, convene a stakeholder process to determine the rules 
        and procedures to develop secure supply channels that allow 
        non-compliant plant material to be processed for non-consumable 
        industrial uses; or to have the THC extracted and removed from 
        the stream of commerce.

   Co-location of hemp and licensed marijuana businesses. 
        Prohibit the co-location of marijuana and hemp cultivation, 
        processing, and manufacturing businesses until Federal laws 
        allow. Explore an efficient regulatory structure to allow for 
        the co-location of all types of cannabis cultivation and/or 
        manufacturing facilities.

   Electronic traceability system. Convene a process to develop 
        specifications, security, and documentation requirements for an 
        ETS that will ensure a secure chain of custody for hemp 
        products in Colorado.

   Transport of concentrated intermediate products. As Federal 
        law allows, determine a transportation protocol for 
        intermediate hemp concentrates. These are business-to-business 
        transactions where products transported will be further 
        processed to bring THC levels into compliance before sale to 
        consumers.

   Non-consumable industrial hemp manufacturing. Determine 
        whether additional regulatory oversight of industrial products 
        manufacturing operations is needed, and if so, establish the 
        lead regulatory agency and most advantageous regulatory 
        framework.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>
        
          Journal Communications Inc., 
        FREELANCE' Shared Rights.

   Inhalable and suppository hemp. Determine the best 
        regulatory treatment for inhalable and suppository hemp, 
        whether direct initial regulation by the state or by deferring 
        to the Federal Government timeline for hemp product regulation.

   Quality assurance program. Determine the costs and benefits 
        of developing a quality assurance program that sets quality, 
        purity, and process standards and promotes a Colorado brand of 
        hemp products.

   Retail Framework. Convene a stakeholder process to develop a 
        retail framework for hemp that integrates into an existing 
        retail framework for food or dietary supplements.

   Financial services and insurance data. Determine data gaps 
        that exist for insurance and financial institutions and the 
        specific requirements and funding needed to expedite access to 
        services

    The items listed above may require a task force or stakeholder 
process to further develop the proper regulatory scope and 
implementation action items[.]
Section 1. Industry Analysis and Key Stakeholders
Introduction
    In response to passing the 2018 Farm Bill, the anticipated 
publication of additional enabling regulations, and Governor Jared 
Polis' stated priority for Colorado to remain a driving force in hemp 
production, the Colorado Department of Agriculture (CDA) developed a 
statewide partnership known as the Colorado Hemp Advancement and 
Management Plan (CHAMP) in June 2019.
    Even though Colorado has hosted a successful hemp industry since 
2014, it was clear that Colorado would need to quickly establish a 
regulatory framework to accommodate new producers and products entering 
the market and to narrow regulatory gaps in the hemp supply chain not 
considered by the 2018 Farm Bill. In addition, with new market 
opportunities materializing, Colorado needed to implement initiatives 
to advance the growth of the industry. CHAMP was formed to develop a 
blueprint that would outline how the state could address the top issues 
related to both the advancement and management of the state hemp 
industry. Through the plan's development, Colorado aimed to build 
consensus among the different stakeholder groups that represent the 
industry, regulators and governmental agencies, and academic 
institutions.
    The CHAMP initiative and this report both represent a broad 
stakeholder effort intended to achieve that consensus. The CHAMP 
initiative includes representatives from CDA, the Governor's Office, 
Department of Public Health and Environment (CDPHE), Department of 
Revenue (DOR), Department of Regulatory Agencies (DORA), Office of 
Economic Development and International Trade (OEDIT), Department of 
Public Safety (DPS), the Southern Ute Indian Tribe, the Ute Mountain 
Ute Tribe, Department of Education (CDE), local governments, state 
institutions of higher learning, and industry experts. A list of all 
CHAMP stakeholders is included in Appendix A.
    Through the CHAMP initiative, stakeholders explored challenges and 
opportunities facing the Colorado hemp supply chain, including research 
and development, seed, cultivation, testing, transportation, 
processing, manufacturing, marketing, and finance and insurance. CDA 
created the CHAMP initiative to ensure that a wide range of 
stakeholders, including members of the public, would have multiple 
opportunities to comment on and participate in a variety of industrial 
hemp topics.
    The goals of this collaborative policy planning process are to (1) 
develop a robust and functional hemp supply chain; (2) create new 
sustainable employment and entrepreneurial opportunities; and (3) 
establish a strong market for Colorado agricultural communities.
    Ultimately, the resulting framework presented in this report 
outlines challenges faced by the hemp industry and initiatives 
suggested by stakeholders to maintain and build upon Colorado's 
position as an industry leader, representing the largest gathering of 
the hemp industry and government stakeholders held in any state to 
date.
Regulatory Context
    The 21 recommend deliverables outlined in this report represent a 
consensus regarding hemp-related policy priorities for Colorado. 
Implementation is conditioned on the regulatory environment; resources, 
including increased staff and funding; as well as the passage of 
legislation and corresponding regulatory action. While every effort 
will be made to pursue these policies and programs, the Federal 
Government may continue its strict regulatory posture and insufficient 
resources may impede overall implementation; particularly with the 
economic impact of COVID-19. But the market-level principles and 
stakeholder recommendations in this report collectively represent a 
broad guidance document for statewide policy for the hemp supply chain. 
CHAMP is informed by the following laws, regulations, and policies.
State Law
    Colorado citizens voted to pass Amendment 64 to the Colorado 
Constitution in 2012, which in part directed the General Assembly to 
enact legislation governing the cultivation, processing, and sale of 
industrial hemp.\1\ Legislation adopted in 2013 delegated 
responsibility for most hemp-related registration and inspection 
oversight to CDA. Statutory authority for Colorado's Industrial Hemp 
Program appears in Title 35 Article 61 of the Colorado Revised 
Statutes. In the following years, CDA promulgated a comprehensive set 
of rules to administer and enforce the Colorado Industrial Hemp 
Regulatory Program Act, which is enabled by the regulations in 8 CCR 
1203-23. Under Colorado's program, interested producers and product 
manufacturers must register with CDA or CDPHE to produce or manufacture 
hemp or hemp products.
---------------------------------------------------------------------------
    \1\ As defined in the Colorado Revised Statutes, and in the 2018 
Farm Bill, the term ``industrial hemp'' means the plant species 
Cannabis sativa L. and any part of that plant, including the seeds 
thereof and all derivatives, extracts, cannabinoids, isomers, acids, 
salts, and salts of isomers, whether growing or not, with a D-9-
tetrahydrocannabinol concentration of not more than 0.3 percent on a 
dry weight basis.
---------------------------------------------------------------------------
2018 Federal Farm Bill
    The 2018 Farm Bill clarified that both hemp and hemp products are 
legal in the U.S., amended the Controlled Substances Act (CSA) to 
remove hemp from the definition of marijuana, and revised language in 
the 2014 Farm Bill to expressly include products derived from hemp in 
the legal definition of industrial hemp. The legislation also allowed 
commercial cultivation and manufacture of hemp outside of 2014 Farm 
Bill pilot projects. Under the 2018 Farm Bill, each state must submit a 
plan to the USDA for approval that includes a framework for regulation 
and monitoring of production. The 2018 Farm Bill also instructs the 
USDA to promulgate Federal rules for commercial hemp production. 
Importantly, the 2018 Farm Bill does not address regulations for 
processing and manufacturing of hemp products into food, drugs, and 
cosmetics, which are still forthcoming from the Food and Drug 
Administration (FDA) as of the date of this report.
USDA Interim and Final Rule
    The USDA issued its first set of hemp regulations in October of 
2019, the Interim Final Rule (IFR), which formally addressed hemp 
cultivation, harvest, and testing. The IFR established a regulatory 
framework for USDA oversight of domestic hemp production under the 2018 
Farm Bill. The IFR established requirements for approval of state or 
Tribal plans regulating the production of hemp in their territories. 
Rules addressed the production, sampling, testing, and disposal of hemp 
plants, and set thresholds for acceptable amounts of THC. In comments 
submitted to USDA, the State of Colorado twice urged USDA to modify the 
IFR and adopt a more flexible regulatory structure to advance the 
development of a robust, nationwide hemp industry.\2\ In January of 
2021, the USDA published a Final Rule which made several changes from 
the IFR. Many of the changes aligned with the comments submitted by the 
State of Colorado. Specifically, the USDA cited the comments from 
Colorado as one of the reasons for increasing the time to sample from 
15 to 30 days before harvest, and to allow remediation of non-compliant 
plants into complaint plant biomass to help farmers mitigate against 
financial loss.
---------------------------------------------------------------------------
    \2\ See comments submitted to USDA on the IFR, https://
www.colorado.gov/pacific/sites/default/files/
FinalIFRComments2020_0.pdf; https://drive.google.com/file/d/
1kUpA86y7oJ3tNEs
VQR26oIDoRdoLHrAu/view.
---------------------------------------------------------------------------
State Hemp Plan Submitted to USDA
    The 2018 Farm Bill and the IFR require each state that desires to 
have primary regulatory authority over the production of hemp within 
its jurisdiction to submit a management plan to USDA that outlines the 
regulation of various aspects of hemp cultivation. The State of 
Colorado submitted its plan for USDA review on June 16, 2020. Many 
details of this plan were derived or adapted from stakeholder 
involvement in the CHAMP process and from the existing Colorado 
industrial hemp regulatory framework, which was established after the 
adoption of Senate Bill 13-241 in 2013. The state plan submitted to 
USDA pushed for several policies reflected in CHAMP that are designed 
to protect and advance the industry. Some of these policies were 
revised to address the specific requirements laid out by USDA in the 
IFR. Due to the changes made by the USDA from the Interim to Final 
Rule, Colorado will be submitting a revised plan by October 2021. CDA 
will continue to advocate for policies that best work for Colorado and 
its hemp producers while staying within Federal guidelines as adopted 
in Senate Bill 20-197, which aligns state and Federal hemp policy and 
regulation.
DEA Interim Final Rule
    In response to the 2018 Farm Bill and the USDA IFR, the U.S. Drug 
Enforcement Administration (DEA) adjusted some of its rules regarding 
hemp and marijuana in August 2020. These changes are stated by the DEA 
to ``merely conform'' certain definitions to the 2018 Farm Bill, 
although there has been immediate opposition and lawsuits filed from 
hemp industry groups. On the surface, the IFR completes three 
revisions: (1) Revising the definition of ``tetrahydrocannabinols'' to 
exclude naturally occurring tetrahydrocannabinols in hemp; (2) Revising 
the definition of marijuana extract (a controlled substance) to include 
any cannabis (i.e., marijuana or hemp) extracts with a concentration of 
more than 0.3 percent D9-THC on a dry weight basis; and (3) Removing 
FDA approved drugs that contain CBD from the controlled substances 
list. The rules, if implemented as written, would limit certain hemp-
derived cannabinoid production and require all hemp extracts to be kept 
below 0.3 percent THC for transport. These rules add further regulatory 
complexity and risk to hemp production and processing.
Objective Statement
    The CHAMP initiative aims to promote the health and safety of the 
hemp industry for farmers, processors, and consumers. In doing so, 
Colorado hopes to set a national example for how to establish an 
advanced hemp industry. The state will achieve this objective through 
balanced regulatory policies with a focus on economic and workforce 
development, inclusion, education, R&D, finance, and entrepreneurship. 
The strength of this report is that it reflects a consensus view among 
stakeholders on how to advance the hemp industry in Colorado. The 
consensus was achieved through inclusive dialogue involving 
stakeholders in the industry, state and local government, federally 
recognized Indian Tribes, and higher education institutions. In 
addition, the report functions as a blueprint for building and 
sustaining a thriving hemp industry in Colorado by providing a 
comprehensive set of recommendations for developing and implementing 
policies in support of each link in the hemp supply chain.
Governance and Process
    The CHAMP Board of Directors provides high-level guidance for the 
initiative. The CHAMP executive committee provides more targeted 
guidance and review of draft materials. The governing structure of the 
project is depicted in Figure 5.
Figure 5. CHAMP Governance
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    The executive committee met in July 2019 to develop the scope of 
work and discussion topics for each stakeholder group. There were eight 
stakeholder groups that met from July through December 2019. The 
stakeholder groups developed the CHAMP policy recommendations included 
in Section 2 of this report. The eight stakeholder groups each 
consisted of 25-30 specific state, Tribal, and local officials, and 
industry experts in each area of the hemp supply chain. Stakeholder 
groups also included representatives from the legal, finance, and 
insurance industries. There were 202 total stakeholders across eight 
stakeholder groups. Figure 6 shows a description of the supply chain 
and stakeholder groups.
Figure 6. Hemp Supply Chain
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    Each stakeholder group met three times and developed a number of 
individual recommended deliverables.
    The project team compiled and combined stakeholder group work into 
21 key recommendations spanning eight distinct links in the hemp 
industry supply chain.
    Additional engagement completed as part of the CHAMP initiative 
includes several public meetings held across the state to solicit 
public input; a stakeholder meeting to discuss and solicit comment on 
the USDA IFR document; and submission of the state hemp plan to USDA. 
Throughout the process, members of the project team provided support 
and research on regulatory best practices, economic and market 
opportunity and characteristics, and a synthesis of proceedings into 
the recommendations contained in this report.
Industry Analysis
    The following is a brief summary analysis of Colorado's hemp 
industry; a more detailed analytical review can be found in Appendix B.
    Hemp is an emerging specialty crop that has received considerable 
attention from agricultural producers, consumers, manufacturing 
businesses, and policymakers both internationally and in the State of 
Colorado. Hemp cultivation may provide an alternative enterprise to 
improve grower profitability and a potential engine of economic 
development and business creation while also contributing to the 
sustainability of Colorado's natural resources as a substitute crop. 
Hemp can be manufactured and processed into numerous industrial and 
commercial goods for which there is national and international demand. 
Hemp applications range from building materials and textiles to food 
ingredients and wellness products.
    While hemp may hold great promise for Colorado, the convergence of 
the hemp supply chain with the broader agricultural and economic 
landscape creates uncertainty and challenges. Historically, hemp has 
been a more regulated crop than others due to its cousin, marijuana. 
Other challenges include a lack of Federal regulation of post-farm hemp 
products by the FDA and a general lack of awareness regarding the uses 
of hemp derivatives in consumer and industrial applications.
    Nonetheless, Colorado has been a leader in virtually all measures 
of hemp activity. In 2019, about 13 percent of all hemp acres 
registered and planted in the United States were in Colorado, the most 
of any state in the U.S. Over the past 3 years, hemp acreage has 
increased substantially in Colorado and the U.S. in response to 
reformations to its legal status, creating an increase in biomass 
supplies at the producer level. However, hemp acreage decreased 
substantially in 2020 in Colorado. CDA records provide information on 
the number of registrations and registered land area between 2014 and 
late July 2020. Between 2014 and 2019, the number of registrants and 
registrations grew each year, resulting in about a ten-fold increase 
during that period. As of late July 2020, however, the number of 
registrants and registrations dropped between 40 and 45 percent below 
their comparable 2019 totals, respectively.
Figure 7. Colorado Hemp Registrants and Registrations, 2014-July 2020
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          Source: Colorado Department of Agriculture.

    Many growers enjoyed solid returns in the 2014-2018 period of pilot 
programs organized under the Agricultural Act of 2014 (2014 Farm Bill). 
A relative scarcity of raw material and domestically produced flower 
available to supply the rapidly expanding CBD market helped to maintain 
wholesale prices for hemp and hemp products well above break-even 
levels. Starting in 2019, however, there was a sharp increase in 
production accompanied by a price collapse in the commodity market 
driven by both supply and demand. On the supply side, expansion of hemp 
production to new states and a dramatic expansion of planted acreage 
over a short period of time made hemp biomass relatively more abundant 
than it had been before. A lack of extraction and processing capacity, 
coupled with slower-than-expected consumer demand for CBD and other 
hemp products, yielded an environment in which hemp supply exceeded 
2019 processing capacity or demand.
    With producers facing oversupply due to a fragmented market, the 
long-term outlook suggests that consumers will continue to look for new 
food and dietary supplement alternatives, while businesses will 
continue to seek more sustainable and renewable sources of materials. 
So, despite recent challenges, there is undeniable potential for growth 
in demand for industrial and consumer hemp products in the U.S.
    As the supply chain grows and matures, Colorado is poised to 
benefit. For this growth in demand to occur, however, the industry must 
be proactive about early-stage issues like standardization, unproven 
use cases and efficacy, and the accuracy of dosing for consumable 
products. Moreover, it is imperative that Colorado explores all 
potential opportunities and supports a supply chain that relies upon 
industrial hemp for use in textiles, polymers, and construction inputs.
    Overall, there is a lack of consumer education around cannabinoids, 
which is exacerbated by the lack of Federal regulations related to 
cannabinoids in consumer products. On the industrial side, there is 
currently little applied research or proven cost-effective use cases 
for different hemp applications.
    Colorado can continue to lead the industry in hemp innovation by 
facilitating and maintaining a favorable regulatory environment for 
research and development. The recommendations outlined in this CHAMP 
document demonstrate that the Colorado hemp industry continues to 
position itself as a production and manufacturing leader.
    To achieve leading status, research and development will be needed 
in several areas including (1) genetics; (2) effective uses for a 
variety of hemp industrial applications; (3) consumer uses and 
preferences for cannabinoid products; and (4) scalable and safe 
manufacturing practices.
Key Stakeholders
    Many agencies and organizations have played key roles in the 
overall establishment of the hemp industry in Colorado. The CHAMP 
initiative brought together these agencies and industry organizations 
to develop the blueprint for further advancement and management of 
hemp. What follows below describes a cross-section of the 
constituencies and highlights the key functions and services provided 
toward developing Colorado's hemp industry.
Governor's Office
    Colorado became a leader in national hemp production with the 
passage of the 2014 Farm Bill and the subsequent roll-out of Colorado's 
hemp pilot program. With the changes in the 2018 Farm Bill, the 
Governor's Office prioritized Colorado's status as an innovative force 
in promoting the production of hemp as a high-value agricultural 
product.
    The Governor's Office dedicated significant resources to the CHAMP 
initiative, ensuring early on that the project involved principals from 
key state departments. Governor Polis twice filed a joint response to 
the USDA's Interim Final Rule and Request for Comments, the first 
printed on Colorado-grown hemp paper and filed in partnership with the 
Department of Agriculture and Attorney General Weiser. More recently, 
the Governor issued a proclamation on June 11, 2020, also printed on 
Colorado-grown hemp, declaring June 6-June 13 as Hemp Week and ordered 
an American flag made from industrial hemp flown over the Colorado 
State Capitol. And on June 18, 2020, with support from the Governor's 
Office, the CDA filed its hemp management plan with the USDA.

    Vision

    Since 2014, Colorado's hemp program has grown to include over 
87,000 acres of hemp and 2,600 registrations. Moving forward, the 
Governor's Office hopes to help the Colorado hemp industry grow and 
innovate while increasing good jobs and keeping Colorado as a top state 
for production through appropriate regulation.
    What's more, the Governor's Office has sought to ensure that hemp 
producers and hemp-related business obtain access to banking, financial 
services, finance, and insurance in a manner similar to other parts of 
the agriculture value chain, initially throughthe joint publication of 
the Roadmap to Cannabis Banking & Financial Services with DORA.

    Experience

    In five terms as a Member of the U.S. Congress, Governor Polis 
advanced various bipartisan bills promoting the development of hemp in 
Colorado. He, along with other Congressional Members, added the hemp 
research amendment to the 2014 Farm Bill that allowed state agriculture 
departments, colleges, and universities to grow hemp for academic and 
agricultural research purposes.\3\ In 2017, then-Congressman Polis also 
helped to launch the Cannabis Caucus, intended to promote and protect 
hemp and marijuana. In that year, Polis hosted ``Hemp on the Hill'' 
with the Cannabis Caucus, which was the first event of its kind.
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    \3\ H. Amdt. 208, 113th Congress (2013-2014).
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Colorado Department of Agriculture
    The CDA oversees and promotes agriculture in partnership with other 
state departments and local governments and through specific programs 
authorized by the General Assembly. The Commissioner of Agriculture 
serves as the head of the CDA, working with members of the Colorado 
Agricultural Commission and other boards or bodies to formulate policy 
for the state.
    In 2015, the CDA became the primary agency responsible for 
regulating hemp cultivation in Colorado with the creation of the 
state's pilot industrial hemp program, principally through the Plant 
Industry and Laboratory Services Divisions. Through those two 
divisions, CDA regulates producers, provides testing services, and 
administers a certified seed program, but does not have jurisdiction 
over the processing, sale, or distribution of the crop. Further, CDA 
serves as the lead agency regarding the development and administration 
of the state's industrial hemp plan submitted to USDA under the 2018 
Farm Bill and the IFR.

    Registration

    The CDA registers applicants under the 2014 Farm Bill pilot hemp 
program and will remain the main regulatory agency for hemp cultivation 
registration. When the 2018 Farm Bill produced a sharp increase in the 
number of registration applications, the CDA developed a secure online 
registration system.

    Field Sampling and Testing

    The CDA Laboratory Services Division conducts accurate, timely, and 
legally defensible analysis of various agricultural samples, including 
industrial hemp, on a random selection basis. The division has 
established standard operating procedures to handle hemp samples for 
THC analysis. CDA will continue in this role in sampling and testing 
hemp for compliant levels of THC and will coordinate and certify third-
party field sampling agents to expand sampling coverage.

    Seed Certification Support

    The CDA Plant Industry Division created the first certified hemp 
seed program in the nation and helped to develop an industry-leading 
hemp program. The Colorado Seed Growers Association (CSGA) is the lead 
certifying agency in Colorado; CDA will continue to support CSGA by 
providing THC verification as part of the seed certification process.
Colorado Department of Public Health & Environment
    CDPHE seeks to advance the health of Coloradans, protecting the 
places where they live through health and environmental protection 
programs and activities. CDPHE has overseen the inclusion of hemp in 
consumable products since 2017, whether as a food ingredient or as a 
nutritional supplement, through a combination of regulations, policy, 
and licensing regimes. It is expected that CDPHE will continue to play 
a role in the Colorado hemp industry under the CHAMP initiative in the 
manner described below.

    Lab Certification and Testing

    CDPHE helps manage lab certification for most analytical 
laboratories in the state for food and environmental testing. CDPHE 
will serve as the main certifying agency for private labs that test for 
compliant THC levels in hemp. Approved and certified labs will be 
required to meet ongoing inspection, testing, and compliance protocols 
for maintaining certification. 
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    Processors and Manufacturers

    Colorado permits the inclusion of industrial hemp in food and 
dietary supplements, subject to compliance with CDPHE requirements. 
CDPHE has adopted applicable FDA regulations, specifically 21 CFR 111 
(dietary supplements) and 117 (food), for hemp manufacturers and 
processors. In addition to these requirements, CDPHE requires that all 
parts of hemp used in consumable products must come from a hemp 
producer registered and in good standing with the laws of the 
jurisdiction where such producer grows hemp, THC must not be above 
allowable limits, finished products are required to be tested, and the 
product must meet state labeling requirements.

    Marketing and Labeling

    CDPHE sets standards for hemp-related product labeling. Hemp 
products must include certain standard language, including an identity 
statement, net weight statement, a list of ingredients, and the company 
name with address. Labels of these products must also clearly identify 
that hemp is an ingredient; list any CBD content; not make 
unsubstantiated health, benefit, or disease claims; and include the 
statement that the ``FDA has not evaluated this product for safety or 
efficacy.''
Office of Economic Development and International Trade
    OEDIT works with partners to create a positive business climate 
that encourages dynamic economic development and sustainable job 
growth. OEDIT strives to advance Colorado's economy through financial 
and technical assistance that fosters local and regional economic 
development activities throughout the state. OEDIT's various divisions 
offer a host of programs and services designed to support the state's 
business recruitment efforts for domestic and foreign companies 
evaluating Colorado for relocation or expansion, existing Colorado 
companies pursuing growth and expansion opportunities, and companies 
requiring other retention services.
    OEDIT's Global Business Development (GBD) division seeks to elevate 
Colorado businesses and communities by using a data-driven approach to 
recruit, support, and retain companies and businesses that contribute 
to a robust and diversified economy. The GBD division has played an 
integral role within the CHAMP initiative and will continue to promote 
the Colorado hemp industry.
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Economic Development Tools and Programs
    OEDIT's financing and incentive programs are comprised of cash 
incentives, business grants, tax credits, debt, and equity financing 
among other programs. Past funding and grants have been awarded to 
companies within the hemp industry. Examples of various OEDIT programs 
that can support and promote the hemp industry include Enterprise Zone 
Tax Credits, Opportunity Zone Initiatives, Small Business Initiatives, 
and other funding programs.
Office of the Attorney General
    The Attorney General (AG) and the Department of Law represent and 
defend the legal interests of the people of the State of Colorado and 
its sovereignty. The AG exercises the responsibilities given to the 
office by the Colorado Constitution, statutes enacted by the Colorado 
General Assembly, and the common law. The AG is the chief legal counsel 
and advisor to the executive branch of state government, including the 
Governor, all the departments of state government, and to the many 
state agencies, boards, and commissions. Both the 2018 Farm Bill and 
the IFR both contemplate a role for the AG within the state plan; the 
CDA must consult with the Attorney General in formulating the plan 
submitted to the USDA, the AG must be notified of intentional 
violations of the state plan, and the AG has access to real-time data 
from the USDA.\4\
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    \4\ IFR at 58532.
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Colorado Department of Public Safety
    The DPS has six divisions that provide public safety services for 
Colorado communities: Colorado Bureau of Investigation, State Patrol, 
Division of Criminal Justice, Division of Fire Prevention & Control, 
Division of Homeland Security and Emergency Management, and the 
Executive Director's Office. Similar to the Department of Law, the 2018 
Farm Bill and the IFR contemplate a role for DPS within the framework 
for hemp.

    Law Enforcement & Public Safety

    DPS will have several areas of focus within the state hemp plan. 
Already, DPS coordinates with local municipal, Tribal, and county law 
enforcement agencies to meet public safety needs, and that coordination 
will extend to a variety of hemp concerns, including registration and 
certification, fire safety, zoning, transportation, and compliance. As 
part of the requirements in the IFR, obtaining a hemp production 
license will require the completion of certain background checks, as 
well as enforcement of state plan elements. It is therefore expected 
that DPS will continue to foster interagency coordination within 
statewide law enforcement efforts.

    Transportation

    The Motor Carrier Safety section will continue to handle various 
aspects of hemp-related transport activity regarding commercial motor 
vehicles, including those related to crashes, hazardous materials 
handling, or any criminal violations. Further, DPS coordinates with law 
enforcement outside of Colorado to address interstate transportation 
issues.
Institutions of Higher Education
    Colorado State University (CSU) is part of the CHAMP initiative and 
is actively involved with the collaboration of agencies, academic 
institutions, and other industry stakeholders in developing the hemp 
industry in Colorado. Further, CSU staff served with the CDA as lead 
authors of this report and its findings. In addition to CSU, other 
Colorado academic institutions will be actively involved in hemp 
research and workforce development, including the University of 
Colorado, Adams State University, CSU-Pueblo Institute of Cannabis 
Research, Fort Lewis College, Colorado Mesa University, Western 
Colorado University, and the University of Northern Colorado.

    Extension Service

    CSU Extension works within Colorado communities to provide 
education, data, and research-based information to the public. 
Expertise includes agriculture, water, business management, and other 
topics useful for understanding and building the hemp industry. CSU 
Extension Service has been instrumental in developing education 
materials to support hemp production, identifying both the risks and 
opportunities associated with hemp production, while also performing 
research intended to close knowledge gaps caused by the decades-long 
prohibition against hemp production in the United States.
Colorado Department of Regulatory Agencies
    DORA announced, along with Governor Polis, the Roadmap to Cannabis 
Banking & Financial Services.\5\ The Roadmap stated Colorado's goal, 
vision, and strategies for improving access to banking, insurance, and 
other financial services to those in the hemp industry.
---------------------------------------------------------------------------
    \5\ Polis Administration Unveils `Roadmap to Cannabis Banking & 
Financial Services' (https://drive.google.com/file/d/
1VJSROIpmW9NJkxETlECy0DQw1kCqgcXm/view).
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    With the passage of the 2018 Farm Bill and the submission to the 
USDA of Colorado's proposed hemp plan, DORA seeks to create a 
regulatory environment where financial services and insurance are 
offered to hemp companies on par with other industries, to provide 
clarity on how state hemp laws and regulations apply to service 
providers within the financial services and insurance industry, and 
encourage innovation for emerging technologies and business models that 
better meet the needs of Colorado's hemp industry stakeholders.

    Insurance

    DORA's Division of Insurance regulates Colorado insurance companies 
and serves as a liaison to the National Association of Insurance 
Commissioners and industry stakeholders. Lack of clarity and 
understanding of the issues surrounding insurance for hemp companies 
has led many insurance companies to avoid providing coverage to the 
industry. It is expected that the Division of Insurance will focus on 
two key areas under the CHAMP: educating insurance companies on 
providing coverage for hemp producers and other users of manufactured 
hemp products; and encouraging underwriters to design products tailored 
to the industry.

    Banking and Financial Services

    The Division of Banking regulates state-chartered commercial banks 
and trust companies, state-licensed money transmitters, and enforces 
the Public Deposit Protection Act. The Division of Financial Services 
regulates state-licensed credit unions and savings and loan 
associations. The Division of Banking and the Division of Financial 
Services are working with the Federal Reserve System, Federal Deposit 
Insurance Corporation, and the National Credit Union Administration to 
offer clarity on how to protect banks and credit unions while building 
a regulatory environment where state-chartered and licensed financial 
institutions, money transmitters, and insurance companies can expand 
services to those in the hemp industry. It is expected that these 
divisions will seek to partner with CDA, CDPHE, and the Colorado AG's 
office to ensure continued compliance with state hemp rules and 
regulations, as well as the continued safety and soundness of 
institutions that opt to offer financial services to hemp companies.
Colorado Department of Natural Resources--Division of Water Resources
    The Division of Water Resources (DWR) administers water rights, 
issues well permits, represents the state in interstate water compact 
proceedings, monitors streamflow and water use, issues licenses for 
well drillers, assures the safe and proper construction of water wells, 
and maintains numerous databases of Colorado water information. This 
division ensures Colorado hemp producers obtain a legal water supply 
for all cultivation activities.
Colorado Department of Revenue--Marijuana Enforcement Division (MED)
    The MED of the Colorado DOR regulates the cultivation, production, 
and sale of marijuana (medical and retail) in Colorado. Representatives 
from the division participated in the stakeholder meetings that 
occurred in connection with the development of this report. While hemp 
producers may not transfer plant material to MED-licensed businesses, 
manufacturers of hemp-derived products such as extracted cannabinoids 
can sell inputs to food and storage facilities registered with CDPHE. 
Such CDPHE-registered businesses may then in turn sell finished 
products containing hemp derivatives to MED-licensed dispensaries, 
subject to satisfaction of certain testing and product tracking 
criteria.
Federally Recognized Indian Tribes
    Reservations of the Ute Mountain Ute Tribe (UMUT) and of the 
Southern Ute Indian Tribe (SUIT) adjoin one another in Southwest 
Colorado near Mesa Verde National Park. The portion of the UMUT 
reservation that overlaps with Colorado spans 575,000 contiguous acres 
extending into New Mexico and Utah, including the 7,700 acre UMUT Farm 
& Ranch Enterprise at the base of Sleeping Ute Mountain. The 1,064\2\ 
mile SUIT reservation includes high-mountain timberlands in its eastern 
portion and mesas to the west (closer to UMUT), but no tribally-owned 
farm and ranch; rather, the Agriculture Division of the SUIT Natural 
Resources Department works to foster economic opportunities for SUIT 
members and the Tribe itself on Tribal and allotted lands.
    Under the 2014 Farm Bill, Tribes could form arrangements with state 
higher education and agriculture departments that would permit the 
production of hemp. The 2018 Farm Bill, by contrast, empowered 
federally recognized Indian Tribes to assume primary regulatory 
authority over cultivation, processing, production, and marketing of 
industrial hemp on Tribal lands. With regards to growers seeking to 
produce hemp on lands within reservation boundaries, the regulator to 
whom a grower or manufacturer is subject will depend (much like oil and 
gas extraction) upon whether such lands are held in fee, owned by the 
Tribe, or allottees.\6\
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    \6\ See, e.g., Erin M. Erhardt, States Versus Tribes: The Problem 
of Multiple Taxation of Non-Indian Oil and Gas Leases on Indian 
Reservations (https://digitalcommons.law.ou.edu/cgi/
viewcontent.cgi?article=1032&context=ailr), 38 Am. Indian L. Rev. 533 
(2014).
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Local Government
    In 2019, the Colorado General Assembly clarified that local 
governments have the authority to regulate businesses engaged in the 
processing, extraction, or manufacturing of hemp. Local governments can 
regulate businesses involved in the sale of industrial or food products 
containing hemp, so long as those regulations do not conflict with 
state law. Local governments continue to play a critical role in the 
evolution and growth of the Colorado hemp economy. For example, local 
governments have the opportunity to address zoning, building & fire 
safety, and other areas that fall within their purview.
    The Colorado Municipal League (CML) and Colorado Counties, Inc. 
(CCI) are nonprofit, nonpartisan organizations providing advocacy, 
information, and training to Colorado's municipalities and counties, 
respectively. These local government agencies seek to ensure that the 
perspectives of municipalities and counties are included in major 
statewide decisions, including the evolution and growth of the Colorado 
hemp industry. CML and CCI are actively engaged with the primary goals 
of maintaining local government authority to regulate businesses and 
gaining more coordination with the state on issues such as permitting 
locations for hemp cultivation.
    As noted elsewhere in this report, the first step for many 
cultivators and manufacturers of hemp is to properly register their 
crop with state agencies. Such businesses must also ensure compliance 
with local ordinances and zoning laws, and obtain necessary local 
licenses, where applicable.

    Zoning, Fire Code, and Building Safety

    Land use codes are implemented at the local level. Local 
governments can control the production of hemp through local zoning and 
land use ordinances in the same way they do businesses and other 
agricultural products. Local governments can designate where hemp may 
be grown within their jurisdictions through land use and/or zoning 
authority. Local noise and odor regulations may also apply to the 
cultivation, production, and storage of hemp products. Given the 
evolving nature of both the hemp industry and land use laws in 
Colorado, local governments may seek additional tools in the future to 
address issues uniquely associated with hemp and/or impacts on adjacent 
property owners.
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    Fire safety is of primary concern in the processing and production 
of hemp products, especially with indoor extraction of CBD oil 
(considered high risk due to the nature of the materials used in the 
process). Local governments may develop permit and inspection 
requirements for these operations to address fire and other safety 
concerns, which may impose additional requirements not currently 
required by state law.
Colorado Industry Associations and Other Nonprofits
    Industry organizations have proven critical to the thoughtful 
evolution of policy and regulations enacted by Federal, state, and 
local agencies and the reemergence of industrial hemp as a nascent 
industry within Colorado. Such organizations represent the concerns and 
interests of the stakeholder members to ensure that laws meet both the 
goals of various governments and the practical needs of the farmers, 
producers, manufacturers, and ancillary businesses within the industry, 
while also providing critical resources surrounding the certified seed. 
The following are key associations that took part in the stakeholder 
process, listed in alphabetical order.

    Colorado Bankers Association

    The Colorado Bankers Association (CBA) strives to provide banks 
with clarity on how to treat hemp-related businesses through ongoing 
education and advocacy. Banks have been left ensnared in a conflict 
between state and Federal laws regarding their ability to serve these 
customers--something CBA continues to work to remedy.
    Bankers associations, including CBA, recently called for changes to 
the USDA IFR that would help facilitate banks offering services to hemp 
growers and related businesses. The changes include increased ability 
to verify would-be borrowers legitimacy as well as more flexibility in 
potency testing for hemp for growers whose crops inadvertently exceed 
the 0.3 percent threshold, which if not changed could lead to increased 
financial loss for borrowers and lenders alike. Most recently, CBA 
advised bankers that they must tailor their anti-money laundering 
programs to monitor their hemp-growing customers more effectively.
    CBA hosts regular forums and educational opportunities to keep its 
members and, in turn, their customers apprised about ongoing efforts to 
help them more easily serve hemp businesses, while complying with all 
state and Federal laws.

    Colorado Farm Bureau

    The mission of the Colorado Farm Bureau (CFB) is ``to advance the 
interest of the Colorado farm and ranch community'' through ``research 
and inquiry into the fields of agriculture, industry, commerce, 
transportation, economics and political relations.'' It advances the 
interests of its members by promoting farming and ranching, providing 
member resources, and developing school farm programs. Membership 
representation includes farming, ranching, education, produce, retail, 
medical, and scientific industries. CFB is actively involved in policy 
development and advocacy in legislation. CFB announced that it is 
looking forward to working with the Governor's Office in supporting 
hemp production and took an active role in CHAMP stakeholder 
discussions.

    Colorado Hemp Industries Association

    The Colorado Hemp Industries Association (COHIA) ``is a member-
driven organization propelling the hemp industry in Colorado through 
reliable information, public policy work, and agriculture and market 
development.'' COHIA has a list of stated goals that include providing 
grassroots representation, education to the public, and various 
advocacy and support functions for the hemp industry. COHIA is an 
active member of the CHAMP initiative and provided comments to the IFR 
on January 9, 2020, expressing concerns and recommendations for changes 
that largely mirrored those of the state. The organization provides 
updates and industry news, conferences and education events, and other 
tools for supporting hemp businesses, researchers, and supporters.

    Colorado Seed Growers Association

    Colorado Seed Growers Association (CSGA), located on the campus of 
Colorado State University, is a nonprofit educational and service 
organization operated in partnership with CSU Cooperative Extension. 
CSGA, a member of the Association of Seed Certifying Agencies (AOSCA), 
is the official seed certifying agency in Colorado and works closely 
with CDA on the CDA Approved Certified Seed program. Certification is 
expected to continue through CSGA by following standards set by the 
AOSCA which comply with the Federal Seed Act and Colorado Seed Act.

    Hemp Feed Coalition

    The Hemp Feed Coalition (HFC) emerged from the 2018 Hemp in Animal 
Feed Report completed by CDA. After completion of the report, the 
Coalition was created by multiple industry stakeholders including the 
hemp industry, Feed Processors and formulators, animal producers, feed 
regulators, and animal experts. The HFC is working to gain Federal 
regulatory approval for hemp as an animal feed ingredient through 
education, research, and completion of applications submitted to the 
FDA and Association of American Feed Control Officials. The secondary 
goals of the HFC are to: establish new markets for hemp and its 
products and the creation of a secure supply chain; and support 
research into the safety and efficacy of hemp which is necessary to 
secure a position for hemp as an ingredient in feed, both for 
production animals and pets.

    Rocky Mountain Farmers Union

    Rocky Mountain Farmers Union (RMFU) is a cooperative enterprise 
described as a grassroots organization that advocates for family 
farmers and ranchers, communities, and consumers in Colorado, New 
Mexico, and Wyoming. RMFU focuses on educational, legislative, and 
cooperation programs, and also participates in developing legislative 
proposals to support member interests. RMFU was active in supporting 
Amendment X, a Colorado state constitutional amendment that changed the 
definition of industrial hemp to match Federal law. In 2019, RMFU 
policies included support for removal of hemp from the CSA, an end to 
restrictions surrounding the transportation and importation of hemp 
seeds and live hemp plants across both state and Federal boundaries, 
recognition of hemp as a specialty agricultural crop, research into the 
various potential uses of hemp, the formation of hemp cooperatives, and 
other legislative support in the development of the hemp industry. RMFU 
continues to emphasize hemp as an important topic at educational 
workshops and symposiums and is also actively involved in advocacy, 
educational outreach, and promotion of hemp as an agricultural 
commodity.
Section 2. Stakeholder Recommendations
Recommendation Summary
    The CHAMP stakeholder process resulted in 21 recommendations that 
span eight links in the hemp industry supply chain. A list of the 
recommendations is included below. Each recommendation in this section 
includes the legal basis and purpose for the policy recommendation; 
information on existing regulatory and supportive practices and on new 
regulatory programs; and guidance on implementation, including needs 
for new legislation, rulemaking, programs and procedures.\7\
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    \7\ At the conclusion of the stakeholder discussions the groups 
produced 45 draft deliverables that function as policy recommendations. 
These were combined to form 21 core regulatory objectives highlighted 
in Figure 8.
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    The recommendations result from an initial identification of 
important topics by the CHAMP executive committee, and then three 
meetings for each stakeholder group where stakeholders further 
identified and specified key regulatory topics and practices.
    Each recommendation was then further refined to include the policy 
or position; education or research required; action items; and key 
resources required for implementation. Figure 8 shows the stakeholder 
groups and recommended deliverables.
Figure 8. Stakeholder Recommendation
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Market-Level Principles Across the Supply Chain
    There were several recurring regulatory principles that emerged 
from the stakeholder groups, documented below. These principles will be 
noted throughout the recommendations, and a holistic approach to each 
is essential to creating a successful hemp regulatory program.
Principle 1: Promote Economic Development Across the Supply Chain
    Colorado State Government, primarily through OEDIT, continuously 
seeks to establish, recruit, support, and retain businesses that 
provide the right jobs for Colorado and that contribute to a robust and 
diversified economy. In keeping with that mission, OEDIT offers a 
variety of programs that seek to draw, maintain, and expand the 
presence of employers in Colorado.
    Several of Governor Polis's ``Wildly Important'' Goals for Fiscal 
Year 2021 focus on the advancement of the hemp industry, including 
goals to increase Colorado hemp production space; increase business 
startups in rural Colorado; initiate a hemp working group with industry 
stakeholders to explore additional ways to support the growth of the 
industry in rural areas; and increase Colorado hemp producers' 
commodity market share through increased business partnerships. OEDIT 
has also sought to actively integrate hemp into its existing toolbox of 
incentives, technical support, and investment. Several programs could 
be available to hemp cultivators, processors, and manufacturers.
    Hemp companies may fit into OEDIT's classification of advanced 
manufacturing, or may be considered a target industry that provides 
desirable employment opportunities, and could be eligible for many 
OEDIT programs. Hemp production operations may also be located in areas 
eligible for rural economic development incentives. OEDIT programs 
appropriate for hemp businesses may include (but are not limited to):

   Skill advance Colorado. Grants for the training or 
        retraining of employees of businesses relocating to or 
        expanding in Colorado; or for established companies to reinvest 
        in their workforce to remain competitive. Awarded for net new 
        job creation.

   Colorado microloans. Grants for nonprofit lenders to make 
        loans to businesses not otherwise served by traditional credit 
        markets.

   Job growth incentive tax credit. Tax credit for businesses 
        pursuing competitive expansion initiatives that provide at 
        least 20 new jobs.

   Enterprise zone. State income tax credits for businesses to 
        locate and expand in economically disadvantaged areas.

   Opportunity zone (Federal). Tax credit for investors in low-
        income communities throughout the state that offers tax 
        forgiveness on capital gains and favorable treatment of 
        reinvested capital gains.

   Strategic fund incentive. An incentive program that offers 
        an even cash match for businesses that create and maintain 
        permanent net new jobs.

   Advanced industries incentive/accelerator program. Grants, 
        tax credits, seed funding and job training programs for 
        advanced manufacturing, aerospace, bioscience, electronics, 
        energy and natural resources, infrastructure engineering, and 
        technology/information businesses.

   Small business development center. Fifteen technical 
        assistance centers across the state that offer a network of 
        mentors and consultants provide no-cost consulting and low-cost 
        training and workshops to entrepreneurs and small businesses.

   Venture capital authority. Publicly supported investment 
        funds that provide equity and debt investments in early-stage 
        companies.

   Promotion. OEDIT seeks to elevate the profile of Colorado 
        businesses and communities throughout the world. OEDIT will 
        continue to promote the Colorado hemp industry under its 
        mission.

    The programs above may require that businesses meet several 
criteria, whether through a competitive application process, new job 
creation metrics, or locating inside specific zones targeted for 
economic development. Hemp companies are encouraged to participate 
alongside all other current or prospective Colorado companies, and all 
hemp companies are eligible for technical assistance and for programs 
designed to support new job creation, especially in disadvantaged zones 
targeted for economic development.
    The CHAMP industry analysis (Appendix B) and stakeholder discussion 
underlined the need for a broad initiative to increase research and 
awareness of the industrial and consumer uses of hemp products and 
extracts. Research and development of new uses and the reinvigoration 
of traditional uses will drive future investment in scalable processing 
facilities that could locate in Colorado as national demand for hemp 
products increases.
    Advanced manufacturing facilities can serve a national or 
international market and would require a reliable source of raw hemp 
fiber or grain as inputs, thus benefiting local agricultural 
communities. Intellectual property that will drive the industry through 
new varietals, products, and manufacturing processes is of equal 
importance as a key industry value component.
    As a result, research and development and processing capacity are 
all vital for the advancement of Colorado hemp. A coordinated public 
economic development effort like the CHAMP often will signal and 
incentivize further private investment in hemp production, processing, 
and manufacturing.
Principle 2: Chain of Custody & Information Sharing Systems Will Drive 
        an Expanding Hemp Industry
    One key item considered for registered hemp industry participants 
is a traceability system that creates a chain of custody beginning at 
harvest and continuing to the final end-product, including 
documentation for all transactions and transport. A traceability system 
that provides an uninterrupted chain of custody between registered 
entities could assist in Federal regulatory compliance, food safety, 
and interstate commerce; and could allow for unencumbered interstate 
transportation in the future. It could also bolster consumer confidence 
in hemp end-products.
    It is expected that chain of custody entries and documents will 
allow for seamless trade and transportation of hemp across the state 
and multiple jurisdictions, and for law enforcement to distinguish 
registered, compliant hemp from other cargo in transport. The 
traceability system would also support potential future development of 
the Colorado regulatory scheme which, depending on the Federal 
regulatory environment, could include post-harvest testing, a THC 
remediation program, and food safety functions like foodborne pathogen 
identification or product recalls.
Principle 3: Focus on THC Control
    Controlling THC in hemp plants and products is important to ensure 
compliance with Federal regulations. Colorado is experienced in 
regulating THC as one of the first states to develop a regulated 
commercial cannabis framework in 2014. CDA officially regulates the 
control of THC for hemp products up to the farm gate to conform to the 
state and Federal definition of hemp. In addition, Colorado has also 
pioneered the use of certified seed to provide farmers the choice to 
use known genetics with low THC level. Looking toward the future, 
Colorado is interested in exploring the remediation of THC (as soon as 
federally permissible) to produce safe and efficient options for non-
compliant plant material to meet the 0.3 percent THC requirement.
Principle 4: Recognize the Importance of Federal Compatibility While 
        Also Advocating for Reasonable Regulations
    The Colorado hemp program must comply with Federal laws and 
regulations, including any forthcoming Federal laws and USDA, FDA, DEA, 
the Federal Trade Commission (FTC) and other agency rules; at the same 
time, stakeholders in Colorado will continue to advocate for the rules 
and policies developed as part of the CHAMP initiative. Some policies 
included in this report are long term objectives and are more forward-
looking than current Federal law and will need to be implemented as 
Federal law and rules evolve. While Federal compatibility is important 
to establish national standards, Colorado should continue to advocate 
for appropriate and reasonable Federal regulations that allow for 
advancement of the industry, while at the same time, maintaining a 
level of public safety.
Principle 5: Recognize the Importance of Intergovernmental Coordination
    Close coordination with state, Tribal, and local governments and 
law enforcement agencies will ensure that compliant cultivation and 
manufacturing businesses can operate efficiently and transport hemp 
without unnecessary delay. Interstate and Tribal government 
communications will be crucial for transport across Tribal/state 
boundaries. Tribal and local government and law enforcement will be 
granted access to state electronic registration and other records, for 
any regulatory activity, through the establishment of a Memorandum of 
Understanding (MOU) that private or proprietary information will be 
kept confidential.
Principle 6: Promote Access to Finance and Insurance Services Across 
        the Supply Chain
    All businesses require stable access to standard finance and 
insurance products. Ensuring comparable access to financial services 
and insurance for hemp is essential for industry development and will 
help businesses achieve stability in its early years, where markets are 
often fragmented and volatile. Colorado can be a leader for guidance 
and outreach to institutions seeking to serve the evolving marketplace 
and facilitate the provision of services in a manner similar to other 
agricultural products.
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    A corollary issue arising out of stakeholder meetings may require 
state involvement or public-private partnerships; namely, that Federal 
crop insurance does not cover non-compliant material like other 
agricultural products that banks look to for underwriting and risk 
management purposes. The state should deepen partnerships to resolve 
this issue in a manner intended to eliminate coverage shortfalls. 
Forward progress is expected to require multi-department coordination 
with support from the Governor's Office, DORA, state, and Federal 
legislators, and as Members of the Colorado Congressional Delegation 
and Tribal leaders.
Principle 7: Promote Equity, Diversity, and Inclusion Across the Supply 
        Chain
    As the industry continues to grow, Colorado should commit to making 
the Colorado hemp industry a model for equity, diversity, and 
inclusions (EDI). Direct initiatives should be made to promote the 
diversity and inclusion of emerging businesses in farming, 
manufacturing, and retail sectors. Any large initiatives to advance the 
industry should be examined through an EDI lens to promote the 
inclusion of those who have historically been underrepresented. 
Colorado should focus on increasing hiring, access to funding, 
promoting a diverse culture, stakeholder outreach and education.
Stakeholder Recommended Deliverables
    Identification of key recommended deliverables through the 
stakeholder process was the driving focus of the CHAMP initiative. The 
following stakeholder recommendations represent a general consensus 
among stakeholders regarding sensible and forward-looking deliverables 
intended to bolster Colorado's hemp industry. Alternative viewpoints 
for certain deliverables are noted where appropriate. However, it is 
important to note that implementation is conditional on the market 
need, Federal regulatory environment, procurement of resources, 
including increased staff and funding, as well the passage of 
legislation and production of rules and regulations. Dynamic changes 
are still occurring for the hemp industry, particularly regarding 
market conditions and Federal regulations. Moreover, the impact of the 
COVID-19 pandemic will most likely have an adverse impact on funding, 
staffing, and other resources.
    Consequently, while these recommendations represent a general 
consensus of the stakeholders, including the agencies that will 
implement the deliverables, some of these recommendations may be 
difficult to implement, require adjustments, or may be delayed based on 
the factors mentioned above.
    Each recommendation is organized as follows:

   A short concept summary

   The basis and purpose of the recommendation

   The regulatory program:

     current program--describes a current program that will 
            be expanded or replaced

     existing program--describes a program that will 
            largely remain the same

     recommended enhancement--describes a new, expanded, or 
            enhanced program

   Implementation steps

   Key government, institutional and industry stakeholders

    Recommendations are further organized by the supply chain area and 
follow the product from seed to market. The following comprise the 21 
final recommendations derived from the CHAMP stakeholder proceedings 
and from public input taken at state events held in 2019 and 2020.
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        R&D and Seed Recommendations

1. Certified Seed and Clone Program
    Stakeholder Recommendation

    Support research and development to provide stable genetics and 
increase the availability of varieties that will consistently meet THC 
compliance regulations. Continue to allow the use of open source seeds 
in Colorado.
    Expand the current hemp seed certification program to include 
standard and feminized seed, encourage national adoption of THC 
verification as part of hemp seed and clone certification. Encourage 
private industry and institutions of higher education to develop state 
hemp varieties. While currently allowed, stakeholders recommend 
Colorado continue to allow the use of open source seeds.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is CRS  35-27-102 
(Colorado Seed Act). The Colorado Seed Act is implemented by 8 CCR 
1203-6.
    A certification program provides a path to verify identity and 
protect traits in the seed. Seed certification is one method used to 
distinguish identity, along with Plant Variety Protection certificates, 
patents, and utility patents. The U.S. seed certification program is 
part of the Federal Seed Act but is carried out by individual state 
agencies, state departments of agriculture or crop improvement 
associations. These agencies are coordinated through the AOSCA. In 
Colorado, the CSGA is the official seed certifying agency and an AOSCA 
member.
    Certified seed and clones assure the buyer (and end-user) of the 
genetic identity and characteristics of the products being purchased. A 
robust certification program protects producers against inaccurate or 
misleading labeling, which can cause severe economic hardship due to 
low crop yields, high THC concentrations, poor crop quality, and the 
spread of noxious weed seed. Under current market conditions, Colorado 
producers have experienced a shortage in reliable hemp seed sources, 
inflated seed prices, and a concerning amount of seed sold by predatory 
sellers using false information.

    Regulatory Program

    Current Program. The hemp seed certification program is operated by 
CSGA. CDA provides THC testing for the program. To certify seed, a CSGA 
hemp varietal review board must deem the entrant to be a genetically 
distinct, uniform, and stable plant variety. Then, the CSU Experiment 
Station plants the variety in several locations across the state in 
trials to prove the applicant claims in varying soil, altitude, and 
general environment. CDA then tests for THC content and the CSU seed 
laboratory tests to verify all other applicant claims (i.e., purity, 
yield, noxious weed presence, etc.) for variety stability. The initial 
single-season trial occurs at four experiment station locations 
throughout Colorado. Each subsequent year a variety is certified and 
labeled under the CDA Approved Certified Seed program, CSGA inspects 
every seed production field prior to harvest. THC verification, 
completed by CDA, will also occur annually for producers of certified 
seed.
    Recommended Enhancement. The features of an enhanced hemp seed 
certification program, including the certification process and 
certifying agencies, will largely remain the same. Stakeholders 
recommended that CSGA evaluate the expansion of the certification 
program to include a clonal certification program (pilot starting in 
2020) and a feminized seed certification program (in process). Key 
features of the hemp certified seed program would include:

   Certifying agencies and general process. Tax Hemp 
        certification should continue to be administered by CSGA and 
        will follow generally accepted AOSCA standards and comply with 
        the Federal Seed Act and the Colorado Seed Act. The current 
        process for seed certification will remain the same, including 
        the varietal review, testing, and labeling procedures described 
        above.

   THC verification. CDA and designated state-certified THC 
        testing labs should provide THC verification and testing for 
        the seed certification program.

   Feminized seed. CSGA and AOSCA certified agencies expand 
        existing hemp certification standards to include feminized seed 
        for accepted varietals. CSGA should work with stakeholder 
        groups to develop and adopt standards for feminized hemp seed 
        breeding and production, including the use of chemical 
        applications to produce female pollen and feminized seed. 
        Feminized seed will be certified only if it has gone through a 
        standard AOSCA certification process for genetic identity and 
        purity, and the additional requirements needed to verify proper 
        feminization procedures. CSGA should harmonize their procedures 
        with AOSCA once there are international guidelines for 
        feminized seed.

   Certified clone program. CSGA should work with AOSCA 
        certified agencies to evaluate the feasibility and enterprise 
        structure to establish a certified clone program. A genetic 
        certification process for clones would be similar to seed 
        certification, where plants enter a varietal review and are 
        grown full term, in multiple conditions over multiple seasons 
        to verify identity, purity and select traits. Definitions for 
        foundation, registered and certified genetic stock would be 
        developed by CSGA.

   Open source hemp genetics. CDA should continue to allow hemp 
        genetics from any source to be grown and harvested in Colorado 
        if it meets the definitions described in 8 CCR 1203-23. Open 
        source genetics mean any seed or clone produced by the plant 
        Cannabis sativa L. that possesses a THC content less than or 
        equal to 0.3 percent tested according to CDA regulations; and 
        is not patented, certified, or otherwise protected. Any open 
        source seed can be entered to become certified if it can pass 
        the required trial process.

    Implementation

    The following action items are needed to implement this 
recommendation:

   THC verification program--pending any expected AOSCA 
        action--standards development, testing and trial procedures, 
        labeling standards;

   Feminized seed certification program--pending AOSCA action--
        testing and trial procedures, labeling standards;

   Clone certification program--pending AOSCA action--standards 
        development, testing and trial procedures, labeling standards; 
        and

   Develop task force to determine need, feasibility, operating 
        model, and funding.

    Key Stakeholders

    CDA, CSU, CSGA, AOSCA, other seed certification agencies, Colorado 
hemp farming and seed breeding industry and associations.
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2. Reduce Cross-Pollination Through Information Sharing
    Stakeholder Recommendation

    Allow CDA to provide limited information on the presence of hemp 
farms to other nearby hemp producers to help minimize cross-pollination 
between different varieties of hemp, and between hemp and marijuana 
plants, that may lead to unwanted traits or non-compliant crops. On a 
long-term basis, stakeholders recommend that researchers, including the 
Center the Excellence, explore ways to mitigate cross-pollination 
issues.

    Basis & Purpose of Recommendation

    The statutory basis for these recommendations is found in CRS  35-
61-104 and implemented by CCR 1203-23. Such laws and regulations define 
and describe the registration process for hemp producers, including 
registration requirements, information collection, and reporting 
requirements.
    Developing cross-pollination reporting provides information to hemp 
producers who might be susceptible to cross-pollination from other 
nearby hemp fields, so they can make informed decisions about 
registering their lots and protecting their crops.
    Seed, fiber, and cannabinoid producers choose their crop location 
without the ability to understand the local cross-pollination risk 
factors, i.e., other nearby hemp crops that may produce pollen. An 
information program, where producers are notified of how many hemp 
crops are located nearby (i.e., within a certain radius in miles) may 
help in risk mitigation, where pollination can significantly reduce the 
value of certain hemp crops.
    The impact of cross-pollination will continue to be an obstacle 
that hemp growers face. The stakeholders determined this specific issue 
should be a prioritized area a Center of Excellence (described in 
recommendation 6) should research.

    Regulatory Program

    Current Program. There is no current program directly addressing 
information sharing to minimize cross-pollination. Anonymized 
information on the presence of nearby hemp registrants is provided to 
other registrants on an as-requested basis. CDA does not restrict or 
prohibit registered locations if they comply with all state and Federal 
hemp laws.
    Recommended Enhancement. The hemp producer registration program 
administered by CDA collects information on location, variety, and 
intended end use of each hemp crop. This information could be combined 
with GPS data to create a notification to producers whether their 
proposed dioecious or feminized crop is within a predetermined distance 
of another registered hemp lot.
    Stakeholders recommended CDA establish a service to inform hemp 
farmers if other registered hemp fields are within a certain defined 
distance, thus potentially posing a cross-pollination threat. The 
producer could request a report during registration to see if other 
hemp lots are registered nearby and an update notification if another 
hemp lot is registered after the producer's initial registration. To 
maintain confidentiality requirements, the CDA would simply report to 
affected producers whether (and how many) other hemp fields exist 
within the defined distance. When possible, the stakeholders' visioned 
the system would be automated based on technological capabilities of 
the CDA database.
    In the longer-term, the stakeholders recommended Colorado research 
institutions, including the Center of Excellence, focus on research 
factors that affect cross-pollination risks, such as proximity, 
geography, climate, pollen viability, presence of hemp genetic research 
facilities, and other factors to develop cross-pollination risk 
standards.
    The consensus from the stakeholders indicated that Colorado should 
continue to not restrict or prohibit registered locations if they 
comply with all state and Federal hemp laws.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include responsible agencies, estimates of 
required budget and funding sources, and additional staff where 
applicable:

   New procedures establishing the by-request information 
        program while protecting producers' confidential information;

   Adopt research-determined definitions for physical distances 
        at which cross-pollination poses a risk; and

   Evaluate the feasibility of an automated notification system 
        for cross-pollination.

    Key Stakeholders

    CDA, Colorado higher education institutions, Center of Excellence, 
Cooperative Extension Service, and other research institutions.
3. Expand Genetic Research and Establish Plant Breeding Regulations
    Stakeholder Recommendation

    Establish regulations and a registration program specific to hemp 
plant breeding and genetic research. This program would allow and 
encourage research to improve the quality and uniformity of seed 
genetics and supply for the state's producers, without restrictive THC 
content rules that would otherwise place them in violation of the 
broader hemp production regulations.
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    Basis & Purpose of Recommendation

    The purpose of developing separate regulations specific to seed and 
clone R&D is to allow plant breeders and researchers to conduct 
research activities that are conducive to atypical production models 
and processes such as continuous planting and culling, as well as 
generation of plant material in possible violation of the THC 
requirements. Because plant breeding requires trial and error across 
multiple generations before genetics are stabilized and predictable, a 
separate set of regulations for these registrants is necessary to allow 
them the flexibility to conduct this research in good faith without the 
threat of penalties.
    Current Federal rules under the IFR include no special provisions 
for genetic research & development or for plant breeding. To implement 
this recommendation, the Federal rules would need to allow for this to 
occur. CDA would implement this recommendation to the extent feasible 
and after consultation with the USDA.

    Regulatory Program

    Current Program. CDA has allowed genetic research under the rules 
established in the 2014 Farm Bill and by rule in 8 CCR 1203-23. This 
program will be impacted in the near term given the omission of 
specific research and development rules in the current IFR. Colorado 
Senate Bill 20-197 amends CRS  35-61-104 to include a separate 
research and development registration and regulations ``except as 
otherwise prohibited by law.'' CDA should develop specific rules for 
genetic research and development once compatible with Federal law and 
USDA rules.
    Recommended Enhancement. Stakeholders recommended the CDA develop 
an industrial hemp research and development regulatory program, once it 
is federally permissible, where the purpose of the research may include 
growing industrial hemp to provide varieties to aid Colorado's 
industrial hemp program.
    The new program would build upon the established research and 
development program rules to further advance an operational regulatory 
framework specifically allowing for effective and innovative seed 
production and genetic research.

   Policy Formation. CDA should convene a multidisciplinary 
        panel, which includes regulatory agents, industry experts, and 
        research professionals, that will work with CDA to establish a 
        set of regulations for the new hemp R&D and plant breeding 
        program.

   Operation and Enforcement. CDA should integrate the new 
        program into its operations and staff and enforce the new 
        regulations as they do all other hemp production rules.

    The program would feature tailored regulations and qualifications 
that allow plant breeders and genetic researchers to retain plants with 
non-compliant THC levels for further breeding and research if they show 
other desirable traits, assuming THC will be bred lower in further 
generations.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Rules and definitions specific to seed research and 
        development operations, including eligibility and regulatory 
        requirements;

   Genetic research and plant breeding registration 
        application, inspection, enforcement, and disposal program; and

   Integration with seed/clone certification program.

    Key Stakeholders

    CDA, Colorado higher education and other research institutions, 
Center of Excellence, seed breeding and genetic research industry, 
CSGA.
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        Cultivation Recommendations

4. Create an Innovative and Flexible Colorado State Hemp Plan that 
        Aligns with Federal Regulations
    Stakeholder Recommendation

    Stakeholders recommend Colorado align state hemp regulatory 
practice with USDA requirements to the extent that it ensures a 
properly functioning regulatory system for the Colorado hemp industry. 
However, stakeholders overwhelmingly recommend that Colorado continue 
to advocate for appropriate changes to Federal law.

    Basis & Purpose of Recommendation

    During the 2019 legislative session, Colorado's General Assembly 
amended the Industrial Hemp Regulatory Program Act to authorize the 
Commissioner of Agriculture to consult with any stakeholders and to 
mandate the Commissioner of Agriculture to consult with private 
industry in drafting a hemp management plan to be submitted to USDA. 
(CRS  35-61-104(6), (Colo. Session Laws 2019, ch. 350 (enacting SB19-
220))).
    The 2018 Farm Bill and the IFR require each state that desires to 
have primary regulatory authority over the production of hemp within 
its state to submit a management plan to USDA that outlines how the 
state will regulate various aspects of hemp cultivation. After the 
enactment of the 2018 Farm Bill, USDA published nine requirements for 
states that intend to develop an industrial hemp regulatory program. In 
October 2019, USDA issued the IFR to further specify the requirements 
for state hemp plans. USDA has indicated the IFR will likely be revised 
to create more flexibility for hemp cultivation when it issues a final 
rule in 2021.
    The Colorado state plan describes how the State of Colorado intends 
to implement USDA's regulatory requirements through existing and 
updated statutory authorities, rules, and procedures. All authorities 
described in the plan are in effect or are intended to take effect 
after USDA approval, and are intended to govern Colorado's industrial 
hemp industry.

    Regulatory Program

    Current Program. CDA currently operates a regulatory framework for 
industrial hemp cultivation under CRS  35-61-101 et. seq. and 8 CCR 
1203-23.
    Recommended Enhancement. Colorado Senate Bill 20-197 aligns state 
statute with Federal Law and Colorado's state plan aligns with the IFR. 
However, based on stakeholder comments, Colorado submitted comments to 
the USDA in January and October 2020 and a draft state plan in June 
2020 that outlined regulations that requested to depart from the IFR 
requirements in several key areas. Colorado will continue to advocate 
for changes in the Federal rules so that hemp growers have the 
flexibility they need to succeed in growing their businesses.
    CDA submitted the state plan to USDA on June 18, 2020 and expects 
Federal policy will become clearer in 2021.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Legislation and rules to allow, create, and implement post-
        harvest sampling; remediation program (when federally legal), 
        and third-party lab certification; and

   Procedures for post-harvest sampling, third-party field 
        sampling, and remediation program.

    Key Stakeholders

    CDA, CDPHE, analytical labs, and Colorado hemp cultivators[.]
5. Verify Registrants Have Access to a Legal Water Supply
    Stakeholder Recommendation

    Stakeholders recommended an update to the CDA registration process 
to check if hemp registrants have, or will obtain, a legal water source 
before planting hemp. In a coordinated and separate process between 
agencies, CDA could provide DWR with specific information from the 
registrant's application so that DWR might review the proposed water 
supply and provide a letter with their findings to the registrant that 
indicates whether the proposed water supply is legal for planned 
irrigation use.

    Basis & Purpose of Recommendation

    The basis for the hemp registration program is found in CRS  35-
61-104 and detailed in 8 CCR 1203-23-2. These statutes define and 
describe the registration process for hemp producers including 
registration requirements, information collection, and reporting 
requirements. DWR's exclusive authority for administering and 
distributing the waters of the state are described in CRS  37-92-
301(1) and 37-92-501(1). Stakeholders recommended that CDA should 
provide DWR information on hemp registrants under a MOU to facilitate 
compliance with DWR statute.
    The purpose of developing this procedure is to notify registrants 
to have a legal water supply and to ensure that registrants may operate 
without potential shutdown because of orders from DWR. This new 
procedure will help inform new producers to secure a legal water supply 
before planting.

    Regulatory Program

    Current Program. The current registration application process does 
not include language or guidance regarding the legal water supply for 
hemp production.
    Recommended Enhancement. CDA should explore ways to incorporate a 
process of referral to DWR during the registration application process. 
Stakeholders recommend that the application could specifically request 
the registrant state which of four types of water supplies will be used 
in the operation, and the registrant would provide additional 
information based on the water supply type selected:

   Municipal supply (Provider)

   Surface Water Right (water right and share or percent of 
        ownership)

   Well (Permit #)

   Hauled Water (Provider)

    DWR could evaluate water supplies according to their procedure and 
notify the registrant whether the proposed water supply is legal for 
industrial hemp production. DWR's comments on the registrant's water 
supply will not prevent CDA from issuing a registration to the 
producer.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Discussion between CDA and DWR on legal aspects of 
        developing collaborative approach to gather and share 
        information across agencies;

   Water supply data fields added to the registration 
        application for applicants to submit their proposed water 
        supply plans; and

   Information exchange MOU to confidentially send data from 
        CDA to DWR.\8\
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    \8\ CRS  24-2-108--For the convenience of the citizens of this 
state and to promote economy in state government, it is the intent of 
the general assembly that all principal departments, when feasible and 
not contrary to Federal or state law, shall share as much information 
as possible and, when reasonably feasible to do so, shall coordinate 
forms, both Federal and state, and shall eliminate multiple mailings to 
addressees.

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    Key Stakeholders

    CDA, DNR-DWR, Colorado hemp cultivators[.]
6. Establish a Center of Excellence
    Stakeholder Recommendation

    The state should facilitate a public-private partnership between 
academic institutions, industry, state agencies, and stakeholders to 
establish a Colorado Hemp Center of Excellence to accelerate education, 
research and development in hemp science and technology.
    A Center of Excellence refers to a collaboration of numerous 
academic, private, and government institutions that combine their 
skills and resources to guide the industry on innovation, best 
practices, novel research, market-ready applications, funding support, 
and educational training programs.
    The mission of the Center of Excellence will be to serve as a 
statewide liaison for the Colorado hemp industry by fostering 
collaboration, resource-sharing, and communication among its 
regulatory, academic, and industry partners in the research development 
efforts. In addition, stakeholders suggested the Center will also serve 
as an ``Educational Hub'' that will provide technical assistance and 
educational resources for hemp growers. The Center should also share 
updates on the industry and findings from its research activities 
through a publicly accessible website that can provide links to 
verifiable resources and regulatory information.

    Basis & Purpose of Recommendation

    The basis for this recommendation follows from the recommendations 
of the industrial hemp advisory committee created under CRS  35-61-
103; the task force created under Senate Bill 18-235; and the consensus 
that emerged from the CHAMP stakeholder process.
    A collaborative governing body between CDA, institutions of higher 
education, CSU Extension, OEDIT, the Governor's Office, and other local 
governmental, nonprofits, private organizations, or individuals, will 
identify important research areas, conduct relevant studies, and 
develop educational resources unique to the Colorado hemp industry.

    Regulatory Program

    Current Program. There is no current coordinated, dedicated 
research institution for industrial hemp in Colorado. However, research 
and development activities currently occur in private corporations, and 
in universities across the state.
    Recommended Enhancement. Stakeholders suggested the Center of 
Excellence represent a flagship institution for the industry, formed as 
a collaboration between Colorado Government, academic institutions, and 
private organizations to leverage their combined research capabilities 
and resources. The Center will serve as a statewide liaison for hemp 
industry stakeholders, striving to support economic vitality and 
advocating for industry advancement.
    Government agencies that could play a major role in the foundation 
and operation of the Center of Excellence include CDA, OEDIT, and the 
Governor's Office. Other state and local government agencies may also 
be engaged where their expertise is appropriate.
    Among Colorado's academic institutions, stakeholders believe that 
CSU will play a large role in the establishment and operation of the 
Center of Excellence; however, other universities and departments will 
be heavily involved in leveraging funding, research capacity, and 
efficiencies. Additional potential academic partners include, but are 
not limited to, the University of Colorado-Boulder, Colorado Mesa 
University, CSU-Pueblo, Fort Lewis College, Western Colorado 
University, Northeastern Junior College, and Adams State University. 
This collaborative academic model has been effective in renewable 
energy research in Colorado.
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          Journal Communications Inc., 
        FREELANCE' Shared Rights.

    Hemp industry organizations, businesses, and individuals with a 
focus on research and development should also be selected as Center of 
Excellence partners as determined through the Center's governance 
structure.
    A primary responsibility of the Center of Excellence would be to 
apply for Federal funding and distribute matching state funds for 
developmental projects. Funding from the Center of Excellence could be 
provided for private businesses, institutions of higher learning, 
government agencies, Tribal governments, and other qualified research 
organizations for qualified research programs. A research agenda could 
include regulatory compliance, genetic research, industrial 
applications, and best practices relating to the cultivation of 
industrial hemp fiber, seed, and cannabinoid crops.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Define a governance structure for the Center of Excellence 
        partners. An emphasis will be placed on those with significant 
        experience providing educational information and programs in an 
        agricultural context.

   Define organizational structure and positions for startup 
        and operations.

   Establish funding structure for administration, research, 
        and educational programs; determine Federal and other funding 
        sources available

    Key Stakeholders

    CDA, CDPHE, Colorado universities, OEDIT, Tribal governments, 
Colorado hemp industry, other industries[.]
7. Non-Compliant Plant Material
    Stakeholder Recommendation

    Follow USDA rules for non-compliant plant material disposal to 
ensure it is properly destroyed and does not enter the market. However, 
advocate for and adopt rules to test and dispose of non-compliant plant 
material that preserves value in the supply chain, including post-
harvest testing, exemption of non-THC containing stalks and seeds from 
destruction, and explore the feasibility of further remediation 
procedures.
    It is important to note that there were some stakeholders who were 
opposed to developing a process in which non-compliant plant material 
could become compliant and enter the market. Their concern was this 
option would unfairly reward producers who produce non-compliant plant 
material; thus, creating a disincentive for producers to ensure their 
crops are compliant prior to harvesting. Should the state continue to 
explore this recommendation, additional discussion with stakeholders is 
warranted.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is 8 CCR 1203-23-5, 
which indicates that non-compliant plant material must be ``destroyed 
or utilized on-site in a manner approved of and verified by the 
Commissioner'' to avoid revocation or suspension of a registration.
    The purpose of the state's non-compliant plant material disposal 
regulations is to ensure that crops that are not compliant with all 
state and Federal rules do not enter the chain of commerce and are 
disposed of under Federal and state requirements. CDA should review and 
adopt enhanced procedures via rulemaking requiring producers to report, 
document, and produce evidence of any non-compliant plant material 
destruction as required by Federal rules.
    In lots that conclusively test higher than 0.3 percent THC, ``non-
compliant plant material'' refers to the parts of the plant that are 
officially considered ``marijuana'' according to the CSA.\9\ Non-
compliant plant material does not refer to the parts of cannabis plants 
that fall outside of the Federal definition of marijuana, which 
includes the sterilized seeds and mature stalks of the plant and any 
products or derivatives produced from those parts of the plant. These 
parts of the cannabis plant are always compliant according to the CSA, 
regardless of other plant characteristics. Stakeholders recommended 
that Colorado take a leading role and explore an exemption of seeds and 
stalks from the destruction of any hemp crop that exceeds the 0.3 
percent THC limit.
---------------------------------------------------------------------------
    \9\ 21 U.S.C.  802(16).
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    If federally permissible, the state should consider creating a 
post-harvest sampling and testing program to protect producers against 
the unnecessary destruction of valuable plant material and associated 
economic loss. This program will be available only to qualifying 
producers with certified or pre-approved varieties with in-field pre-
harvest test results indicating non-compliant THC content. This 
secondary testing program provides producers an opportunity to re-test 
a homogenized and representative sample of their plant material. Post-
harvest sampling and testing would serve as the final determination as 
to whether a crop has a compliant THC content below 0.3 percent.
    In addition, if USDA rules permit, CDA and CDPHE should consider 
establishing a program to provide effective and safe industrial 
processing of stalks and seeds and/or removal and remediation of THC 
from hemp plants that test non-compliant. This ``Hemp Value Retention 
Program'' will bring needed certainty and predictability to the 
industry while hemp genetics improve and stabilize. It will drastically 
reduce the amount of product destruction and improve investment in all 
facets of the hemp industry.

    Regulatory Program

    Current Program. Under Colorado's rules, if an in-field pre-harvest 
sample tests non-compliant with THC greater than 0.3 percent, CDA 
issues notice to affected producers describing their permissible 
disposal options. Communication to registrants with hemp lots that 
exceed the maximum THC threshold explicitly notes that under CDA rules, 
the crop is prohibited from:

   Leaving the registered land area;

   Entering the stream of commerce; and

   Being used for human or animal consumption.

    The rules provide that all crops with non-compliant THC levels must 
be ``destroyed or utilized onsite in a manner approved of and verified 
by the Commissioner.'' (8 CCR 1203-23, (Rule 5.2)) Approved disposal/
utilization methods include disking the crop into the ground, mulching, 
composting, burning, and burying. These destruction methods are aligned 
with 21 CFR 1317.15 and 1317.90, which require that controlled 
substances be rendered non-recognizable and irretrievable, while also 
keeping environmental considerations in mind.
    Recommended Enhancement. Colorado should continue to ensure legal 
disposal remains in compliance with Federal law and appropriate 
enforcement action is taken. While remaining federally compliant, 
Colorado should advocate for alternative disposal methods that provide 
farmers means of economic recovery, like clarifying exemptions of 
mature stalks and seeds of hemp plants from destruction; and having 
restricted and monitored THC remediation programs. These programs will 
mitigate financial risk for hemp producers while ensuring that non-
compliant plant material does not enter the market for human and animal 
consumption. While the state intends to comply with Federal law, 
Colorado should advocate for the policies below to be federally 
permissible.\10\
---------------------------------------------------------------------------
    \10\ Under the current regulations published by the USDA under the 
IFR, all plant material testing higher than 0.3 percent THC must be 
destroyed. Producers with plant material testing higher than 0.5 
percent THC will also receive a ``negligent violation''. The policies 
contained in the recommendations do not include negligence at 0.5 
percent, but at 1.0 percent, and are thus not compliant with current 
proposed Federal rules.

---------------------------------------------------------------------------
    Allowance for Post-Harvest Testing

    If Federal laws permit, CDA should update its rules to allow for 
post-harvest sampling as the conclusive determination as to whether the 
plant material is compliant, contingent upon the use of certified or 
pre-approved varieties.
    CDA would create a post-harvest sampling and testing program to 
conclusively determine if a full representation of the plant material 
intended for the stream of commerce is non-compliant. If this post-
harvest sample tests less than 0.3 percent THC, the result would be 
considered official and the crop will be considered compliant and 
allowed to enter the stream of commerce.
    If a crop conclusively tests higher than the acceptable hemp THC 
level via in-field and post-harvest sampling, but below 1.0 percent 
THC, CDA would issue an ``Options Letter'' to the producer that 
describes the nature of the failure, informs the producer that CDA will 
notify the USDA of non-compliant plant material, and guides the 
producer on how to dispose of their non-compliant crop. Test results 
above 1.0 percent would result in a negligent violation. Producers will 
be responsible for all post-harvest sampling costs.

    Development of a Hemp Value Retention Program

    If Federal laws permit, CDA should explore the feasibility of 
establishing a Hemp Value Retention program. The program could offer 
various options for farmers to sell their non-compliant plant material 
to licensed processors, which will allow them to retain more value in 
the crops that test conclusively above 0.3 percent THC at post-harvest, 
such as, but not limited to: (1) an industrial processing channel, 
where the mature stalks and seeds, or other plant material is used to 
produce non-consumable goods; and/or (2) a THC remediation channel, 
where THC is removed from hemp flowers during the extraction process 
and destroyed. Any hemp testing above 1.0 percent THC after post-
harvest testing will require disposal.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Advocacy by Colorado leadership to approve disposal 
        alternatives on a national level;

   New rules and definitions for post-harvest testing 
        qualifications and implementation;

   Updated rules and definitions for allowable disposal methods 
        and reporting requirements;

   New rules and definitions for hemp value retention program 
        qualifications and implementation, when Federal law permits;

   New standard operating procedures for collecting, 
        transporting, processing, and testing homogenized post-harvest 
        hemp samples;

   Secure designation for CDA as a DEA Reverse Distributor to 
        be eligible to conduct or oversee non-compliant plant material 
        disposal;

   New standard operating procedures for collecting, 
        transporting, recycling, and properly disposing of non-
        compliant plant material; and

   New standard operating procedures for qualifying, 
        collecting, transporting, and processing hemp for THC 
        remediation or for industrial processing, when Federal law 
        permits.

    Key Stakeholders

    CDA, CDPHE, Colorado hemp cultivators, Tribal governments, 
processors[.]
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8. Coordination of State and Local Regulatory Authority
    Stakeholder Recommendation

    Provide limited hemp registration information to other state and 
local government agencies, under a privacy restriction, to facilitate 
other jurisdictions' inspections, permit approvals, and enforcement 
actions. This generally applies to cultivation and processing/
manufacturing sites within municipalities, unincorporated areas, or 
indoor cultivation facilities in cities or counties.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is 8 CCR 1203-23-2, 
which indicates that ``any information provided to the Department may 
be . . . provided to (local) law enforcement agencies (for maintaining 
public order and enforcing the law)''.
    The purpose of coordinating state and local regulatory authority is 
to optimize resources, agency abilities, and regulatory experience to 
ensure that hemp production complies with all state requirements and 
local zoning and land use rules.

    Regulatory Program

    Current Program. CDA and CDPHE share limited information with 
Federal, Tribal, state, and local government agencies, including law 
enforcement agencies, as requested, or on an ongoing basis subject to 
privacy restrictions under a MOU. CDA and CDPHE have MOUs with several 
agencies in place already to facilitate other governmental permitting 
functions.
    Recommended Enhancement. The need for collaboration between state 
and local government is necessary to ensure hemp producers comply with 
all state and local laws and requirements. While CDA and CDPHE regulate 
for production compliance, registrants are also subject to local 
government regulation for zoning, water use, public health and all 
other local laws as enforced by local law enforcement agencies.
    Stakeholders recommended CDA and CDPHE develop a communication 
protocol with local governments and law enforcement, under a MOU, and 
assist localities to facilitate compliance with all local rules and 
regulations. Stakeholders also visioned the development of a hemp 
electronic traceability system (see recommendation 11). CDA and CDPHE 
will provide local governments and law enforcement with limited access 
specific to support local government regulatory functions, while 
maintaining compliance with all state and local confidentiality 
requirements. CDA and CDPHE should work with local governments through 
MOU to share necessary information.

    Implementation

    The following action items are needed to implement this 
recommendation:

   State and Local MOUs to coordinate information sharing;

   Local rule changes pertaining to the agencies responsible 
        for establishing and enforcing local cultivation requirements; 
        and

   Continued communication between the state and local agencies 
        on compliance issues.

    Key Stakeholders

    CDA, CDPHE, Tribal, municipal and county governments, law 
enforcement agencies, Colorado hemp industry[.]
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        Testing Recommendations

9. Field Sampling and Sampling Agent Certification
    Stakeholder Recommendation

    The CDA Hemp Program should develop guidance on sampling hemp grown 
in Colorado for testing THC content according to USDA requirements, and 
establish a certification program to allow third parties to collect 
samples in the field for regulatory use.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is CRS  35-61-104 and 
 35-61-105. These statutes are specified for raw hemp sampling and 
testing in 8 CCR 1203-23-4 and should be further specified in rule 
during implementation.
    The purpose of establishing a field sampling program is to: (1) 
comply with Federal regulations that require sampling of all hemp; and 
(2) to test hemp for THC content to ensure that crops meet the 
definition of industrial hemp according to CRS  35-61-101.

    Regulatory Program

    Current Program. CDA has historically conducted random sampling 
across all registered lots each year to test for THC compliance. CDA 
anticipates they will increase sampling coverage from 25-30 percent of 
hemp lots to 100 percent to comply with the Federal rule. Beginning in 
2021, CDA will develop and implement a third-party sampling 
certification program to allow private, certified sampling agents to 
collect samples and deliver them to certified labs. Recently, CDA has 
updated its Hemp Sampling Guidelines to materially align with sampling 
guidance from the USDA.
    Recommended Enhancement. CDA should continue to conduct sampling 
with its own staff, consistent with its current practices and 
procedures, to ensure continuity of CDA's practice of accurate, 
efficient, and effective sampling. In addition, CDA should also 
implement the following certification program.

    Third-party Sampling Program

    Stakeholders recommended CDA develop a certification program for 
individuals and businesses to become official sampling agents. To 
acquire certification, an applicant would register with CDA and 
complete a certification training under CDA's Hemp Sampling Guidelines. 
The certification training would permit CDA to ensure that every 
certified sampler follows CDA's sampling guidelines when collecting 
hemp samples, including sample collection, transportation, and 
documentation. Third-party samplers will also receive training and be 
required to comply with special chain of custody procedures for the 
collection and transfer of hemp samples to eligible laboratories. The 
sampler certification program would be offered to qualified 
agricultural service providers or to other eligible and qualified 
entities and individuals.

    Implementation

    The following action items are needed to implement this 
recommendation:

   New field sampling standards and procedures that include 
        post-harvest sampling for secondary testing

   New curriculum and administrative procedures for obtaining 
        and maintaining certification as a field sampling agent

    Key Stakeholders

    CDA, Third-party field sampling agents, Colorado hemp 
cultivators[.]
10. Hemp Laboratory Certification Program
    Stakeholder Recommendation

    Develop a certification program that provides guidance to private 
analytical laboratories on certification requirements, appropriate 
analytical methods, and general testing procedures.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation lies in CRS  35-61-
105,  35-61-105.5,  25-1.5-101,  25-1.5-104 and  25-5-426. These 
statutes inform regulations for raw hemp testing in 8 CCR 1203-23-4 and 
should be further specified in rule during implementation.
    Establishing a Hemp Testing Laboratory Certification Program would 
comply with the USDA rules to guarantee potency testing of all hemp 
lots grown in Colorado, and to protect public safety by ensuring 
consumable products meet standards for safety and purity. Further, 
Colorado should provide an initial testing framework for food and 
supplement products absent Federal guidelines from the FDA. Once a 
Federal framework is in place, the Colorado testing framework would be 
adjusted.
    Testing information from certified labs is crucial for:

   Maintaining compliance with the USDA;

   Implementing an important part of the hemp electronic 
        traceability system;

   Assuring potency and purity to consumers and businesses 
        purchasing hemp products; and

   Protecting businesses and the public against inaccurate or 
        misleading product claims, product impurities, and foodborne 
        illnesses.

    Regulatory Program

    Current Program. The hemp and hemp products testing program 
includes a random hemp testing program administered by CDA and 
completed by the CDA laboratory. The CDA samples about 25 percent to 30 
percent of hemp program registrants per year and tests hemp growing in 
the field for THC content. Testing for consumable hemp products is 
currently completed by CDPHE-certified labs. Hemp manufacturers selling 
consumable products must register with CDPHE to sell into the 
commercial food and supplement supply.
    Recommended Enhancement. The new lab certification program would 
include the certification process, requirements for testing methods, 
and a framework for when testing is required by the state. The program 
is expected to be a minimum framework intended to supplement rigorous 
voluntary testing practices that will accompany products in most 
transactions. Key features of certified laboratory and testing program 
include:

    Certifying process and criteria

    CDPHE will serve as the certifying agency for labs that test 
consumable hemp and hemp products. CDPHE will adapt its process for 
certifying all other clinical, food, and environmental labs to hemp 
testing labs. At a minimum, CDPHE will inspect and certify labs to test 
hemp plant material and hemp products for:

   Cannabinoids (THC and other).

   Microbials;

   Residual solvents;

   Pesticides;

   Mycotoxins; and

   Heavy metals.

    Each of the above would require a separate certification from the 
CDPHE. CDPHE certification requires that each laboratory obtain 
accreditation, including but not limited to ISO 17025, from an ILAC-MRA 
signatory accreditation body. The laboratory would then be required to 
apply and submit corporate and operational documentation and go through 
on-site inspection and auditing for approval. An annual fee would be 
required for certification.
    CDPHE will require these documents at a minimum:

   Proof of ISO 17025 accreditation;

   An application that specifies which methods/analytes the lab 
        is applying for certification;

   Organizational reporting structure;

   Acknowledgment that the laboratory will comply with policies 
        established for all certified laboratories;

   Key staff qualification information; and

   Standard operating procedures and other essential laboratory 
        documentation.

    The CDPHE should incorporate all CDA and USDA requirements into the 
certification program. The USDA will require labs that test hemp to 
obtain a DEA certification. The program could offer two tiers of 
approval for hemp THC testing laboratories in Colorado:

   Certified Laboratories have met all specific state 
        requirements, including ISO 17025 accreditation and 
        registration with DEA, and

   Conditionally Certified Laboratories are ISO 17025 
        accredited and have met all CDPHE certification requirements 
        but are not registered by the DEA.

    Testing methods

    All Colorado hemp testing labs must use analytical methods approved 
by CDPHE to ensure consistency of results across all laboratories. The 
CDPHE will consult rules established for other analytical labs, USDA, 
and FDA rules, as well as standards available from Association of 
Official Agricultural Chemists, American Society for Testing Materials 
(ASTM), the Association of Public Health Laboratories, and other 
relevant institutions.
    Accepted methods may include gas chromatography, gas chromatography 
mass spectrometry, high-performance liquid chromatography, and other 
validated testing methodology. Official test results reportable to the 
USDA must provide the percentage of total THC content.\11\
---------------------------------------------------------------------------
    \11\ Calculating total THC is achieved either using a post-
decarboxylation analytical method (i.e., gas chromatography) or by 
adding 87.7 percent of the THCA weight to the THC weight determined by 
a pre-decarboxylation (liquid chromatography) analytical method.

---------------------------------------------------------------------------
    Testing framework

    All raw hemp is subject to mandatory field THC testing to enter the 
stream of commerce as required by the USDA. Field sampling will be 
conducted by the CDA and by CDA-certified sampling agents. For hemp 
entering the industrial supply chain, no further testing is required. 
For hemp destined for further processing for human or animal 
consumption, hemp products either need to be processed or manufactured 
in facilities that have their processes validated by CDPHE; or subject 
to a mandatory testing program that includes pathogens and microbials, 
pesticides, heavy metals, residual solvents, and cannabinoid content.
    All state-mandated \12\ testing of hemp and hemp products will be 
conducted by CDPHE-certified labs or the CDA. The CDPHE will require 
mandatory testing of production batches of all finished consumable 
products for ingestion and topical applications, for cannabinoid 
content, heavy metals, pesticides, microbials, mycotoxins and residual 
solvents. Processing and manufacturing registrants that opt to have 
their processes validated \13\ through consistent purity and potency 
tests can reduce or bypass potency and contaminant testing of every 
production batch. Process validation is obtained through submitting 
information to CDPHE on procedures and passing multiple consecutive 
contaminant and potency tests within a specified period. Renewal and 
re-inspection are required upon a process change or according to CDPHE 
recommended interval.\14\ All testing expenses are the responsibility 
of the business selling hemp or hemp products.
---------------------------------------------------------------------------
    \12\ Most market participants exchanging product require a 
certificate of analysis that provides information on intermediate 
product potency, purity, and the presence of contaminants (if any). For 
general or R&D purposes, use of CDPHE-certified labs is not required.
    \13\ CDPHE process validation for hemp will be the same for other 
food and supplement manufacturers. It is modeled after FDA process 
validation guidelines and unique to each facility and process 
introduced. Each applicant must present its procedures and 
certifications to CDPHE, which inspects, approves, and re-inspects on 
risk-based parameters. Companies with detailed safety plans in place, 
such as a HACCP or CAPA plan, and with an audit for compliance with 
cGMP standards are viewed favorably in the CDPHE assessment.
    \14\ CDPHE renews either bi-annually, annually, semi-annually, or 
quarterly based on risk profile.

---------------------------------------------------------------------------
    Disposal protocol

    Compliant hemp samples do not need any special disposal procedures. 
If necessary, certified labs should comply with DEA and/or state 
guidelines for marijuana disposal, i.e., excess samples that test above 
0.3 percent THC is only disposed of after being ``rendered 
unrecognizable'' by mixing with dirt, compost, or similar material. 
Excess sample that tests below 0.3 percent THC may be disposed of as 
is. Hazardous waste created during cultivation, laboratory testing, and 
the manufacturing process will need to be disposed of per Federal, 
state, and local laws, regulations, rules, and/or other requirements.
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    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Obtain statutory authority to promulgate rules related to 
        certification of hemp labs (CDPHE)

   Adopt rules for certification requirements, testing 
        framework, based on existing programs (CDPHE)

   Adopt rules for accepted lab procedures and inspections, 
        based on existing programs (CDPHE)

   Obtain statutory authority to collect inspection fees; to 
        direct where the funding goes; and to and periodically adjust 
        fee collection and disbursement procedure (CDPHE)

   Implement lab certification program, inspection procedures 
        and system to verify field testing and finished product testing

    Key Stakeholders

    CDPHE, CDA, Analytical labs, Colorado hemp cultivators and 
processors[.]
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        Transportation Recommendations

11. Electronic Traceability System
    Stakeholder Recommendation

    Implement an Electronic Traceability System (ETS) to support an 
uninterrupted chain of custody for hemp products from harvest to 
commercial sale and to provide secure and verifiable information to 
various stakeholders.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is the 2018 Farm Bill 
Section 12619 and Colorado Senate Bill 17-090.
    The purpose of an ETS would be to collect information throughout 
the hemp supply chain that can be accessed and reviewed in a single 
application by multiple stakeholders. The ETS would create a 
standardized electronic database system for all required documentation 
such as the manifest for verification while transporting hemp; a 
confirmation of laboratory testing of products; and a transaction 
history.
    Stakeholders envisioned the ETS would allow for the coordination 
among the many agencies that regulate hemp and intrastate and 
interstate commerce including but not limited to; CDOT, CDA, CDPHE, The 
Office of the Governor, The Office of the Attorney General, Colorado 
State Patrol, and local and Tribal governments. The ETS will interface 
with databases across all involved industry businesses and agencies to 
create a secure and verifiable ledger for tracing hemp across the 
supply chain and protect the integrity of the hemp industry. It is 
important to note that stakeholders felt that since hemp is a legal 
commodity the ETS should not be used to provide unnecessary over-
regulation. Rather, the ETS should utilize an appropriate block-chain 
technology to help the industry comply with existing regulations and 
provide verifiable importation of the products related to compliance 
and quality standards.
    Key users such as producers, processors, law enforcement, and 
government officials could use the system for a variety of purposes 
including, but not limited to:

   Providing hemp transporters and law enforcement a tool for 
        real-time verification of the legality of a shipment;

   Providing banking and insurance sectors with data that 
        allows verification of a licensed hemp grower or an ancillary 
        business in good standing;

   Supplying compliance information, such as passed or failed, 
        at all stages of production such as cultivation and 
        manufacturing;

   Verifying certifications such as using certified seed or 
        organic designation;

   Distributing information accessible to all relevant agencies 
        including names and contact information of parties in the chain 
        of custody; and

   Allowing consumers the ability to confirm the source of the 
        products they are purchasing as originating within the Colorado 
        regulated hemp system.

    Regulatory Program

    Current Program. There is no current ETS in Colorado for hemp. The 
state registration system and detailed product documentation, including 
manifests and certificates of analysis, are used to determine product 
authenticity.
    Recommended Enhancement.

    Intrastate transport

    The creation of a new communication protocol through an ETS for 
tracking hemp could be modeled on existing protocols for the shipment 
of agricultural and non-hazardous manufactured products. CDA and CDPHE 
should have the final say in the provision of documents for product 
verification.
    Required documents will likely follow those outlined for the 
protocol, but the standardized protocol should be expanded to provide 
enhanced communication and tracking across the hemp supply chain. For 
this to occur, the selection and development of a single platform will 
be essential. The following should be considered in developing the 
protocol:

   A process for verification when in remote areas without 
        reliable internet access;

   Standardization anti-tampering requirements;

   Flexibility for the future implementation of distributed 
        ledgers and associated technologies for enhanced traceability 
        and fraud protection;

   Use of batch level tracking (not per plant) will be 
        imperative for recall and verification purposes; and

   Creation of training materials on the protocol.

    The ETS will allow any user to distinguish whether hemp or hemp 
products encountered in the field, in facilities, or in transit can be 
verified as hemp and can be traced to its origin. Without reliable and 
affordable mobile testing procedures, it is impossible to distinguish 
legal hemp from legal or illegal marijuana. In place of physically 
testing the product a standardized protocol, along with education, will 
reduce the risk of costly miscommunications.

    Interstate transport

    Additional documents may be required when transporting across state 
borders and the electronic system must provide flexibility for this. 
Colorado will comply with all Federal documentation requirements for 
interstate hemp shipments. Interstate communication and coordination 
will be essential for the success of the Colorado hemp industry. 
Colorado should share the lessons learned from developing its 
intrastate communication protocol with other states, and work to build 
partnerships with other states and the USDA in developing a nationwide 
traceability system and serve as a leader absent Federal guidelines.

    System development

    The ETS should be developed through an interagency workgroup to 
ensure buy-in and input from relevant agencies. It is recommended that 
this task force include representatives from the Office of the Colorado 
Attorney General, Colorado State Patrol, CDA, CDPHE, Office of 
Information Technology, Colorado Bureau of Investigation, a local 
government, Tribal government and industry.
    The duties of the task force should be to:

   Develop requirements for the protocol;

   Secure funding;

   Select the company to develop the system through a 
        competitive request for proposal process;

   Determine required documents;

   Specify the interstate interface;

   Establish protocol for questions and verification process 
        for the documents;
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   Monitor implementation of new protocol and needed 
        adaptations;

   Select the agency(s) responsible for the ongoing management 
        of the system and facilitate the transition from the task 
        force; and

   Appoint a liaison from the State of Colorado to coordinate 
        with other states this person should work alongside the 
        tracking systems contracted vendors to help other states 
        develop their own tracking systems.

    Implementation

    The following action items are needed to implement this 
recommendation:

   Collaboration with the Hemp Advisory Committee and the hemp 
        industry to confirm the direction and implementation of a 
        tracking system is appropriate;

   Development of a taskforce among key stakeholders to 
        evaluate options and develop implementation plan;

   Legislation to establish the creation of an ETS; a protocol 
        to provide information to legitimate users and to protect data 
        confidentiality of participants; and

   Creation of a funding mechanism for agency or task force to 
        develop technical specifications and solicitation process to 
        develop and implement the electronic tracking system.

    Key Stakeholders

    CDA, CDPHE, Tribal and local governments, Colorado hemp cultivators 
and manufacturers, transportation industry, law enforcement[.]
12. Transportation Protocol
    Stakeholder Recommendation

    Develop guidance and best practices for transporting hemp and hemp 
products within Colorado including proper documentation and 
recordkeeping.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is CRS  35-61-108(3), 
which states that CDA ``may promulgate rules to require approved 
shipping documentation for the transportation of hemp.''
    The purpose of the establishment of a protocol and industry best 
practices for the transportation of hemp is to develop a clear set of 
rules around the intrastate and interstate transportation of hemp and 
transportation across Tribal and international boundaries. The creation 
of guidance will build on existing CDA rules and regulations and 
establish standards around the appropriate documentation, communication 
procedures, best practices and training protocols surrounding the 
transportation of hemp in Colorado.

    Regulatory Program

    Current Program. Transporters currently carry a manifest and a 
Certificate of Analysis (COA), but local law enforcement often is 
unclear how to verify the shipments. A successful Colorado hemp 
industry requires standardization of processes and documentation. 
Developing a coordinated protocol will take time. It is recommended 
that in the intermediate time frame transporters should have the 
following documents on-hand so that law enforcement can verify by the 
issuing agencies if needed:

   Travel Manifest;

   COA matching travel manifest;

   CDA Registration Number;

   Manufactured Food or Storage Facility Registration Number; 
        and

   Commodity Handler or Farm Producer Dealer License from CDA 
        (if applicable).

    Recommended Enhancement. Develop guidance and best practices for 
the transportation of hemp and hemp products utilizing existing CDA 
rules. Due to the nature of hemp, specific protocols will need to be 
developed with input from numerous state agencies and hemp businesses.
    The regulatory protocol will develop the following standards:

   Required transportation documentation;

   Rules for the storage, packing and transportation of hemp;

   Development of interstate compacts;

   A unified communication protocol;

   Insurance company documentation to insure hemp loads and 
        bond drivers;

   Protocol for the transportation of hemp products (such as 
        intermediate products or products bound for destruction) that 
        are over 0.3 percent THC, as allowed in Federal rule; and

   Protocol and procedure for a coordinated response by state 
        law enforcement regulatory authorities.

    Transportation best practices

    The CHAMP process identified these best practices to include in the 
transportation regulatory protocol:

   Ensure shipping documents are fraud-resistant and display 
        information such as the CDA or CDPHE registration numbers;

   Provide guidance on paper and digital records and ensure 
        that the records match;

   Communication from all involved government agencies and 
        local law enforcement;

   Require adherence to all state and local regulations, 
        including storage and odor control;

   Develop a database of all key law enforcement and regulatory 
        authorities available for contact.

    Interstate considerations

    One of the key aspects of the transportation protocol will be the 
creation of interstate compacts which should include:

   Development of a reciprocity agreement for states and Tribal 
        governments that states approved hemp and hemp products in one 
        state will be recognized in all;

   Development of an agreement on a common set of shipping 
        documentation to verify compliance with hemp regulations in the 
        state of origin;

   Agreement on hemp tracing systems to assist law enforcement;

   Protocol for third-party entities transporting hemp;

   Interstate weighing requirements; and

   Appointment of a liaison to serve as the key contact for 
        coordination with other states.

    Implementation

    The following action items are needed to implement this 
recommendation:

   Develop transportation rules and requirements for 
        documentation, including rules to transport intermediate 
        products;

   Develop interstate compacts for hemp transport as needed;

   CDA, CDPHE, and Tribal governments should each focus on 
        education and outreach to:

     Assist the state in developing rules and standards for 
            transporting hemp and hemp products;

     Educate industry practitioners and law enforcement 
            about hemp documentation and labeling requirements;

     Evaluate the need for requirements to maintain 
            registrations and for the creation of a `fit for commerce' 
            certification program for transporters and producers; and

   Secure appropriation and allocation of funds to develop and 
        implement protocols.

    Key Stakeholders

    CDA, CDPHE, Tribal and local governments, Colorado hemp cultivators 
and manufacturers, transportation industry, law enforcement[.]
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        Processing Recommendations

13. Processor Registration and Inspection
    Stakeholder Recommendation

    Continue the integration of hemp into the CDPHE food and dietary 
supplement processor and manufacturer program. Further define licensed 
activities as needed and provide a means for the state to register and 
regulate hemp processors and manufacturers in Colorado. This is an 
existing, active program.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is CRS  35-61-108,  
35-1-104,  25-1.5-104,  25-4-1603, and  25-5-426. These statutes 
authorize CDA and CDPHE to regulate and inspect food processing 
facilities generally and hemp processing facilities specifically. These 
statutes are further specified in 6 CCR 1010-2 and 1010-21 Colorado 
Retail and Wholesale Food Regulations.
    Maintaining a proper processing licensing system for hemp products 
is necessary to protect public safety and to ensure that only properly 
trained and supervised professionals using current good manufacturing 
practices create products that enter the commercial food, dietary 
supplement, and cosmetic supply chain. A licensing system ensures 
safety and accountability in processing procedures for ingredients and 
products that ultimately end up as food, dietary supplements, or 
industrial products.

    Regulatory Program

    Existing Program.

    Hemp Processor Definition

    Licensed hemp processors fall into three categories depending on 
their processing methods and intended market. A key distinction in 
processor licensing and regulation is whether the processor produces 
products intended for human consumption through topical, ingestible, or 
inhalable delivery methods:

   Industrial processor. Industrial processors use raw hemp 
        inputs to make intermediate and final industrial products out 
        of hemp bast, fiber, cellulose, hurd, and lignin. These 
        materials are processed to make fuel, textiles, paper, 
        plastics, building materials, and other industrial products.

   Extraction and post-processing (consumable). Hemp extractors 
        and post-processors use a variety of chemical and mechanical 
        processes to extract and separate cannabinoids, terpenes, 
        flavinoids, and other compounds from plant fibers and waxes. 
        CDPHE is the lead state agency for licensing and regulating 
        hemp extractors and post-processors. Hemp extractors and post-
        processors must follow all state and local laws and 
        regulations, including local fire, building, and zoning codes.

   Finished products (consumable). Finished products 
        registrants include all processors that manufacture hemp 
        products for sale to retailers and directly to consumers. CDPHE 
        licenses and regulates Colorado food and supplement 
        manufacturers and maintains a list of all registrants. This 
        list includes hemp finished product manufacturers. CDPHE 
        inspects these operations under 6 CCR 1010-21 to ensure 
        compliance with product and process standards. Local 
        governments inspect facilities for conformance with local fire, 
        building, and zoning codes and ordinances. All hemp finished 
        products are subject to safety and potency testing according to 
        CDPHE rule (6 CCR 1010-21).

    State and Local Authority

    A combination of state and local governments regulates hemp 
processors. CDPHE regulates consumables processors for safety and 
technical procedures. CDA regulates farm processors for safety. All 
processing facilities are subject to local government regulation for 
zoning, fire safety and public health, and all local laws as enforced 
by local law enforcement agencies. CDA and CDPHE provide hemp 
registration information under MOU to local governments and law 
enforcement and have developed a communication protocol to facilitate 
local enforcement and regulatory activities.

    Licensing and Inspection

    Licensing and inspections are already completed by CDPHE and local 
governments for consumable product processors. CDPHE already requires 
new applicants to submit documentation of occupancy permits which 
includes local government regulatory compliance. CDPHE uses procedural 
guidelines for food production in accordance with Federal regulations 
and has incorporated the use of hemp as an ingredient in food 
processing. Consumable processors are expected to follow all local, 
state, and Federal guidelines for safe and sanitary food production. 
License and inspection fees are required for local occupancy permits 
and by CDPHE. Facility inspections occur at the discretion of CDPHE and 
local government agencies, usually at the time of license, certificate 
of occupancy issuance, upon renewal, as part of a corrective action 
plan, or at random.
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    Industrial processors do not require a specific state license, 
other than compliance with all state and local safety regulations, and 
ordinances to obtain a local occupancy permit.

    Implementation

    Colorado state and local governments already have procedures and 
programs in place to regulate hemp processors or to integrate hemp into 
existing regulatory programs. The following action items are needed to 
implement this recommendation:

   Harmonize registration, statute, and regulation with 
        definitions of terms and types of processors above;

   Develop (or renew as needed) MOU for information sharing 
        with local governments and law enforcement; and

   Consult with ISO, ASTM, NSF, U.S. Hemp Authority (USHA), 
        American Herbal Products Association (AHPA), and other groups 
        developing hemp-specific processing standards.

    Key Stakeholders

    CDPHE, CDA, Colorado hemp processors, national processor certifying 
agencies[.]
14. Processor and Manufacturer Standards
    Stakeholder Recommendation

    Clarify and develop state regulatory requirements for processing 
and manufacturing practices related to hemp products. Current Good 
Manufacturing Practice (cGMP) should be administered through the CDPHE 
Manufactured Food Program. This program is largely an existing program 
in CDPHE with some specific adaptations for hemp products.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is CRS  25-5-426. This 
statute authorizes CDPHE to promulgate standards for food and other 
consumable products made by hemp processing and manufacturing 
operations. These statutes are further specified in 6 CCR 1010-2 and 
1010-21 Colorado Retail and Wholesale Food Regulations.
    CDPHE is the state licensing, certification, and food protection 
agency. The department is tasked with establishing minimum standards 
and rules for wholesale and retail food establishments to protect 
public health and safety. Hemp and hemp extracts are processed into 
food, dietary supplements, cosmetics, and other consumable products and 
come under CDPHE regulatory authority. CDPHE requirements for 
processing and manufacturing standards ensure that products are 
unadulterated and safe for consumption. Hemp and hemp products are 
already integrated into CDPHE programs for wholesale and retail food, 
which also includes dietary supplements. CDA provides regulatory 
oversight for products for animal consumption.

    Regulatory Program

    Existing Program. CDPHE incorporates by reference into its 
regulations the majority of the Code of Federal Regulations for food 
and dietary supplements established under the authority of the FDA.
    cGMP regulations require a quality approach to manufacturing, 
enabling companies to minimize or eliminate instances of contamination 
and errors. This protects the consumer from purchasing a product that 
is not effective or potentially dangerous. CDPHE verifies compliance 
with cGMP through random inspections and through the licensing process 
by review of operating procedures, acceptance of 3rd party 
verification, and initial inspection.

    Consumable Food, Dietary Supplements, and Cosmetics

    All hemp processors and manufacturers defined as producing 
cosmetics and consumable products should follow the adopted regulations 
modeled after standards set by appropriate regulatory authorities, 
including CDPHE and FDA, and industry standards organizations such as 
ASTM, AHPA, Organic & Natural Health Association, NSF, and ISO. These 
rules include the existing CDPHE rules for wholesale and retail food 
producers cited above and these Federal rules, included in CDPHE rule 
by reference or CDA authority:

   FDA cGMP for:

     Food (and 21 CFR 117)

     Dietary supplements (21 CFR 111)

     Animal products (21 CFR 507)

   The U.S. Food, Drug, and Cosmetics Act, and the Fair 
        Packaging and Labeling Program, for cosmetics and topicals (21 
        U.S.C.  361-363, 15 U.S.C.  1451-1461).

    The above Federal and state regulations address issues including 
recordkeeping, personnel qualifications, sanitation, cleanliness, 
equipment verification, process validation, and complaint handling, and 
generally allow each manufacturer to decide individually how to best 
implement the necessary controls in their business. In developing 
additional hemp-specific rules, CDPHE shall consider the inclusion of 
both a hazard analysis and critical control point (HACCP) assessment; 
and corrective action--preventive action systems (CAPA, required), 
which identify, evaluate, and control for safety hazards and pathogens 
in production facilities. These plans require batch coding, contaminant 
controls, pathogen mitigation and other preventive and corrective 
measures.

    Inhalable Products

    There are no state guidelines for hemp products sold for 
inhalation, including smokable hemp flower and oils intended for 
vaporization and inhalation. A statutory change will need to be 
initiated to provide CDPHE or another state agency the authority to 
adopt cGMP for these products to ensure purity and consumer safety to 
the greatest extent possible. For smokable flower, CDPHE could examine 
FDA tobacco rules (21 CFR 1140) or potentially the Colorado MED 
marijuana rules (1 CCR 212-3) for information on purity and safety 
requirements if deemed applicable. Similarly, for vaporized oils, CDPHE 
can refer to the FDA rules for dietary supplements (21 CFR 111) and to 
MED marijuana rules for infused concentrate products (1 CCR 212-3 Rule 
3-335) if deemed applicable. Producers of these products are subject to 
CDPHE licensing and testing protocols.

    Process Validation and Testing

    CDPHE should incorporate hemp processors and manufacturers into 
existing process validation practices for food and supplement 
producers. Considerations should be made in the regulations that 
registrants that opt to have their processes validated may reduce or 
bypass potency and contaminant testing of every production batch. 
Process validation should be renewed upon a process change or other 
approved interval \15\ and is obtained through passing multiple 
consecutive contaminant and potency tests within a specified period.
---------------------------------------------------------------------------
    \15\ Most renewal intervals are either biannual, annual, or 
quarterly, although specific to each facility and process.

---------------------------------------------------------------------------
    Implementation

    Colorado state and local governments already have procedures and 
programs in place to regulate hemp processors and manufacturers. The 
following action items are needed to implement this recommendation.

   Legislation to extend CDPHE regulatory authority to hemp 
        products and for proper hemp integration as needed;

   Consult with FDA, other states, and other groups developing 
        hemp-specific processing and manufacturing standards; and

   Develop education program for CDPHE to hold sessions for new 
        and existing manufacturers for how to comply with cGMP (and 
        other) hemp regulations.

    Key Stakeholders

    CDPHE, Colorado hemp processors, national processor certifying 
agencies[.]
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        Manufacturing Recommendations

15. Manufacturer Registration and Inspection
    Stakeholder Recommendation

    Continue the integration of hemp into the food and dietary 
supplement manufacturer program. Further, define licensed activities as 
needed and provide a means for the state to register and regulate hemp 
processors and manufacturers in Colorado. This is an existing, active 
program.

    Basis & Purpose of Recommendation

    The statutory basis for this recommendation is HB 18-1295 which 
established that hemp food and cosmetic products shall be treated like 
other similar product types. Other relevant Federal statutes:

   Food (21 CFR 110 and 21 CFR 117)

   Dietary supplements (21 CFR 111)

   Animal products (21 CFR 507)

    The infrastructure for the creation of registration procedures for 
hemp manufacturers is already in place with the food manufacturing 
registration procedures of the CDPHE, but slight modifications will be 
needed, including the development of a hemp-specific registration form.

    Regulatory Program

    Existing Program.

    Hemp Manufacturer Definition

    A hemp manufacturer is defined as an industrial hemp processor or 
producer making hemp-derived products and is divided into two subtypes:

   Consumable Manufacturer. An industrial hemp manufacturer 
        making hemp-derived products intended for human use or 
        consumption, either as a finished good or as an ingredient/
        component of a finished good. This definition includes (but is 
        not limited to) foods, beverages, tinctures, topicals, and 
        transdermals. Inhaled products and suppositories are not 
        covered under the registration program, a legislative change 
        would be required for their inclusion.

   Industrial Manufacturer. An industrial hemp manufacturer 
        making industrial hemp products (including but not limited to 
        textiles, construction materials, fibers, animal/pet feed or 
        treats) not intended for human use or consumption.

    Registration Procedure

    Registration of hemp manufacturers is already occurring and builds 
on the already existing protocols set out by the CDPHE for all food and 
dietary supplement manufacturers. CDPHE already has a procedure for 
registering manufacturers and consumable hemp product manufacturers 
that can fall under this existing registration process. CDPHE also has 
existing packaging and labeling requirements in place that can be 
adapted to hemp.
    Considerations for potential modifications of existing procedures 
for hemp manufacturing regulation:

   Procedures for regulating waste processors, the potential 
        need for registration with CDA.

   Determination on whether additional oversight of non-
        consumable industrial hemp manufacturers is needed, and the 
        appropriate state and/or local government agencies to lead.

   More review and discussion to determine if there is a need 
        to include cosmetics and topicals in the consumables procedure 
        (currently exempt from the CDPHE procedure).
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   More review and discussion to determine the procedure for 
        vaping (currently exempt from the CDPHE procedure).

   Adherence to all local jurisdiction and Tribal authority 
        requirements will be necessary for license approval.

   Consideration of options to utilize non-compliant hemp 
        products (but not for human consumption).

    Non-consumable Industrial Manufacturers

    CHAMP stakeholders determined more discussion is needed to 
determine whether there is the need for additional regulatory oversight 
for non-consumable industrial hemp production and manufacturing, and 
the appropriate state agency if needed. Local and Tribal jurisdictions 
will continue to be involved in health inspections, business licenses, 
building permits, occupancy, and zoning regulations. CDPHE is the lead 
state regulatory agency for manufacturing consumable hemp products in 
Colorado.

    Implementation

    The following action items are needed to implement this 
recommendation:

   Continue to integrate hemp manufacturers in CDPHE licensing, 
        inspection, and regulatory rules--legislation will be needed to 
        provide CDPHE with the authority to regulate inhalable 
        products;

   Clarify the point in the hemp supply chain where regulatory 
        authority over industrial hemp is transferred to the CDPHE when 
        hemp-related products are intended for human consumption;

   Clarify whether there is additional regulatory oversight 
        required of non-consumable industrial hemp[.]

    Key Stakeholders

    CDPHE, CDA, Colorado hemp manufacturers, national manufacturer 
certifying agencies[.]
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        Marketing Recommendations

16. Glossary of Terms
    Stakeholder Recommendation

    Provide a list of terms and definitions for different stages in the 
supply chain to create a universal understanding of the hemp industry 
terminology.

    Basis & Purpose of Recommendation

    Every profession, industry, or sector has technical nomenclature. 
The hemp industry is no exception to this principle and uses many terms 
that may be misconstrued or confusing to people not directly involved 
in the sector. This has implications for communications, transparency, 
and information flows across the supply chain, where buyers, sellers, 
and consumers must know what they are purchasing and using.
    Given the nascent status of the industry, Stakeholders suggested 
that a glossary of terms would be useful as a starting point to 
standardize how products are defined along the supply chain.

    Glossary by Stage in Supply Chain

    Disclaimer. The following are conceptual definitions that were 
developed by participants during meetings in the R&D and seed, 
cultivation, testing, processing, manufacturing, and marketing 
stakeholder groups. Official Federal, state, and local regulatory terms 
may differ from the definitions contained herein.
    Stakeholders should ultimately rely on Federal definitions of hemp 
and marijuana, and on definitions published in the Colorado Revised 
Statutes or Code of Colorado Regulations for reference.
    State agencies should strive to adopt standardized definitions when 
developing official regulatory definitions, and the following can 
provide a basis.

    Biology and Chemistry of Plant Compounds

   Bioavailability--This term refers to the degree and rate at 
        which a drug is absorbed by the body's circulatory system. It's 
        an important measurement tool because it determines the correct 
        dosage for drugs, supplements, and herbs administered non-
        intravenously, such as through consumption, inhalation, or 
        topical application. Bioavailability measurements denote the 
        fraction of the ingested dose that gets absorbed by the body.
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   Cannabinoid(s)--(also ``phytocannabinoid(s)'') A group of 
        compounds that can be found in cannabis, other food-producing 
        plants, and in the human endocannabinoid system. There are many 
        different cannabinoids, and they are often written in their 
        abbreviated form.\16\ Below is a (non-exhaustive) list of 
        cannabinoids.
---------------------------------------------------------------------------
    \16\ Note: Every cannabinoid has an ``acid'' precursor form. These 
acid precursors are produced by the plant and are converted into their 
non-acid form in a process known as decarboxylation, which we will 
describe later. Acid precursors have their abbreviation appended with 
an ``-A'' or ``A.'' (i.e.: THCA/THC-A, CBDA/CBD-A)

     Delta-9 Tetrahydrocannabinol (Abbrev: THC): THC is the 
---------------------------------------------------------------------------
            primary psychoactive compound in cannabis

     Cannabidiol (Abbrev: CBD) CBD is valued for several 
            medical properties and is non-psychoactive

     Cannabinol (Abbrev: CBN)

     Cannabigerol (Abbrev: CBG)

     Cannabichromene (Abbrev: CBC)

     Cannabicyclol (Abbrev: CBL)

     Cannabivarin (Abbrev: CBV)

     Cannabielsoin (Abbrev: CBE)

     Cannabicitran (Abbrev: CBT)

     Tetrahydrocannabivarin (Abbrev: THCV)

   CB1/CB2 Receptors--The CB1 and CB2 receptors are 
        endocannabinoid receptors found in the human body that are 
        responsible for interacting with different cannabinoids. CBD 
        and THC often interact directly with these receptors.

   Decarboxylation/Decarb--Decarboxylation is a chemical 
        process that relies on heat (often from combustion or cooking) 
        to eliminate a carboxylic acid group from the cannabinoid. 
        Decarboxylation is how the acid forms of cannabinoids are 
        converted into their non-acid forms. For example, THCA is 
        converted to THC by decarboxylation.

   Delta-9 tetrahydrocannabinol (THC)--This is the primary 
        cannabinoid responsible for psychoactive effects. It interacts 
        with endocannabinoid receptors in the brain to release 
        dopamine.

   Endocannabinoid System--The endocannabinoid system is a 
        signaling system responsible for regulating a variety of 
        hormones and chemical signals. In humans and most animals, 
        constituents of cannabis act upon the endocannabinoid system 
        and may affect some functions of the body and/or how sensations 
        such as pain are experienced.

   Industrial Hemp--Federal Definition \17\--(also ``hemp'') Is 
        the plant Cannabis sativa L. and any part of that plant, 
        including the seeds thereof and all derivatives, extracts, 
        cannabinoids, isomers, acids, salts, and salts of isomers, 
        whether growing or not, with a delta-9 tetrahydrocannabinol 
        (THC) concentration of not more than \3/10\ of one percent 
        (0.3%) on a dry weight basis.
---------------------------------------------------------------------------
    \17\ 7 U.S.C.  1639o(1).

   Marijuana--Federal Definition \18\--All parts of the plant 
        Cannabis sativa L., whether growing or not; the seeds thereof; 
        the resin extracted from any part of such plant; and every 
        compound, manufacture, salt, derivative, mixture, or 
        preparation of such plant, its seeds or resin. Marijuana does 
        not include--hemp, as defined above; or the mature stalks of 
        Cannabis sativa L., fiber produced from such stalks, oil or 
        cake made from the seeds of such plant, any other compound, 
        manufacture, salt, derivative, mixture, or preparation of such 
        mature stalks (except the resin extracted therefrom), fiber, 
        oil, or cake, or the sterilized seed of such plant which is 
        incapable of germination.
---------------------------------------------------------------------------
    \18\ 21 U.S.C.  802(16).

   Terpene(s)--Terpenes occur naturally in many plant families 
        and create the wide variety of smells and flavors associated 
---------------------------------------------------------------------------
        with cannabis and other botanicals.

    Seed Testing and Certification

   Certified seed--Certified seed designation validates a 
        variety's genetic purity, weed absence, uniformity for harvest, 
        and yield standards for each crop. The seed certification 
        process includes specific varietal review, testing and labeling 
        procedures.

   THC verification--A CDA-approved trial process (separate 
        from AOSCA certification) that occurs alongside the seed 
        certification process to test THC level in mature hemp plants 
        entered for seed certification. This process will be harmonized 
        with AOSCA once there are international standards for THC 
        verification.

   Feminized seed--Feminized seeds are seeds with a very high 
        likelihood to produce female hemp plants. Feminized seeds are 
        specially bred or separated from male seeds using genetic 
        testing. Cannabis as a plant is dioecious, which means plants 
        can be male, female, or a hermaphrodite (showing traits of both 
        sexes). Female plants are most desirable for cannabinoid and 
        oilseed production. Feminized seeds are made by essentially 
        crossing one female with another. Breeders use techniques to 
        force female plants to produce ``female'' pollen. They then 
        fertilize another female; whose flowers produce a generation of 
        feminized seeds.

   Certified clone program--A genetic certification program for 
        plants used for cloning, similar to seed certification. Under a 
        certified clone program, plants enter a varietal review and are 
        grown full term, in multiple conditions over multiple seasons 
        to verify identity, purity and select traits. Definitions for 
        foundation, registered and certified genetic stock will be 
        developed by CSGA.

   Open source hemp genetics--Any seed or clone used for 
        breeding, produced by the plant Cannabis sativa L. that 
        possesses a THC content less than or equal to 0.3 percent 
        tested according to CDA regulations; and is not patented, 
        certified or otherwise protected.

    Plant and Cultivation Terminology

   Aeroponics--A hydroponic cultivation method where the 
        plant's roots are suspended in air and sprayed regularly with a 
        fine mist of nutrient solution. Unlike other hydroponic 
        methods, aeroponically grown plants do not have their roots 
        suspended in water.

   Bud/Nugget/Flower--Terms that refer to the flower of female 
        cannabis plants. Unlike other flowering plants, cannabis 
        flowers are dense and concentrated.

   Dry weight--The weight of plant material with no greater 
        than 13 percent moisture content.

   Flowering--A late stage in the life cycle of cannabis where 
        buds become dense, trichomes appear with greater frequency, and 
        the cannabis plant prepares for reproduction. After flowering, 
        cannabis plants will die.

   Hydroponics--A growing method that does not rely upon 
        traditional soil. Plants can be grown in a variety of media and 
        fed nutrients dissolved in water using different methods, 
        including ebb-and-flow, aeroponics, and deep-water culture.

   Integrated Pest Management--A pest control strategy that 
        focuses on preventive and proactive techniques, rather than 
        reactive pest control.

   Medium--A substance in which plants are rooted if not in 
        soil in the ground. This can be traditional soil, coco coir, 
        rockwool, clay, sand, pebbles, or other material.

   Mother Plants--Also known as stock plants, cannabis plants 
        kept permanently in a vegetative state for growers to take 
        cuttings or clones from them. Mother plants serve as the 
        genetic basis for clones in a growing facility.

   Propagation--Early plant life cycle phase in which plants 
        are cloned or grown from seed. This is the most delicate phase 
        of growth.

   Vegetative State--The period in-between propagation and 
        flowering. It is a period where the cannabis plants have a 
        sturdy root system and focus photosynthetic energy on growth.

    Processing and Manufacturing

   Acceptable Potency Level--A hemp crop or product with a 
        delta-9 THC concentration of 0.3 percent or less by weight.

   Broad Spectrum Extract/Product--Extracts and products from 
        hemp which contain multiple cannabinoids but have THC 
        effectively removed. Broad spectrum products have a non-
        detectable level of THC & have detectable levels of other 
        cannabinoids & terpenes.

   CBD Isolate--The purest form of CBD, which is produced by 
        removing all other compounds found in the plant including, 
        terpenes, flavonoids, plant parts, and other cannabinoids. CBD 
        isolate comes in a granular or powder form and is odorless and 
        tasteless. The end-product contains no (or nondetectable) 
        levels of THC or other compounds. No specific identity 
        threshold currently exists to define purity required to use the 
        term `isolate'.

   CO2 extraction--The carbon dioxide extraction 
        process uses changes in temperature and pressure to create 
        phase changes in carbon dioxide, gently drawing out the plant's 
        beneficial components. The result is clean, pure oil with a 
        long shelf life.

   Concentrates/Distillates/Extracts/Isolates--These terms 
        describe compounds made by extraction, concentration, 
        distillation, and isolation processes that separate compounds 
        that are recognized as useful and beneficial from other plant 
        compounds.

   Ethanol extraction--Extraction using cold or hot, high-grade 
        alcohol that detaches all the active compounds from the 
        cannabis plant's cellulose material, resulting in pure, full 
        spectrum hemp oil. Oils extracted using this method are further 
        refined via centrifugal chromatography to remove all remaining 
        traces of ethanol.

   Full Spectrum Extract/Product--Extracts and products from 
        hemp that contain the full cannabinoid profile and all other 
        compounds including terpenes, flavonoids, proteins, phenols, 
        sterols, and esters, naturally occurring in the cultivar from 
        which it was produced.

   Non-detectable THC--Term used to describe a hemp product, 
        usually a broad-spectrum product, with THC removed and reduced 
        to levels undetectable by common testing methods. A specific 
        detection threshold needs to be established. This term can be 
        used on any hemp product with THC removed.

   Potency--A measure of drug activity expressed in terms of 
        the amount required to produce an effect of given intensity in 
        the body. A high-potency drug evokes a larger response even at 
        a low dose, while a low-potency drug evokes a small response at 
        low concentrations and requires higher doses for a similar 
        effect.

   THC Free Extract/Product--An intermediary or final product 
        that when tested, shows no or a non-detectable level of THC. 
        This term should only describe cannabinoid (usually CBD) 
        isolate or isolate products. Lab results must show the presence 
        of terpenes, CBD, & other minor cannabinoids. A specific 
        detection threshold definition needs to be established to 
        determine a product as free of THC.

   Whole Plant Extract/Product--This is a term used for extract 
        or products using the entire plant, stems, leaves, roots, and 
        flowers in the extraction process, and is also commonly called 
        a botanical extraction. Full spectrum is implied if a product 
        is a whole plant extract. The product retains the terpenes, 
        cannabinoids, vitamins, minerals, fatty acids, phytonutrients, 
        and any other materials naturally occurring in the cultivar 
        from which it was produced.

         Figure 9. Primary Hemp Crops: Fiber, Seeds, and Flowers
------------------------------------------------------------------------
    Characteristic          Fiber      Seed/Grains   Flower/Cannabinoids
------------------------------------------------------------------------
Desired Plant Material  Stalks (bast  Dried (high    Dried and cut
                         fibers and    in oil and     (flower bud and
                         hurd/core     protein)       floral material)
                         fibers)
Planting Density        Dense         Dense spacing  Well-spaced
                         spacing to    to             (typically planted
                         discourage    discourage     3-4 apart on a 3-5
                         branching     branching      center)
                         and           and
                         flowering     flowering
                         (35-50        (35-50
                         plants/       plants/
                         ft\2\)        ft\2\)
Physical                Tall plants   Plants with    Bushy plant with
 Characteristics         with small    small stalks   wide branching to
                         stalks and    and less       promote flowers/
                         less leafy    leafy          buds (selecting
                         material      material       female plants is
                                                      ideal)
Harvest Height          10-15         6-9            4-8
Harvesting              Typically     Must be        Harvesting is
 Considerations          using hay     harvested      highly labor
                         equipment     within a       intensive, in part
                         (mow, field   short window   given possible
                         retting 2-3   due to seed    degradation of
                         weeks, then   scatter        plant material
                         roll          issues         related to efforts
                         balling)                     to preserve the
                                                      chemical
                                                      properties of the
                                                      plant's flowering
                                                      heads; also
                                                      requires drying
                                                      down to ten
                                                      percent moisture
------------------------------------------------------------------------
Source: Congressional Research Service: https://fas.org/sgp/crs/misc/
  R44742.pdf.

    Regulated Marketing Claims and Medicinal Foods

   Regulated Marketing Claim--There are four major categories 
        of marketing claims regulated by the Federal Government (FDA 
        and FTC) including:

     Authorized Health Claim. Food ingredients for which 
            there is significant scientific agreement on specific 
            health benefits may receive formal approval from the FDA to 
            make claims that consuming a certain amount of the 
            ingredient may improve certain health conditions (such as 
            eating rolled oats to reduce heart disease).\19\
---------------------------------------------------------------------------
    \19\ There are only a handful of Authorized Health Claims for food 
ingredients with health benefits. Many of these claims required 
extensive clinical trials and lawsuits to secure. FDA Guidance[.]

     Drug Claim. Any product that claims to diagnose, 
            prevent, mitigate, treat, or cure a disease is a drug. 
            Typically, any mention of a disease on labels or marketing 
            materials (print or digital) triggers the product's status 
            as a drug. Drugs must be approved by the FDA prior to being 
            marketed.\20\
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    \20\ Drug approvals and claims require FDA approval, extensive 
research, clinical trials, and safety reviews.

     Health Benefit Claim. The Federal standard for making 
            a health benefit claim requires the marketer to have 
            ``competent and reliable scientific evidence'' produced by 
            ``qualified professionals'' using ``procedures generally 
            accepted in the profession to yield accurate and reliable 
            results.'' \21\
---------------------------------------------------------------------------
    \21\ See further FTC guidance.

     Structure/Function Claims. Structure and function 
            claims may describe the role of a nutrient or dietary 
            ingredient intended to affect the normal structure or 
            function of the human body, for example, ``calcium builds 
            strong bones.'' In addition, these claims may characterize 
            the means by which a nutrient or dietary ingredient acts to 
            maintain such structure or function, e.g., ``fiber 
            maintains bowel regularity,'' or ``antioxidants maintain 
            cell integrity.'' \22\
---------------------------------------------------------------------------
    \22\ See further FDA structure/function claims guidance.

   Medicinal Foods--There are two types of medicinal foods 
---------------------------------------------------------------------------
        regulated by the FDA including:

     Functional Foods and Nutraceuticals. These terms are 
            used often in the marketplace, but there is no statutory 
            definition. The FDA regulates functional foods (e.g., 
            oatmeal) and nutraceuticals (e.g., milk with added vitamin 
            D) like any other food: if it contains a drug ingredient, 
            makes a disease claim, or makes a health benefit claim 
            without proper substantiation, the agency will act 
            accordingly.\23\
---------------------------------------------------------------------------
    \23\ FDA perspective on functional food from the American Journal 
of Clinical Nutrition.

     Medical Foods. A food which is formulated to be 
            consumed or administered enterally under the supervision of 
            a physician and which is intended for the specific dietary 
            management of a disease or condition for which distinctive 
            nutritional requirements, based on recognized scientific 
            principles, are established by medical evaluation.\24\ 
            Medical foods must be administered under the supervision of 
            a physician.
---------------------------------------------------------------------------
    \24\ 21 U.S.C. 360ee(b)(3)[.]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>
    
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    End-User and Retail

   Edibles--Edibles are a large variety of different foods 
        created using cannabis concentrates including infused sugar, 
        infused oil, or infused butter. Common products include:

     Gummies/lollipops/taffy/candy

     Brownies/baked goods

     Sodas/drinks

     Infused oil or butter mixed in with other food items 
            such as popcorn or salad dressing

   Hemp Seed Oil--Non-psychoactive oil obtained by pressing 
        hemp seeds. Cold-pressed, unrefined hemp oil is dark to clear 
        light green in color, with a nutty flavor.

   Inclusion Rate--A measure, expressed as a percentage by 
        weight or volume, that quantifies the concentration of hemp 
        extract or cannabinoids in a food product or dietary 
        supplement. An inclusion rate allows for the creation of 
        recommended daily intake values for humans and animals in food 
        and supplement products.

   Tincture--Tincture is a term used to refer to cannabis 
        extracts/concentrates typically delivered under the tongue 
        (sublingually) or in a mucous membrane via an eyedropper. 
        Tinctures are intended to be a fast delivery method without 
        smoking or swallowing.

   Topicals/Transdermals--Topicals and transdermals are 
        consumption methods that use a lotion or patch to apply the 
        cannabinoids to your skin.

   Vape/Vaporizer/Vape Pen/Vape Cartridge--A consumption method 
        that uses heat to vaporize concentrated oil, which is then 
        inhaled.
17. Marketing and Labeling Guidance Stakeholder Recommendation
    Continue to establish guidance for retailer and manufacturer 
marketing and labeling which harmonize with national and international 
standards, when appropriate, for consumable hemp products.

    Basis & Purpose of Recommendation

    The FDA maintains oversight of hemp-derived consumer products under 
the Federal Food, Drug, and Cosmetic Act.\25\ FDA jurisdiction includes 
hemp and hemp-derived products as a food and food ingredients, and an 
ingredient for body products, cosmetics, dietary supplements, and 
therapeutic products. Analogous guidance made for other supplements and 
products provides the basis for the guidance presented here.
---------------------------------------------------------------------------
    \25\ 21 U.S.C.  301 et seq.
---------------------------------------------------------------------------
    Although hemp-derived products are relatively new to the 
marketplace, there are several precedents for other products with 
unique ingredients. Guidance on marketing and labeling requirements has 
evolved to assure that consumers and buyers are not misled. This 
Federal guidance will apply to consumable hemp products.

    Regulatory Program

    Existing Program.

    The Role of the FDA

    FDA is a Federal agency within the Department of Health and Human 
Services charged with protecting and promoting public health through 
oversight of a broad range of products. The farm bill, by preserving 
FDA authority while removing other restrictions under the CSA, made FDA 
much more practically relevant to many hemp stakeholder, including 
those who may not have experience dealing with the FDA.
    The FDA has discovered many hemp products (including CBD products) 
being marketed with claims of therapeutic benefit, or other drug 
claims, without having gone through the drug approval process. These 
include CBD products marketed for serious diseases and conditions like 
cancer, Alzheimer's disease, opioid use disorder, and pain. In 
response, the FDA actively oversees the sector and sends warning 
letters to companies unlawfully marketing such products.

    Guidance for the Manufacturing Sector

    Unlike drugs approved by FDA, the manufacturing processes of hemp-
derived products is not subject to FDA review as part of the drug 
approval process, and FDA has not evaluated whether these products are 
effective for their intended use, proper dosages, interactions with 
other FDA approved drugs, or potentially dangerous side effects or 
other safety concerns.
    Outside the drug space, enterprises are also marketing hemp 
products, including human and animal foods, as well as dietary 
supplements and cosmetics: each has a different regulatory framework. 
Unlike drugs, foods, dietary supplements, and cosmetics rarely need to 
be approved by FDA before they can be marketed in interstate commerce. 
One exception is food additives, which the FDA must determine to be 
safe for specified conditions before they can be added to foods unless 
the substance is ``generally recognized as safe'' (GRAS) by qualified 
experts.
    Similarly, for production and companion animal feed, the process 
for approval is overseen by the FDA Center for Veterinary Medicine. 
Animal byproducts or animals fed unapproved ingredients may not enter 
the stream of commerce and it is not legal to feed unapproved animal 
feed ingredients. For dietary supplements, if the product contains a 
new dietary ingredient--meaning a dietary ingredient that was not 
marketed in the United States before October 1994--the manufacturer 
generally must notify FDA before coming to market.
    Approved food additives can be found on the FDA list of GRAS 
ingredients. Most recently added to this list (effective December 20, 
2018) are hulled hemp seeds, hemp seed protein, and hemp seed oil. The 
GRAS recognition also included a statement that Cannabis sativa L. oil 
seeds do not naturally produce cannabinoids. These items can now be 
included in human foods provided they comply with all other 
requirements and do not make disease treatment claims.

    Guidance on Broader Cannabinoid Products

    Two statutory provisions have relevance for cannabinoid products:

  1.  Under the Federal Food, Drug & Cosmetic Act, it's prohibited to 
            add a substance into food if that substance has been 
            approved as a drug, or if that substance has been the 
            subject of public clinical investigations; and

  2.  A product that includes such a substance is excluded from the 
            definition of a dietary supplement.

    These provisions have an exception for substances in foods 
(including supplements) before they were ever approved or studied as 
drugs. So, for example, substances like caffeine and baking soda have 
this type of grandfathering in foods and beverages. For cannabinoids 
and CBD, the FDA has concluded this exception does not apply.

    Guidance for the Retail Sector

    The top FDA regulatory priority is to protect public health. This 
priority includes alerting consumers when products pose health and 
safety risks, such as when product manufacturers make claims to 
prevent, diagnose, treat, mitigate, or cure serious diseases.
    For example, the agency has warned companies to stop selling CBD 
products claimed to prevent, diagnose, treat, mitigate, or cure serious 
diseases such as cancer, Alzheimer's disease, psychiatric disorders, 
and diabetes. Misleading, unproven, or false claims associated with CBD 
products may lead consumers to put off getting important medical care 
or to ignore symptoms associated with serious diseases.
    Unapproved CBD products, which could include cosmetics, foods, 
products marketed as dietary supplements, and any other product making 
therapeutic claims, generally have not been subject to FDA evaluation 
for:

   Indication and efficacy for treating a specified disease or 
        medical condition;

   Proper dosage;

   Interactions with other drugs or foods; or

   Presence of dangerous side effects or other safety concerns.

    Besides safety risks and unproven claims, the quality of many CBD 
products may also be in question due to a current lack of processing 
controls and practices. For example, the FDA has tested some products, 
and many were found to not contain the levels of CBD claimed on the 
label. There are also reports of CBD potentially containing unsafe 
levels of contaminants (e.g., pesticides, heavy metals, THC).
    FDA has not approved CBD for any use in animals and the concerns 
regarding CBD products with unproven medical claims and of unknown 
quality equally apply to CBD products marketed for animals. In 
addition, hemp seeds and other hemp byproducts are not currently 
approved by the FDA for use with animals. The FDA recommends pet owners 
talk with their veterinarians about treatment options with CBD for 
their pets.

    Implementation

    In general, CDPHE already has a framework in place that adopts 
related FDA policies. The following action items are needed to 
implement this recommendation.

   Continue to guide packaging and labeling for hemp products 
        that extend FDA guidance where appropriate; and

   Develop programs as needed to support public health and 
        consumer safety related to hemp products.

    Key Stakeholders

    CDPHE, CDA, FDA, Colorado hemp manufacturers and retailers[.]
18. Quality Assurance Certification Program
    Stakeholder Recommendation

    Develop a quality assurance program, such as a ``Good Hemp 
Program'', that establishes minimum standards for Colorado producers/
manufacturers to qualify for special certification/designation. The 
program will collect fees to fund hemp research and promotion.

    Basis & Purpose of Recommendation

    Certification provides a marketing alternative to commodity and 
unbranded markets that allows individual producers to be included under 
an established umbrella program and label, organized, and overseen by a 
third-party. The program establishes criteria to promote a set of 
differentiated characteristics. Third-party certification provides 
independent verification of product or production claims. Securing a 
reputable third-party certifier is a way to differentiate Colorado 
grown hemp products from others on the market.
    Another potential motivation for having a state certification 
program is that it allows for Colorado to maintain control over its 
standards for product integrity. For example, the USDA organic program 
has an integrity database,\26\ that consumers and buyers can use to 
identify reputable suppliers. A similar system could support the 
Colorado hemp industry.
---------------------------------------------------------------------------
    \26\ https://organic.ams.usda.gov/Integrity/Default.aspx.

---------------------------------------------------------------------------
    Regulatory Program

    Current Program. There is no current state-level certification and 
promotion specific to hemp products. Hemp and hemp products can 
currently qualify for any other similar agricultural or locally 
produced product initiative.
    Recommended Enhancement. Certification programs and labels depend 
on establishing a set of production processes and quality standards 
that verify whether the certified product have certain qualities or 
attributes valued by consumers.
    A certification process offered by the USHA covers several stages 
of production including cultivation, processing, and manufacturing.\27\ 
This program offers a sensible starting point for to examine key 
features of a quality assurance program.
---------------------------------------------------------------------------
    \27\ https://ushempauthority.org/assets/uploads/USHA-Guidance-
Procedures-Version-2.0-WEB-VERSION-Rev-3-25-20_200504_141204.pdf.
---------------------------------------------------------------------------
    Relevant components include:

   Cultivators

     Registration, personnel guidance, sampling and 
            handling practices, contaminant testing and hemp 
            cannabinoid quantification (pre-harvest and post-harvest), 
            transportation and storage guidance, and checklists for 
            best practices

   Processors, Manufacturers and Brand Owners

     Similar guidance topics as those for cultivators 
            (employee and facility guidance),

     Post-harvest material handling under process controls 
            and testing to maintain potency and assure purity.

     Quality Management Systems including clear direction 
            on any point, step, or stage in the manufacturing process 
            where control is necessary to ensure the quality of the 
            hemp product, very similar to HACCP in food products.

     Guidance on product packaging, labeling, and storage 
            that aligns closely with other third-party certification 
            programs, such as the U.S. organic program.

     Importance of recordkeeping, supplier specifications, 
            know your supplier practices, and packaging and labeling 
            best practices.

   Retailers

     There is no current USHA guidance for retailers.

     Retailers in organic foods often become certified by 
            USDA as a branding resource and to demonstrate their 
            commitment to delivering organic foods to their customers.

     License or accreditation for retailers to assure hemp 
            products have been correctly handled from production 
            through delivery to the customer.

    Implementation

    The following action items are required to implement this 
recommendation:

   New rules and definitions for a Colorado hemp quality 
        assurance program; and

   Procedures for audit services to verify compliance at 
        several stages of the supply chain.

    Key Stakeholders

    CDA, Colorado hemp cultivators, processors, manufacturers, 
retailers[.]
19. State Procurement of Industrial Hemp Products
    Stakeholder Recommendation

    Encourage state procurement and use of industrial hemp products.

    Basis & Purpose of Recommendation

    With industrial hemp, there are concerns among Colorado hemp 
industry stakeholders there may be less than optimal investment in the 
processing and manufacturing of hemp industrial products until the 
market is ``proven.'' Yet, the market may not grow if there continues 
to be a few industrial hemp product options to purchase. This is an 
expected challenge for a sector prohibited for so long, and where there 
is little historical market data or supply chain expertise to support 
an emerging product market.
    The State of Colorado can support the Colorado hemp industry 
through encouraging procurement and use of hemp products by state 
agencies and institutions.

    Regulatory Program

    Current Program.

    Colorado Procurement Overview

    Procurement in Colorado is decentralized--most state agencies 
conduct their own solicitations. Businesses wanting to sell goods or 
services to the state government must promote themselves to individual 
state agencies and actively search for opportunities on the state 
procurement website. Colorado currently has a preferred purchasing 
program for recycled products that can serve as a model for a hemp 
product preference.\28\
---------------------------------------------------------------------------
    \28\ CO Procurement Code & Rules 24-103-903(5): When purchasing any 
product with public funds, any procurement agent may purchase products 
or materials with recycled content, that have been source reduced, that 
are reusable, or that have been composted[.]

---------------------------------------------------------------------------
    Reciprocity Considerations

    Colorado law mandates that resident bidders be given preference 
over non-resident bidders equal to the preference given by the state in 
which the nonresident bidder is a resident, i.e., if a non-resident 
bidder is four percent lower than the resident bidder but the state of 
residence of the non-resident bidder awards a five percent preference 
to in-state bidders, then the Colorado bidder becomes the lowest bidder 
by one percent.

    Sustainability Considerations

    Purchasing agencies may utilize life cycle costing and/or value 
analysis in determining the lowest responsible bidder. In bids where 
life cycle costing or value analysis is to be used, the specifications 
shall indicate the procedure and evaluative factors to be considered. 
When appropriate, specifications issued and/or used by the Federal 
Government, other public procurement units, or professional 
organizations may be referenced by the State of Colorado. Bidders may 
have to certify these standardized specifications have been met.

    Recommended Enhancement.

    State Preferential Practices

    Stakeholders recommended the state could include hemp as part of a 
preferred product program. A range of ``price preferences'' from 3-10 
percent across states for products that would fall under other policy-
driven ``preferred'' categories. Among sectors, agriculture, forestry, 
and fishery products are commonly mentioned, for sustainability 
outcomes, local site preferences, recyclables, and other sustainable 
products as evaluated by life cycle analyses, renewable fuels, corn-
based plastics, and printing were common across states.

    Implementation

    The following action items are needed to implement this 
deliverable. Items include:

   Modify the Procurement Code through legislative action and 
        rulemaking process;

   Encourage the State Purchasing and Contracts Office (SPCO) 
        to include hemp-based products on the state pricing agreement 
        list;

   Integration of industrial hemp products into current 
        initiatives:

     Colorado Procurement Technical Assistance Center 
            (PTAC)

       The purpose of the Colorado PTAC is to generate 
            employment and improve 
              the general economic condition of the state by assisting 
            Colorado companies 
              in obtaining local, state, and Federal Government 
            contracts.

       PTAC provides procurement technical assistance to help 
            in selling products 
              or services to government agencies.

     HUBZone Small Business Administration Empowerment 
            Contracting Program

       The HUBZone Empowerment Contracting program provides 
            Federal con-
              tracting opportunities for qualified small businesses in 
            federally designated 
              distressed areas.

    Key Stakeholders

    Department of Personnel and Administration, SPCO, Colorado hemp 
industry[.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

        Finance and Insurance

20. Develop Guidance & Best Practices
    Stakeholder Recommendation

    Provide guidance and best practices to financial services 
institutions and insurance carriers to encourage them to provide 
services to Colorado hemp businesses. Colorado can be the bellwether 
for guidance and outreach to institutions seeking to serve the 
industrial hemp marketplace. Guidance can include written materials and 
direct stakeholder engagement, rulemaking, or general outreach.

    Basis & Purpose of Recommendation

    This recommendation seeks to destigmatize opening and holding 
accounts for hemp and hemp-related businesses. With enhanced guidance 
and stakeholder engagement, it is hoped that providers will serve the 
industrial hemp industry similar to other agricultural industries.
    Regulatory entities and associated authorizing statutes involved 
with this recommendation are:

   CRS  10-1-101, et seq. (Insurance)

   Division of Insurance Protocol for Engaging Stakeholders in 
        Rulemaking

   CRS  11-101-101, et seq. (Banks)

   CRS  11-110-101, et seq. (Money Transmitters)

   CRS  11-30-101, et seq. (Credit Unions)

   CRS  11-40-101, et. seq. (Savings and Loan Associations)

    Regulatory Program

    Current Program.

    Since the passage of Colorado Amendment 64, Federal and state 
regulators published cannabis-related guidelines for banks, credit 
unions, and money services businesses. More recently, Colorado 
regulators published a variety of guidance on marijuana and hemp that 
includes:

   Division of Financial Services, April 4, 2019, ``BSA 
        Expectations for Industrial Hemp''

   DORA, January 2020 ``Roadmap to Cannabis Banking & Financial 
        Services''

   Division of Banking, January 31, 2020 ``Hemp Industry 
        Guidance''

    Similarly, the National Association of Insurance Commissioners 
maintains a cannabis insurance working group, of which the Colorado 
Insurance Commissioner is a member. As most insurance is not a single-
state enterprise, Colorado works with regulators across the country to 
encourage the introduction of innovative products, particularly in the 
admitted market (as opposed to surplus lines), to cover industrial hemp 
and to remove any barriers to the offering of such products.
    Despite more recent changes to industrial hemp laws at the Federal 
level, providers of financial services and insurance remain uncertain 
about the degree to which they can serve hemp-related companies and the 
compliance and reporting practices that such relationships require. 
Some Federal banking regulators have issued helpful clarifications 
regarding hemp accounts, but banks remain subject to a complex set of 
Federal legal requirements and regulatory expectations, requiring 
specific guidance to ensure they act appropriately. Representatives 
from the American Bankers Association have thus encouraged banks to 
wait until more guidance is set forth before providing financial 
products to hemp-related businesses.
    In response to the need for additional guidance, on June 29, 2020, 
the Financial Crimes Enforcement Network (FinCEN), a division of the 
United States Treasury, released FIN-2020-G001, Guidance Regarding Due 
Diligence Requirements Under the Bank Secrecy Act for Hemp-Related 
Business Customers, will help clarify a bank's regulatory requirements 
if it provides banking services. In addition, on July 6, 2020, the 
Conference of State Bank Supervisors (CSBS), released the CSBS Cannabis 
Job Aid, a resource for both bankers and bank examiners, that provides 
information and risk assessment guidance for banks that wish to provide 
banking services to the hemp industry.

    Recommended Enhancement.

    Developing a guidance program informs and destigmatizes industrial 
hemp, hemp products, and hemp-related businesses through facilitated 
sessions for state and local regulators; state-chartered financial 
institutions, domestic insurers; and the general public, whether for 
producers, vendors, or other stakeholders, as determined necessary.
    The proposed enhanced outreach program builds upon existing efforts 
of DORA and the work of cross-functional groups like the cannabis 
insurance working group of the National Association of Insurance 
Commissioners. Such efforts would focus on three constituencies: 
regulators, industry, and the public. Regarding the Division of 
Insurance, guidance and education may also focus on the need for multi-
state admitted lines specifically focused on coverage thresholds built 
into the 2018 Farm Bill for industrial hemp; that is, the division may 
wish to engage in further discussions with regulatory colleagues in 
other states and industry stakeholders regarding insurance products 
that would cover industrial hemp with THC levels over statutory limits.

    Implementation

    The following action items are needed to implement this 
recommendation. Items include:

   Development of targeted meetings with Federal and state 
        banking, financial services, and insurance regulators

   Development of targeted meetings with banking & financial 
        services institutions and their respective trade associations

    Key Stakeholders

    DORA (Divisions of Insurance, Banking, and Financial Services), 
banking and insurance trade groups, and other key identified groups[.]
21. Expanded Data Availability
    Stakeholder Recommendation

    Make available aggregated industry registration data and other 
information to financial institutions and insurance carriers to 
expedite access to account services.
    Stakeholders recommended CDA and CDPHE provide aggregated 
registration information in structured formats, subject to development 
of key standards and norms, to the finance and insurance industry to 
help these institutions expand services to all qualified participants 
in the hemp supply chain. Moreover, stakeholders recommended that 
Colorado should allow CDA and CDPHE to release or verify specific 
application information to a financial or insurance institution upon 
the written request of the registrant to facilitate and expedite 
account servicing.

    Basis & Purpose of Recommendation

    Accurate de-identified information and standardized figures are key 
for risk management, insurance industry actuaries, underwriting, and 
pricing, whether in the hemp industry or otherwise. Data points of 
significant interest included registration, testing, and regulatory 
compliance information. Making such data available would encourage 
coverage of commercial risks in the same manner as other industries and 
emphasize that providing coverage to hemp businesses requires the same 
application of general commercial insurance principles as other 
agricultural concerns. Access to such information can also serve as one 
tool among others in a holistic underwriting process, much like other 
sources of public data relied upon to understand a specific business' 
overall efficiency and competency compared to similarly situated 
businesses.
    Making a limited set of registration data available serves two 
goals. First, financial institutions and insurance carriers can more 
easily determine whether a registrant complies with state and Federal 
law when opening and maintaining an account on their behalf. Second, if 
registrants opt to provide more detailed information, account holders 
and service providers can use that data to reduce costs associated with 
ongoing servicing of hemp-related accounts. Transitioning toward access 
to structured data is also expected to facilitate better understanding 
and analysis of data in the aggregate.

    Regulatory Program

    Current Program.

    CDA and CDPHE periodically publish information that shows active 
registrations. CDA periodically updates the list but does not include 
underlying information regarding changes in license status (if any) nor 
any other data. CDPHE updates their information regarding the number of 
processors registered. Regularly published aggregated statistical data 
on hemp is currently lacking in Colorado.

    Recommended Enhancement.

    Initially, Colorado should develop uniform standards for hemp-
related data so information can be accurately collected and provided 
both to the USDA under the IFR, and through a public application 
platform. With the foregoing, CDA should make aggregated de-identified 
data available both in terms of structured information and in an 
analysis performed and provided through partnerships among CDA, CDPHE, 
CSU, and OEDIT.

    Implementation

    The following action items are needed to implement this 
recommendation:

   Establish a platform to provide aggregated data under 
        Colorado Open Records Act and standards in which the date will 
        be collected and provided;

   Modification to CDA rules to provide for platform-specific 
        disclosures and opt-in that allows CDA to verify registration 
        information as the request of the registrant

   Convene a stakeholder group if needed to define the data 
        requirements, privacy concerns, and program operational 
        characteristics

    Key Stakeholders

    CDA, CD[PH]E, DORA, CSU, Office of the Attorney General, hemp 
industry associations, banking, and insurance trade[.]
Future Research & Policy Development
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

    The following regulatory issues were identified during the 
stakeholder meetings and subsequent proceedings as issues or subjects 
that needed further research and policy development.

   Feminized seed and clone certification. Convene a 
        stakeholder process to develop guidance and determine the 
        feasibility of a feminized seed certification program and for 
        the operational model and facilities for a clonal certification 
        program. This program will involve CSGA and CDA.

   Cross-pollination. Research the distance, pollen viability, 
        size, and other factors that determine risk for hemp cross-
        pollination and recommend thresholds for notification.

   Retaining value in the supply chain. Convene a stakeholder 
        process to determine the rules and procedures to develop secure 
        supply channels that allow non-compliant plant material to be 
        processed for non-consumable industrial uses; or to have the 
        THC extracted and removed from the stream of commerce. In 
        addition, use existing regulatory avenues for non-compliant 
        plant material including advocating for exemption of mature 
        stalks and seeds from destruction.

   Co-location of hemp and licensed marijuana businesses. 
        Prohibit the co-location of marijuana and hemp cultivation, 
        processing, and manufacturing businesses until Federal laws 
        allow. Explore an efficient regulatory structure to allow for 
        the co-location of all types of cannabis cultivation and/or 
        manufacturing facilities.

   Electronic Traceability System. Convene a process to develop 
        specifications, security, and documentation requirements for an 
        ETS that will ensure a secure chain of custody for hemp 
        products in Colorado.

   Transport of concentrated intermediate products. Determine a 
        transportation protocol for hemp concentrates with THC over 
        statutory limits. These are business-to-business transactions 
        where products transported will be further processed to bring 
        THC levels into compliance before sale to consumers.

   Non-consumable industrial hemp manufacturing. Determine 
        whether additional regulatory oversight of industrial products 
        manufacturing operations is needed and if so the lead 
        regulatory agency and most advantageous regulatory framework.

   Emerging cannabinoid analytes, inhalable and suppository 
        hemp. Monitor and address new cannabinoid analytes, such as 
        Delta-8 THC, as they are identified and be prepared to address 
        in policy and regulation. Assure Colorado's approach aligns 
        with Federal hemp/cannabis laws and state marijuana laws. 
        Determine the best regulatory treatment for inhalable and 
        suppository hemp, whether direct initial regulation by the 
        state or by deferring to the Federal Government timeline for 
        hemp product regulation.

   Quality assurance program. Determine the costs and benefits 
        of developing a quality assurance program that sets quality, 
        purity, and process standards and promotes a Colorado brand of 
        hemp products.

   Retail Framework. Convene a stakeholder process to develop a 
        retail framework for hemp that integrates into an existing 
        retail framework for food or dietary supplements.

   Financial services and insurance data. Determine data gaps 
        that exist for insurance and financial institutions and the 
        specific requirements and funding needed to expedite access to 
        services[.]

    The items listed above may require a task force or stakeholder 
process to further develop the proper regulatory scope and 
implementation action items.
Appendices
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Appendix A. CHAMP Stakeholders and Participants
Board of Directors

 
 
 
Gwen Carr, Commission of Indian      Karin McGowan, Department of Public
 Affairs                              Health and Environment
Mishawn Cook, City of Boulder        James Pritchett, Colorado State
                                      University
Kate Greenberg, Department of        Patty Salazar, Department of
 Agriculture                          Regulatory Agencies
Stan Hilkey, Department of Public    Ean Seeb, Governor's Office
 Safety
Ed Lehrburger, Hemp Advisory         Billy Seiber, Office of the
 Committee                            Attorney General
Betsy Markey, Office of Economic     John Swartout, Colorado Counties
 Development and International        Inc
 Trade
 

Executive Committee

 
 
 
Anshul Bagga, City and County of     Courtney Krause, Governor's Office
 Denver
Eric Bergman, Colorado Counties,     Heather Krug, Department of Public
 Inc.                                 Health and Environment
Ken Boldt, Department of Regulatory  Nick Levendofsky, Rocky Mountain
 Agencies                             Farmers Union
Mara Brosy-Wiwchar, Department of    Alan Lewis, Natural Grocers
 Public Health and Environment       Dominque Mendiola, Department of
                                      Revenue
Peg Brown, Department of Regulatory  Brian Morrow, Office of the
 Agencies                             Attorney General
Hunter Buffington, Hemp Feed         Peter Ortego, Ute Mountain Ute
 Coalition                            Tribe
Sean Callan, Ellipses Laboratory     Grant Orvis, BoCo Farms
Michael Coury, Department of Public  Donald Schneider, Sedgwick County
 Safety
Morgan Ferris, Commission of Indian  Dave Smith, Southern Ute Tribe
 Affairs
Wondirad Gebru, Department of        Ashley Stokes, CSU Extension
 Agriculture
Tim Gordan, Functional Remedies      Luke Teater, Office of State
                                      Planning and Budget
Michelle Hadwiger, Office of         Beauclarine Thomas, Colorado
 Economic Development and             Municipal League
 International Trade                 Thuy Vu, Hammer Enterprises
Lelia Al-Hamoodah, Office of State   Jenifer Waller, Colorado Bankers
 Planning and Budget                  Association
Emily Ibach, Farm Bureau             Brent Young, CSU Extension
Eugene Kely, Colorado State          Roger Zalneraitis, Southern Ute
 University                           Tribe
Andrew Kline, National Cannabis
 Industry Association
 

Stakeholders--R&D and Seed

 
 
 
William Althouse, Fat Pig Society    Wendy Mosher, New West Genetics
Michael Bowman, First Crop, Inc.     Rick Novak, Colorado State
                                      University
Veronica Carpio, Grow Hemp Colorado  Robin Peterson, City of Aurora
Judy Daniels, Soil Sage, LLC         Laura Pottorff, Department of
                                      Agriculture
Mike Davis, Atkinson, Andelson,      K. Bear Reel, Charlotte's Web
 Loya, Ruud & Romo
Wondirad Gebru, Department of        Robert Roscow, Canopy Growth
 Agriculture                          Company
Tim Gordon, Functional Remedies      Donald Schoderbek, Pawnee Buttes
                                      Seed, Inc.
John Harloe, Balanced Health         Duane Stjernholm, Colorado Hemp
 Botanicals                           Processing Cooperative
Shawn Hauser, Vicente Sederberg      Ian Terry, Cannaissance Creative
Chris LaPlante, System Processing    Matthew Wallenstein, Colorado State
                                      University
Ed Lehrburger, PureHemp Technology   Preston Whitfield, Flex Mod
 LLC
Terry Moran, Bija Hemp
 

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Stakeholders--Cultivation

 
 
 
Lance Allen, Colorado Bureau of      Margaret MacKenzie, Salt Creek Hemp
 Investigation                        Company
Marley Bordovsky, Denver City        Kevin Mallow, Southern Ute Indian
 Attorney's Office                    Tribe
Alex Buscher, Buscher Law LLC        Jeff Markley, C-Beyond Health Inc.
David Coker, Paradox Ventures Inc    Scott Meining, Wildcat Grow, LLC
Vaughn Cook, Ute Mountain Ute Tribe  Brian Mitchell, Colorado State
                                      University
Jason Cranford, Flowering Hope       Darcie Moran, Joy Organics
Brandy DeLange, Colorado Municipal   Grant Orvis, BoCo Farms, LLC
 League
Jessica Feingold, Stem Holdings,     Scott Perez, Perez Agricultural
 Inc.
Wondirad Gebru, Department of        Josh Raderman, Raderman Holdings
 Agriculture
Garrett Graff, Hoban Law Group       Kathleen Russell, Colorado State
                                      University
Chris Grimes, Department of Natural  Chris Schaefer, Colorado Bureau of
 Resources                            Investigation
Nick Hice, Denver Relief Consulting  Hazen Schlachter, Colekehr Farms,
                                      LLC
Timothy Hunsinger, Gold Standard     Billy Seiber, Office of the
 Hemp LLC                             Attorney General
Emily Ibach, Colorado Farm Bureau    Bob Sievers, Sievers Infinity
Andrew Kamolvathin, Wholesome        Katrina Skinner, Safe Harbor
 Nutrients LLC                        Services
Brian Koontz, Colorado Department    Patrick Vo, BioTrackTHC
 of Agriculture
Kristen Kunau, Freida Farms, LLC     Dan Volz, Colorado Bureau of
                                      Investigation
Jim Lenderts, City of Fort Collins   Chris Wiseman, Pueblo County
Nick Levendofsky, Rocky Mountain     Brent Young, CSU Extension
 Farmers Union
 

Stakeholders--Testing

 
 
 
Jaclyn Bowen, Clean Label Project    Brian Morrow, Office of the
                                      Attorney General
Hunter Buffington, Hemp Feed         Wendy Mosher, New West Genetics
 Coalition
Tatiana Calvo, TGS Global (The       Rick Novak, Colorado State
 Green Solution)                      University
Amy Charkowski, Colorado State       Claire Ohman, Agriscience Labs
 University
Germaine Ewing, Southern Ute Indian  Jon Person, Gobi Hemp
 Tribe
Charles Ferris, OnSite Tests, Inc.   Eric Petty, Department of
                                      Agriculture
Wondirad Gebru, Department of        Abraham Rahmanizadeh, Leafwell
 Agriculture                          Botanicals, Inc.
Liz Geisleman, 710 Spirits by Rocky  Jason Schimschal, Denver Police
 Mountain Reagents                    Department
Anna Hatch, LivWell Enlightened      Hansen Scott, Botanacor
 Health                               Laboratories
Andrew Kline, The National Cannabis  Sean, Ellipse Analytics
 Industry Association
Heather Krug, Department of Public   Dana Shierstone, Vapor Distilled
 Health and Environment
Kara Lavaux, Denver Dept. of Public  Thuy Vu, Hammer Enterprises
 Health & Env.
Kevin Liebrock, Bluebird Botanicals  Jordan Wellington, VS Strategies
Daya Mitchell, Department of         Seth Wong, Industrial Laboratories
 Agriculture
Brian Moore, bioMerieux, Inc.        Wendi Young, Mile High Labs
 

Stakeholders--Transportation

 
 
 
Moe Afaneh, BioTrack THC             Tim Martinez, Colorado Bureau of
                                      Investigation
Angela Agnew, Green Cherry Organics  Doug McDonald, South Ute Tribe
Courtney Barnes, Vicente Sederberg   Dan McMahon, BioTrack THC
Barry Bratt, Colorado Bureau of      Brandon Mills, Independent
 Investigation
Hunter Buffington, Hemp Feed         Arman Motiwalla, ADM Labs
 Coalition
David Bernard Bush, Hoban Law Group  Antonio Negroni, Independent
Rodney A. Dean, SafeTivi Ltd.        Laura Pottorff, Department of
                                      Agriculture
John DeLue, Invicta Solutions        James Reil, WOH Consulting
Mark Gallegos, Department of         Mark Savage, Colorado State Patrol
 Agriculture
Wondirad Gebru, Department of        Chris Schaefer, Colorado Bureau of
 Agriculture                          Investigation
Talisa Gula-Yeast, City of Fort      Cheryl J. Smith, Department of
 Collins                              Agriculture
Tom Hewson, Sentinel Mountain        Cindy Sovine, Sovine Consulting
Rebecca Hill, Colorado State         Herman Stockinger, CDOT
 University
Andrew Howard, Colorado Bureau of    Dan Voltz, Colorado Bureau of
 Investigation                        Investigation
Brian Koontz, Department of          Philip von Mecklenburg, Mile High
 Agriculture                          Labs
Ed Lehrburger, PureHemp Technology   Shawn West, Colorado Bureau of
 LLC                                  Investigation
Margaret MacKenzie, Salt Creek Hemp  Laurel Witt, Colorado Municipal
 Company                              League
 

Stakeholders--Processing

 
 
 
Jessica Alizadeh, Fairfield and      Antonio Negroni, Independent
 Wood
Pamela Baxter, Charlotte's Web,      Patrick Neil, Botanex Technologies
 Inc.
Michael Bowman, First Crop, Inc.     Grant Orvis, BoCo Farms, LLC
Sean Callan, Ellipse Analytics       Scott Perez, Perez Agricultural
Amy Charkowski, Colorado State       Josh Raderman, Raderman Holdings
 University
Steve Clark, Marijuana Enforcement   James Reil, WOH Consulting
 Division
DeLange, Colorado Municipal League   Alyssa Rosenblum, Extract Labs
Francis DellaVecchia, King Pharma    Kathleen Russell, Colorado State
 and 7Hands                           University
Tim Gordon, Functional Remedies      Priyanka Sharma, Kazmira LLC
Mattie Gullixson, City of Colorado   Dana Shierstone, Vapor Distilled
 Springs
Jimmy Haberer, 1287 Enterprises      Bob Sievers, Sievers Infinity
Jeff Hays, Resinosa LLC              Steven Stinson, Stinson LLP
Kasey Irwin, Bluebird Botanicals     Jon Strauss, CDPHE-DEHS
Brian Koontz, Department of          Kipp Stroden, 7Hands
 Agriculture
Kim Kreimeyer, Marijuana             Kimberly A. Stuck, Allay Consulting
 Enforcement Division                 LLC
Nick Levendofsky, Rocky Mountain     Kaitlin Urso, Department of Public
 Farmers Union                        Health and Environment
Brian Lukas, City and County of      Shawn West, Colorado Bureau of
 Denver/Fire Department               Investigation
Jeff Markley, C-Beyond Health        Preston Whitfield, Flex Mod
Jessica McStravick, IHP Refinery     Roger Zalneraitis, Southern Ute
                                      Indian Tribe
Brian Morrow, Office of the
 Attorney General
 

Stakeholders--Manufacturing

 
 
 
Jamie Baumgartner, Panacea Life      Kevin Liebrock, Bluebird Botanicals
 Sciences
Chris Bedrosian, Flora's Mercantile  Sommer Martinez, Balanced Health
 & Hemp Emporium                      Botanicals
Steve Cape, Next Frontier            Arnold Matthew, Salad Ground
 Biosciences                          Kitchens
Veronica Carpio, GrowHempColorado    George Rhoades, Pure Water, LLC
Abby Davidson, Denver Department of  Erica Rogers, Denver's Department
 Public Health and Environment        of Excise and Licenses
                                     Justin Singer, Caliper Foods
Robert Dimarco, Boulder Botanicals   Cindy Sovine, Sovine Consulting
 & Bioscience Laboratories, Inc.     Erin Spies, Native Roots Dispensary
Wondirad Gebru, Department of        Steven Stinson, Stinson LLP
 Agriculture
Nathan Gerhardt, Charlotte's Web,    Jon Strauss, CDPHE-DEHS
 Inc.
Garrett Graff, Hoban Law Group       Eric Thayer, Southern Ute Indian
                                      Tribe
Joshua Jetton, Sacred Body           Jackson Tine, HOPE manufacturing
Jerell Klaver, WholeMade, Inc.       Laurel Witt, Colorado Municipal
                                      League
Kim Kreimeyer, City of Aurora        Thuy Vu, Hammer Enterprisesis
Ed Lehrburger, PureHemp Technology   Chris Wiseman, Pueblo County
 LLC
Alan Lewis, Natural Grocers          Ken Woodlin, Canopy Growth
                                      Corporation
 

                                      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>
                                      
Stakeholders--Marketing

 
 
 
Morris Beegle, We Are For Better     Jean Lotus, Haepenny Hemp
 Alternatives; Noco Hemp Expo        Scott Meining, Wildcat Grow, LLC
Jaclyn Bowen, Clean Label Project    Corry Mihm, Colorado Agritourism
                                      Association
Romy Campbell, VivaOil, LLC          Brandon Mills, Independent
Larry Carstensen, The Data Hub       Lynette Myers, Department of Public
                                      Health and Environment
Lily Colley, LC Management           Erica Rogers, Denver's Department
 Consulting                           of Excise and Licenses
Jason Cranford, Flowering Hope       Kathleen Russell, Colorado State
                                      University
Nick French, Frangiosa Farms         Ben Snow, City of Greeley
Pierce Grogan, Front Range Hemp      Eric Thayer, Southern Ute Tribe
 Harvesting Services
Talisa Gula-Yeast, City of Fort      Lindsay Topping, GRIT
 Collins
Anna Hatch, LivWell Enlightened      Samantha Walsh, Colorado Hemp
 Health                               Industries Association
Steven Hoffman, Compass Natural      Wendy White, Department of
                                      Agriculture
Alan Lewis, Natural Grocers          Chris Znerold, Native Roots
                                      Colorado
Tom Lipetzky, Department of
 Agriculture
 

Stakeholders--Finance & Insurance

 
 
 
John Ball, Colorado Financial        Jeff Markley, C-Beyond Health
 Holdings LLC
Joy Beckerman, Elixinol LLC          Leah Marvin-Riley, Department of
                                      Treasury
Abdel Berrada, Mesa Verde Ag         Michael O'Neill, Safe Harbor
 Solutions                            Private Banking
Ken Boldt, Colorado Department of    Robin Peterson, City of Aurora
 Regulatory Agencies
Peg Brown, Department of Regulatory  John Podvin Jr., Shapiro Bieging
 Agencies                             Barber Otteson
Brad Collins, American AgCredit      Mark Robey, Mountain West Credit
                                      Union Association
Thomas Dermody, Bija Hemp, LLC       Eric Rothaus, Department of
                                      Treasury
Kelly Fletcher, Travelers Insurance  Rochonne Sanchez, Bank of the West
Gary Hahn, Colorado Farm Bureau      Shauna Sansotta, Sooper Credit
 Insurance                            Union
Kathy Hays, Resinosa LLC             Ray Sitorius, Charlotte's Web, Inc.
Chris Hill, Banker's Bank of the     Katrina Skinner, Safe Harbor
 West                                 Services
Michael Holland, FirstBank           Mike Steenson, Farmers Mutual
Brian Koontz, Department of          Joe Tassano, Denver Community
 Agriculture                          Credit Union
Daniel Larsen, Southern Ute Indian   Mark Valente, Colorado Dept of
 Tribe                                Regulatory Agencies
Rebecca Laurie, Department of        Jenifer Waller, Colorado Bankers
 Regulatory Agencies                  Assoc.
Nick Levendofsky, Rocky Mountain     Brent Young, CSU Extension
 Farmers Union
Jason Lopez, Xodiak
 

Project Staff
    Project Directors

 
 
 
Hollis Glenn, Department of          Jeff Lawrence, Department of Public
 Agriculture                          Health and Environment
Leslie Hylton, Office of Economic    Max Nathanson, Office of Economic
 Development and International        Development and International
 Trade                                Trade
Rebecca Laurie, Department of        Laura Pottorff, Department of
 Regulatory Agencies                  Agriculture
 

    Facilitation and Support

 
 
 
Tracy Garceau, Department of         Courtney Roberts, Department of
 Regulatory Agencies                  Regulatory Agencies
Lisa Hall, Office of Information     Cary Ruble, Department of Public
 Technology                           Health and Environment
Scott Leach, Department of Public    Heather Weir, Department of Public
 Health and Environment               Health and Environment
Joe Lomeli, Department of Public     Ashley Young, Department of
 Health and Environment               Regulatory Agencies
Lindsay Nelson, Department of        Brian Young, Department of Public
 Agriculture                          Health and Environment
Corey Niemeyer, Department of
 Public Safety
 

    Consultant Team

 
 
 
Sal Barnes, MPG Consulting           Daniel Mooney, Colorado State
                                      University
Greg Bellomo, Government             Adam Orens, MPG Consulting
 Performance Solutions
Davide Fortin, MPG Consulting        Brian Pool, Government Performance
                                      Solutions
Regan Gilmore, Colorado State        Clinton Saloga, MPG Consulting
 University
Rebecca Hill, Colorado State         Micah Schwalb, Roenbaugh Schwalb
 University
Lauren Mangus, Colorado State        Dawn Thilmany, Colorado State
 University                           University
Malea McKeown, Roenbaugh Schwalb
 

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Appendix B. Detailed Industry Analysis
    Hemp is an emerging specialty crop, both nationally and in 
Colorado, that has received considerable attention from producers, 
consumers, private businesses, and policymakers. Cultivation of the 
crop may serve as an alternative cropping enterprise that improves 
grower profitability and as an engine of economic development. Hemp can 
be manufactured and processed into numerous industrial and commercial 
goods for which there is a national and international demand. 
Industrial applications range from building materials and textiles to 
food ingredients and wellness products. However, given limited research 
and development examining domestic uses, there is potential for many 
other applications to emerge.
    While hemp may hold promise for Colorado, integrating this sector 
into the state's agricultural and economic landscape also creates 
challenges. The CHAMP initiative is one step that Colorado has taken to 
identify and address potential obstacles. This section provides context 
for understanding hemp markets, cultivation, and processing in Colorado 
and nationally, and discusses possible future directions for the 
industry.
Background
    The terms ``industrial hemp'' and ``hemp'' both refer to a plant of 
the Cannabis sativa L. species and any part of that plant (including 
the seeds, stalks, leaves, and flowers whether growing or not) and all 
extracts and compounds derived from the plant (such as cannabinoids, 
terpenes, isomers, or acids) with a delta-9 tetrahydrocannabinol, or 
THC, concentration of 0.3 percent or less on a dry weight basis. THC is 
the primary intoxicating component of cannabis. Cannabis plants, plant 
parts, and derivatives with THC levels that exceed 0.3 percent are 
considered marijuana, which remains a Schedule I controlled substance 
and is regulated by the DEA.
    Hemp is not a new crop for Colorado or U.S. producers. Before and 
during World War II, the U.S. grew hundreds of thousands of acres, 
reaching 220,000 acres in 1943.\29\ Such production was largely for 
manufacturing rope and sailing cordage and was highly incentivized via 
Federal Government price supports such as the war-era Hemp for Victory 
campaign. Removal of price supports following the war led to a sharp 
decline in prices and widespread closure of processing mills followed. 
That, coupled with increased domestic taxes for hemp production under 
the Marijuana Tax Act and imports from parts of Latin America, 
Caribbean, and Asia, made growing and processing hemp unprofitable. 
Production remained largely negligible thereafter until it was 
officially prohibited in 1970 under the CSA due to its' similarity to 
marijuana.
---------------------------------------------------------------------------
    \29\ Johnson, N. 2019. American Weed: A History of Cannabis 
Cultivation in the United States. (https://www.researchgate.net/
publication/334452841_American_Weed_A_History_of_Canna
bis_Cultivation_in_the_United_States) EchoGeo 48.
---------------------------------------------------------------------------
    Following over 4 decades of prohibition, hemp was reintroduced as a 
legal crop in the United States under the 2014 Farm Bill.\30\ The 2014 
Farm Bill allowed for the establishment of state, Tribal, or territory 
hemp pilot programs and did not require state production plans to be 
approved at a national level by the USDA. Colorado was an early mover, 
being among the first states to establish a hemp program, and one of 
only four states to report acreage in 2014. The 2018 Farm Bill \31\ 
allowed for hemp production in all states, Tribal entities, and 
territories on the condition these programs obtain approval from the 
USDA and meet requirements in the IFR.\32\
---------------------------------------------------------------------------
    \30\ Agricultural Act of 2014, (https://www.govinfo.gov/content/
pkg/PLAW-113publ79/pdf/PLAW-113publ79.pdf) Public Law 113-79.
    \31\ Agricultural Improvement Act of 2018 (https://
www.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-
implications/).
    \32\ Federal Register, Vol. 84, No. 211.
---------------------------------------------------------------------------
Market Context
    Hemp in the United States is, and will likely remain, highly 
regulated compared to other commodity crops. This stems from the finely 
drawn distinction that separates hemp from marijuana based on THC 
level, combined with the inability to visually distinguish between 
these variants of the cannabis plant. Producers or entities intending 
to grow, handle, or process hemp must generally obtain a license, or 
other types of registration permit, for these purposes. The licensing 
requirements are necessary for inspection and enforcement purposes, but 
also have the added benefit of making available some market-related 
information on cultivation and processing at the national and state 
levels.
    In 2019, U.S. land area registered for industrial hemp cultivation 
surpassed 500,000 acres, with Colorado accounting for over 13 percent 
of the total.\33\ While this more than doubles previous peak production 
in 1943, not all registered acres are planted. To put this distinction 
in context, one recent hemp production study put 2019 U.S. planted 
acres closer in line with that previous peak at 200,000 acres (Hubbard, 
2020). It furthermore estimated that most acres (>90 percent) were 
planted to produce hemp flower for cannabinoid extraction. Just under 
80% of the total area was intended primarily for CBD extraction and 
another 14 percent was intended primarily for CBG extraction, another 
cannabinoid compound that has formed some traction among consumers. 
Hemp intended for oil seed and fiber accounted for much smaller areas, 
representing 3.6 percent and 2.5 percent of total planted area, 
respectively. As the market for CBD and other cannabinoids stabilizes, 
acreage planted for oil seed, fiber, and other uses is expected to 
increase.
---------------------------------------------------------------------------
    \33\ Drotleff, Laura. 2020 Outlook: Licensed U.S. hemp acreages 
fall 9% from 2019 but grower numbers increased 27%. June 19, 2020. Hemp 
Industry Daily, https://hempindustrydaily.com/2020-outlook-licensed-u-
s-hemp-acreage-falls-9-from-2019-but-grower-numbers-increase-27/ (last 
visited July 22, 2020).
---------------------------------------------------------------------------
    Many growers received healthy profits in the early years of the 
hemp pilot programs. A relative scarcity of raw hemp material and 
domestically produced hemp flower to supply an expanding CBD market 
helped to maintain wholesale prices for hemp and hemp products well 
above break-even levels. Production budgets for hemp floral material in 
2019 showed variable costs exceeding $10,000 per acre, with clones or 
transplant plugs alone representing 70-80 percent of this total.\34\ In 
mid-2019, however, industry benchmark reports showed a steep decline in 
national wholesale prices for raw and processed hemp products of up to 
80 percent,\35\ resulting in reduced to negative profitability for many 
growers.
---------------------------------------------------------------------------
    \34\ Mark and Shepard. 2019. Industrial Hemp Budgets 2019. 
University of Kentucky Extension, Lexington, KY, https://
agecon.ca.uky.edu/budgets#Specialty_Crops (last visited July 7, 2020).
    \35\ Hemp Benchmarks. 2020a. U.S. Hemp Extraction Survey May 2020, 
https://www.hempbenchmarks.com/special-reports/ (last visited July 20, 
2020). Hemp Benchmarks. 2020b. Price Commentary. April 2020 Hemp Spot 
Price Index Report, https://www.hempbenchmarks.com/special-reports/ 
(last visited May 21, 2020).
---------------------------------------------------------------------------
    The decline in wholesale prices was due to both supply and demand 
factors. On the supply side, expansion of hemp production to new states 
and dramatic growth in planted acreage over a short period in pilot 
program states made hemp biomass relatively more abundant than it had 
been earlier. Total U.S. hemp production had been only 1,866 acres in 
2014,\36\ as compared to the 200,000 acres estimated for 2019.
---------------------------------------------------------------------------
    \36\ Mark, Tyler, Jonathan Shepherd, David Olson, William Snell, 
Susan Proper, and Suzanne Thornsbury. February 2020. Economic Viability 
of Industrial Hemp in the United States: A Review of State Pilot 
Programs, EIB-217, U.S. Department of Agriculture, Economic Research 
Service.
---------------------------------------------------------------------------
    At the same time, extraction and processing plants faced hurdles in 
keeping up with the supply of raw hemp material. In a 2020 study of 
over 200 hemp cannabinoid extraction facilities, over 70 percent of 
respondents had a daily input capacity of 1,000 pounds of hemp floral 
material or less, including about \1/3\ with a capacity under 100 
pounds per day. For reference, a generous estimate of national yield 
per acre for hemp floral material in 2019 is 1,520 pounds per acre.\37\ 
Consumer demand for CBD and other hemp-based products grew at a slower 
pace than anticipated in early 2020 due to COVID-19 related disruptions 
and the stagnating economy that followed.
---------------------------------------------------------------------------
    \37\ Hubbard, Chase. 2020 Hemp Crop Production Survey Results. The 
Jacobsen Publishing, https://thejacobsen.com/wp-content/uploads/2020/
05/2020-Hemp-Survey-Results.pdf (last visited July 22, 2020).
---------------------------------------------------------------------------
    Growers produced more hemp in 2019 than could be processed or sold. 
As of mid-2020, there are many reports of unsold raw and processed hemp 
products remaining in storage from the 2019 production year. National 
hemp acreage in 2020 is estimated to decrease, with one study 
estimating a nine percent overall decline as compared to 2019.\38\ 
While hemp commodity prices declined sharply, downward price movement 
for inputs like clones and transplant plugs was slower to follow. 
Nevertheless, some producers have reported lower costs for these items 
in 2020 and wholesale prices appear to be stabilizing from their recent 
drop for the time being.
---------------------------------------------------------------------------
    \38\ Drotleff, Laura. 2020 Outlook: Licensed U.S. hemp acreages 
fall 9% from 2019 but grower numbers increased 27%. June 19, 2020. Hemp 
Industry Daily, https://hempindustrydaily.com/2020-outlook-licensed-u-
s-hemp-acreage-falls-9-from-2019-but-grower-numbers-increase-27/ (last 
visited July 22, 2020).
---------------------------------------------------------------------------
    A further consideration is a global market for hemp-based 
industrial and commercial processed goods besides produced raw hemp 
materials. There is a large and established global market for around 
25,000 hemp-based products including textiles, recycling, automotive, 
furniture, food and beverages, paper, construction materials, and 
personal care and wellness products including cosmetics. While there is 
little information on U.S. retail sales of hemp products, reports 
estimate that as early as 2016 hemp product sales amounted to almost 
$700 million.\39\ Domestic retail sales were concentrated in a variety 
of categories such as CBD and supplements, personal care products, 
textiles, foods, and other applications and consumer products.
---------------------------------------------------------------------------
    \39\ Johnson, Renee. Hemp as an Agricultural Commodity. June 22, 
2018. Congressional Research Service Report. 7-5700. RL32725, https://
fas.org/sgp/crs/misc/RL32725.pdf (last visited July 22, 2020).
---------------------------------------------------------------------------
    Hemp production is permitted in around 30 countries with an 
estimated aggregate acreage of around 225,000 acres as of 2016. In 
2017, the U.S. imported $67.3 million worth of hemp material. Trade 
data is not available for finished products (such as textiles, 
construction materials, and paper products), thus the $67.3 million 
consists only of hemp seeds, oil, solids, and fibers used as inputs in 
further manufacturing.\40\ In 2018, the largest supplier of U.S. hemp 
imports is Canada which accounts for 90 percent of the value of 
imports, followed by China and Romania.
---------------------------------------------------------------------------
    \40\ Johnson, Renee. Hemp as an Agricultural Commodity. June 22, 
2018. Congressional Research Service Report. 7-5700. RL32725, https://
fas.org/sgp/crs/misc/RL32725.pdf (last visited July 22, 2020).
---------------------------------------------------------------------------
    Growth in global hemp production and relative costs of production 
across countries is expected to be a significant determinant of U.S. 
hemp land area expansion, especially for hemp fiber which is already 
widely traded in international markets \41\ and used primarily for 
industrial applications rather than consumed as a food ingredient or 
supplement.
---------------------------------------------------------------------------
    \41\ OED. 2020. Hemp Fibers Profile. Organization for Economic 
Complexity, https://oec.world/en/profile/hs92/hemp-fibers (last visited 
July 30, 2020).
---------------------------------------------------------------------------
Hemp Cultivation in Colorado
    This section provides further context on hemp cultivation in 
Colorado. Despite being an early mover, the sector is yet to mature and 
there are numerous market information gaps. In this section, we 
summarize the available data to provide a picture of the industry and 
characterize some recent trends within the sector. All hemp growers 
must register with the CDA. Annual registration costs are $500 plus an 
additional $5 per acre and an additional $0.30 per hundred square feet 
of hoop house, greenhouse, or other indoor space. If the registered 
land area (in acres) includes the hoop house, greenhouse, or other 
indoor space within its boundaries, then both the outdoor acreage and 
indoor square footage can be filed under a single registration.
    CDA records provide information on the number of registrations and 
registered land area between 2014 and late July 2020. Between 2014 and 
2019, the number of registrants and registrations grew each year (solid 
lines), resulting in about a ten-fold increase during that period 
(Figure B1). As of late July 2020 (dashed lines), the number of 
registrants and registrations were 40 percent and 45 percent below 
their comparable 2019 totals, respectively. The numbers shown represent 
lower bounds on the number of registrants and registrations for 2020, 
however, because some registrations that are set to expire in fall 2020 
will be renewed. The final numbers will depend on the registration 
renewal rate in the coming months. An analysis of 2019 records 
indicated that 54 percent of registrations included outdoor area only, 
15 percent included hoop house, greenhouse, or other indoor areas only, 
and 31 percent included both outdoor and indoor areas.
Figure B1. Colorado Hemp Registrants and Registrations, 2014-July 2020
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]>

          Source: Colorado Department of Agriculture.

    The total registered land area also increased annually between 2014 
and 2019, but at a more rapid pace than registrations (Figure B2), 
indicating operations increasing in size. In terms of both registered 
acres and indoor square footage Colorado saw a forty-fold increase. 
Records for 2019 show a median land area of around 20 acres for 
registrations with an outdoor area only. Indoor only registrations had 
a median area of about 3,600\2\. Registrations with both indoor and 
outdoor areas had median land areas of 7 acres and 3,000\2\, 
respectively. As of late July 2020, registered acres were down over 50 
percent as compared to 2019. Registered square feet were similarly down 
about 41 percent. The number of registered acres is unlikely to change 
substantially given that the main outdoor planting window has passed. 
Square footage is more likely to rise given that indoor cultivation can 
occur later into fall and winter to produce clones, transplants, or 
seeds, or potentially other off-season or niche production.
Figure B2. Registered Hemp Cultivation Space, 2014-July 2020
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          Source: Colorado Department of Agriculture.

    Actual acres and indoor square footage planted and harvested is 
consistently lower than the registered acres (Figure B3). There are 
many reasons that producers may register for hemp production but not 
actually plant such as grower inexperience, a lack of financing, or the 
inability to secure inputs like seed or clones. There are even fewer 
acres harvested than are planted but statewide data on acres harvested 
are not available. As shown in Figure B4, the majority of Colorado 
counties had some registered hemp acreage in 2019. Hemp production 
appears to be relatively well-distributed across the state, with some 
regional concentrations and a few counties with no registered acreage.
Figure B3. Colorado Hemp Acreage, Registered and Planted, 2017-2019
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          Source: Colorado Department of Agriculture.
Figure B4. Colorado Registered Hemp Acres by County, 2019
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          Source: Colorado Department of Agriculture.

    Many of the hemp registrations are for small parcels (Figure B5); 
over 60 percent of hemp registrations were for less than 25 acres 
whereas just over two percent were for 200 or more acres. Since the 
launch of Colorado's pilot program, hemp acreage in Colorado has also 
heavily tilted toward production for floral material to the same, or 
perhaps an even higher, degree as compared to the national picture.
Figure B5. Hemp Registration Size (Acres), 2019
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          Source: Colorado Department of Agriculture.

    One way to understand the relative footprint of hemp cultivation 
within Colorado's agricultural sector is to compare its planted acreage 
with other crops (Figure B6). While planted hemp acres in 2019 (50,000) 
were well below those for Colorado's top field crops such as corn 
(1,550,000 acres) and wheat (2,150,000 acres), they were comparable to 
other specialty crops within the state. Planted hemp acreage was very 
similar to sunflower, barley, and potatoes, and nearly double that for 
sugar beets. This illustrates that, at its 2019 planted acreage level, 
hemp has grown to become an important specialty crop for Colorado.
Figure B6. Colorado Planted Acres by Crop, 2019
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          Source: National Agricultural Statistics Service, 2019.

    Colorado's hemp sector extends beyond cultivation and handling to 
include processing and manufacturing. The number of processors and 
manufacturers using hemp or its derivatives (oils, extracts, 
concentrates, isolates, resins, seed meal, flour, etc.) as a food 
ingredient or nutritional supplement has grown rapidly in recent years. 
This includes existing businesses that have expanded their product 
lines to include hemp-based ingredients and new business creation. 
Using hemp in food and supplement manufacturing is allowed in Colorado 
under state statutes and is regulated by the CDPHE. The hemp 
ingredients used in the manufacturing process must come from an 
approved source, remain below allowable THC thresholds, and be 
appropriately labeled.
    CDPHE maintains a list of registered hemp food and supplement 
manufacturers and approved storage facilities, such as warehouses and 
packing facilities, from which hemp may be sourced. Figure B7 gives 
more insights into new hemp business registrations by year and survival 
rates as of May 2020. Starting in 2017, when records first became 
available, the total registered by CDPHE rose from just under 90 to 
over 640 by the spring of 2020. Before 2020, these numbers 
approximately doubled year over year. In 2020, the number appears 
lower, however, it represents only a partial year through May of 2020. 
The number of new hemp processing and manufacturing business starts is 
expected to continue to slow, as these measures usually start high 
after a new Federal or state business regulatory program is announced 
as entrants rush to a new market and then slow as the market becomes 
saturated.
    As of spring 2020, about \3/4\ of all businesses registered 
continued to handle hemp materials. This represents just over \1/2\ of 
the businesses first registering in 2017, \2/3\ of the businesses first 
registering in 2018, and well above \3/4\ of businesses first 
registering in 2019. Overall, the number of food and supplement 
manufacturing businesses continued to grow in the first few years of 
Colorado's pilot program with more new businesses registering each year 
than closed or discontinued hemp processing.
Figure B7. Colorado Hemp Extraction, Processing, and Consumable 
        Manufacturing Business Growth, 2017-May 2020
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          Note: Includes all businesses that process and manufacture 
        hemp for human or animal consumption.
          Source: Colorado Department of Public Health and Environment.
Figure B8. Colorado Hemp Extraction, Processing, and Manufacturing 
        Business Summary, 2017-May 2020
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          Note: Includes all businesses that process and manufacture 
        hemp for human or animal consumption.
          Source: Colorado Department of Public Health and Environment.

    As of May 2020, the number of active CDPHE hemp registrants were 
relatively evenly distributed across extraction, food processing, and 
supplement manufacturing activities (Figure B8). Nearly 40 percent of 
the 392 active registrants were involved in extraction. About 60 
percent of these extraction businesses were specialized within that 
processing activity alone whereas 40 percent were also involved in food 
processing, supplement manufacturing, or both. Additionally, businesses 
specialized in hemp food processing or supplement manufacturing 
activities, respectively, also represented large shares of the CDPHE 
registrants at just over 30 percent each. These businesses largely 
focused on hemp flower processing for CBD and other cannabinoid 
extraction; however, several food manufacturers incorporate hemp 
protein and oils from hemp seed into their processes.
    This discussion highlights the growth in hemp processing and 
manufacturing activities related to the extraction, food, and 
supplements. Other hemp processing and manufacturing activities such as 
non-food industrial applications like textiles, paper, polymers, 
building materials, and specialized equipment manufacturing are also 
present in the state. These hemp processors represent a currently small 
industry in its early stages with unknown capacity, but with the 
potential to grow and establish itself as a significant agricultural 
and manufacturing industry and employer in the state. No comprehensive 
source of information on these sources was identified and therefore not 
summarized here.
    Anecdotally, there are a relatively small number of industrial 
manufacturing facilities, operating at a relatively small scale in the 
state. Companies in their early stages have perfected methods to 
manufacture a diverse array of products, including concrete, 
insulation, plastics, animal bedding, and textile fabrics. These 
companies are in different stages of growth and scale. The industrial 
hemp products manufacturing sector represents a potential opportunity 
for growth and investment as demand and the industrial supply chain for 
hemp products in the U.S. matures. In that case, acreage in the state 
devoted to fiber and oil seed would be expected to increase.
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Future Opportunities
    Hemp has the potential to diversify farm incomes and drive economic 
growth in Colorado. Future levels of hemp production will be influenced 
by a multitude of factors that can be difficult to predict including 
the number of hemp growers, the hemp area planted, growth and 
diversification of intended end use, and processing and retail 
capacity. Most important, hemp enterprises must remain profitable 
relative to other agricultural alternatives. Industrial and consumer 
hemp products must also remain competitive with established and new 
alternatives.
    The appropriate scale of production also remains an open question. 
Many hemp registrations under the pilot program were for small- or 
micro-sized areas (ten percent of 2019 registrations were less than 1 
acre, for example, Figure B5). Business turnover will also play a role 
in the number of registrants producing hemp into the future. Many 
producers may simply experiment with hemp and decide not to continue 
with its cultivation. In addition, growers will need to understand the 
risk management tools at their disposal and be able to take advantage 
of them. Currently, there is a lack of information and confusion around 
crop insurance which needs to be clarified going forward.
    While the industry is experiencing an oversupply of hemp biomass at 
the farm level there is anecdotal evidence suggesting that contracts 
(production and marketing) have played a role in grower access to 
processing and therefore profitability. If processing capacity remains 
relatively small scale this trend may continue, and producers would be 
discouraged from growing hemp for the spot market. The sector is also 
likely to be shaped by developing vertical relationships among 
extractors, processors, and industrial users or retailers. There will 
likely be continued supply chain issues related to uncertainty, such as 
around testing and processing, as the industry continues to grow and 
develop. These growing pains should ease, however, as innovation 
pipelines increase yields, make THC levels more predictable and stable, 
and potentially reduce other risks such as those associated with cross-
pollination.
    In Colorado, the vast majority of industrial hemp cultivation is 
for CBD or other cannabinoid production. As an early mover, Colorado 
may have an advantage in cannabinoid production, but the state needs to 
consider whether other industrial hemp applications would be profitable 
for producers in the state. As the industry grows, hemp production for 
fiber and oil seeds or dual purposes may increase, but the supply chain 
will need to grow alongside increased cultivation. The supply chain is 
immature, but there is potential interest in industrial hemp materials 
in transportation and construction for example by auto manufacturers 
for vehicle interiors or by major home building and aerospace 
manufacturing corporations.
    Research and development by major end-users or by materials 
manufacturers are still necessary to determine if hemp-based materials 
are an advantageous alternative to current materials. Given Colorado's 
history of hemp cultivation, the state could attract a major 
decortication facility or other mid-stream manufacturing plants if 
demand for industrial hemp products materializes.
    The lack of reliable information on hemp marketing channels and 
other hemp-related data will continue to improve; providing valuable 
information as this emerging industry grows. While we have current 
information on registered hemp processing and manufacturing businesses, 
in the future the compilation of further data on processors and 
manufacturers that produce non-industrial items like textiles or 
building materials (that do not fall under CDPHE's purview) will be 
helpful in informing the industry.
    While farms are experiencing a frictional oversupply due to a 
fragmented market, consumers are looking for new food and dietary 
supplement alternatives; and businesses are looking for sustainable and 
renewable energy and building materials. Despite the recent challenges 
on the supply side, there is undeniable potential for growth in demand 
for industrial and consumer hemp products in the U.S. As the entire 
industrial hemp supply chain grows and matures, Colorado is poised to 
take advantage of this growth in demand if it materializes. For this 
growth in demand to occur the industry needs to be proactive about 
addressing quality issues, unproven medical efficacy claims, and the 
accuracy of dosing. It is imperative that Colorado explores any 
potential opportunity and develops the supply chain for the emergence 
of industrial hemp for textiles, polymers, and building materials.
    Overall, there is a lack of consumer education around cannabinoids, 
which is exacerbated by the lack of Federal regulations related to 
cannabinoids in consumer products. On the industrial side, there is a 
lack of applied research and proven cost-effective use cases for 
different hemp applications.
    Colorado can continue to lead the industry in hemp innovation by 
facilitating and maintaining a favorable regulatory environment for 
research and development. The recommendations outlined in this CHAMP 
document demonstrate that the Colorado hemp industry is eager to 
position the state to be a production and manufacturing leader.
    To achieve leading status, research and development will be needed 
in several areas including (1) plant genetics; (2) effective uses for a 
variety of hemp industrial applications; (3) consumer uses and 
preferences for cannabinoid products; and (4) scalable and safe 
manufacturing practices.
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Notes

 
 
 
 
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          A Partnership of the Colorado Departments of Agriculture, 
        Public Health & Environment, Regulatory Agencies, and Office of 
        Economic Development and International Trade.

    The Chair. Thank you very much.
    At this time, I want to welcome the Ranking Member, Mr. 
Thompson, and allow him the opportunity for 5 minutes for any 
opening statement he would like to make.

 OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN 
                   CONGRESS FROM PENNSYLVANIA

    Mr. Thompson. Well, good morning, and thank you, Madam 
Chair and Ranking Member Baird, for holding today's hearing and 
to the witnesses for being here, much, much appreciated. I 
think this is our first hearing on this commodity, which is 
amazing, given the work that we did laying the foundation in 
the 2014 and 2018 Farm Bills, so long overdue, and thank you to 
both of you for your leadership on this.
    While I am excited to hear from such a distinguished group 
of witnesses, I am disappointed we are having another hearing 
where USDA--and in this case the FDA too--are missing in 
action, absent without leave, from the discussion. I think 
everyone in attendance would have welcomed to hear their 
perspectives as a part of this hearing.
    These two agencies have an integral role related to both 
regulation and oversight of the hemp program, and without them, 
we are missing a piece of the puzzle on an issue that has never 
once been publicly discussed by this Committee. And I hope we 
can rectify that in the remaining months of Congress, 
especially given the testimony. And thank you for your 
testimony, all five of you, and specifically where you noted 
the frustration of waiting for the FDA in particular.
    As we all know, there was a lot of excitement--I witnessed 
it firsthand--and trepidation surrounding hemp following the 
passage of the 2018 Farm Bill. However, after the first growing 
season, many producers were left with hemp in the field and had 
no markets to sell their products to. And since the 2019 
growing season, there has been a significant decrease in the 
number of acres planted. At the same time, though, we have seen 
continued investments in using hemp fiber for a variety of 
industrial products. I think it really is reflected in American 
agriculture innovation, not just in the practice, but 
identifying uses for this commodity.
    The investments have been made in using hemp fiber for a 
variety of industrial products. Now, I am excited to learn more 
from our witnesses today and have appreciated hearing that, 
about the innovative work that is being done. These 
conversations are important to our oversight mandate, so I look 
forward to the Q&A part of this hearing to continue to gain 
perspective on what worked and what didn't work and learn more 
about what stakeholders are thinking as we approach the 
reauthorization for the 2023 Farm Bill. I do appreciate all the 
recommendations and thoughts in your oral testimony and your 
written testimony. I once again want to thank our panel for 
taking time to be with us today.
    And with that, Madam Chair, I yield back.
    The Chair. Thank you very much to the Ranking Member of the 
full Committee. I appreciate your opening statement and your 
comments during this time.
    I wanted to at this time begin the questioning. At this 
time, Members are recognized for questions in order of 
seniority, alternating between Majority and Minority Members. 
You will be recognized for 5 minutes each in order to allow us 
to get to as many questions as possible. Please keep your 
microphones muted until you are recognized in order to minimize 
background noise. I recognize myself for 5 minutes.
    And I first want to thank all of the witnesses for their 
testimony and for being with us.
    Commissioner Quarles, in your article, Hemp, Kentucky, and 
the Law, you discuss the economic opportunities of hemp, but 
also the challenges. Could you outline some of the complexities 
that arose after the 2018 Farm Bill? Has the USDA Final Rule 
helped to clarify things for states, Tribes, and other 
producers?
    Dr. Quarles. Thank you so much for that question, Chair 
Plaskett. The biggest issue before 2018 for industrial hemp was 
obviously the Federal prohibition, classifying it as a 
controlled substance. And so after the 2018 Farm Bill was 
passed, other issues emerged as, say, speed bumps, I guess you 
could say, for the progress of hemp legalization. These were a 
half dozen issues or so ranking from problems with the banking 
industry, with interstate travel or transportation of hemp 
material seeds, seedlings, et cetera. We also saw issues where 
there was some confusion from law enforcement, as well as the 
need for us to have standardized and uniform testing across the 
country.
    And so I know that USDA at the time inherited a monumental 
task with legalizing hemp through regulation, and we knew that 
the interim rule findings would need to be adjusted into the 
final rule as well. I think that the USDA deserves accolades 
for the progress that they have made. They have separated out 
the production of hemp versus the legal products, but there are 
still a lot of issues that I think need to be addressed in the 
2023 Farm Bill. For instance, I think that the lot program at 
USDA, there is a lot of confusion. There is a lot of issues 
between the state regulators, as well as the reporting 
guidelines with the FSA. And I would agree with Commissioner 
Greenberg that this might be an opportunity for us to look for 
those states that elect to have hemp programs to have a 
cooperative federalism program with funding attached because 
what we are seeing right now is that some states may not want 
to continue underneath the USDA program and leave it to USDA 
and not let the states regulate.
    And the final issue that I have is that we need to make 
sure we have a productive conversation with FDA so that they 
can give us clear guidance, particularly on what to do with 
floral products that derive from hemp.
    The Chair. Thank you.
    Dr. Quarles. We have a lot of companies that want to sell 
these products. We just need guidance from the FDA. Thank you.
    The Chair. Thank you. And Commissioner Greenberg, how have 
the markets for hemp in the U.S. developed and fluctuated since 
Congress passed the 2018 Farm Bill? What is needed to provide 
certainty and stability across the market for farmers, 
producers, and consumers of hemp?
    Ms. Greenberg. Thank you for the question, Chair Plaskett. 
It is an excellent question and one we are very much focused on 
in Colorado. I mentioned market diversification and how 
important that is to a thriving hemp economy. Immediately after 
the 2018 Farm Bill, as I mentioned, we saw a very narrow market 
opportunity for our producers, which was strictly around CBD. 
But since then, we have seen much growth around a much more 
diversified industry for hemp. That includes fiber, food, fuel, 
and other products like you have heard about today that we are 
looking into and seeing progress on.
    I would say one barrier that we are intimately focused on 
and familiar with in Colorado is the gaps and limits in our 
supply chain primarily around processing and manufacturing here 
in this country, so that is a place that we are very much 
focused on. I think we have a lot of production capacity and 
incredible farmers who are able to grow fantastic crops. We 
need to make sure every step along the supply chain across 
these market opportunities are strengthened and grown.
    The Chair. Thank you. I guess one of my other questions is 
how do--and this is for any of the witnesses. How do you 
suggest increasing socially disadvantaged farmers' involvement 
in the hemp production? This seems to be a market where those 
who are already up and running farming know the process, know 
how to get things to market are the most successful. How do we 
get socially disadvantaged farmers involved in this?
    Dr. Phipps. Thank you for that question, Chair Plaskett. As 
an 1890 institution, we were clearly founded to address issues 
like that. So like all of the other land-grant institutions, 
while we serve the tripartite mission of education, outreach, 
and research, we have an added layer of making sure that we are 
targeting the most disadvantaged members of our society, 
including farmers, community members, et cetera. So I think the 
USDA has already made great strides, and I do want to give them 
accolades for the programs that they have put into place for 
Tribal communities, as well as historically Black colleges and 
universities, and for Black and other minority farmers.
    I think that projects similar to the one that I am running 
that I have mentioned, the SUSHI Project where we actually 
partner with all three types of land-grant institutions, so we 
have 1890s, Central State, and Kentucky State. We have College 
of Menominee Nation that Marcus has already mentioned, and we 
have three 1862s. I think encouraging those sorts of 
transdisciplinary, multi-institutional research projects and 
outreach projects would be helpful.
    The Chair. Thank you. Thank you very much.
    At this time, I would ask the Ranking Member to begin 
questioning the witnesses for his 5 minutes.
    Mr. Baird. Thank you, Madam Chair. I am going to begin with 
the question to Dr. Phipps. In your testimony you mentioned 
your role as the project director for a grant from Agricultural 
Food and Research Initiative, Sustainable Agriculture Systems, 
and it is a grant that includes researchers from six different 
land-grant institutions. So could you talk a little more about 
the importance of these competitive grants, the lessons that we 
have learned going through the application process, and how a 
multiple-institution project may have benefited your 
application?
    Dr. Phipps. Absolutely. So we are still in the early stages 
of this project. We are finishing up year 1 of a 5 year 
project, but we have already seen the benefits of having, 
again, integrated, transdisciplinary, and multi-institution 
focus in the project. And so, like I mentioned, we have Central 
State University, we have Kentucky State University, we have 
College of Menominee Nation, we have University of Kentucky, 
which has already been spoken about here. Tyler Mark is an 
economist there. We have Mississippi State University. We have 
an environmental economist on our team from there and a 
University of Delaware consumer economist.
    I would say that, as I mentioned in my opening, I think 
that in order to adequately address these complex issues that 
we are dealing with, you need to have people that are working 
from all different sides of the issue, so you need your 
economists, you need your social scientists, you need Tribal 
representatives, you need people that are focused on equity and 
nutrition and health. You need fish nutritionists. You need 
hemp or whatever crop you are working with experts to be able 
to touch on all of the aspects that are going to make the 
project successful and provide the wealth of information that 
is needed for policymakers and for consumers ultimately to make 
decisions regarding a project.
    And so, again, I think that the Sustainable Agriculture 
Systems Program within USDA, it is currently their flagship 
program, up to $10 million, has done an excellent job of making 
sure that they are addressing those complex issues in ways that 
are going to be sustainable and valuable answers for the long-
term. And I think that more projects that have those kinds of 
requirements and those kinds of partnerships are going to be 
key to continuing to move forward in whether we are talking 
about hemp or any other commodity crop or agricultural issue. 
Thank you.
    Mr. Baird. Thank you. I really appreciate the work you are 
doing at Central State University. I would also like to 
recognize other land-grant universities that are doing great 
research in the hemp industry, which includes, as you mentioned 
the University of Kentucky, which was one of my alma maters, 
and they are not represented here today on this panel, but they 
have prepared a written testimony. So Madam Chair, with your 
permission, I would like to submit their statement for the 
record.
    The Chair. It is very welcome, and without objection.
    [The joint statement is located on p. 141.]
    Mr. Baird. So then I have one more question. Mr. Wang, you 
spent several years in Australia before joining Ecofibre. And 
while Ecofibre recently entered the U.S. market, you mentioned 
they have been in operation in Australia since 1999. So could 
you share some of the differences between what is going on in 
Australia and what you see here in the U.S. and what this 
Committee might learn to incorporate in our 2023 Farm Bill?
    Mr. Wang. Yes, sure. Thank you for the question, Mr. Baird. 
So Ecofibre started, as I mentioned, in 1999 primarily as a 
genetics company collecting a range of genetics from across the 
world for hemp or cannabis at the time, and a lot of work done 
by Ecofibre was to set up a genetic pool for the research to be 
done. So today, we have about 2,100 different accessions of 
hemp genetics. And the work done for the first 15 years was 
really about growing hemp in the latitudes of Australia, which 
actually matched the latitudes of the United States, which is 
quite important because I think while people think it is easy 
to grow, it actually it is a bit harder, and genetics is at the 
core of that. So that is what the company had done for about 15 
years.
    The work done over there was brought over to the U.S. 
mainly because of the market size and opportunity in the U.S. 
And, listen I think the U.S. with the farm bill in 2018 has 
probably a better structure in my opinion. In Australia right 
now hemp is regulated by three different agencies. For food, 
there is something called FSANZ (Food Standards Australia New 
Zealand), for medicinal purposes it is the Therapeutic Goods 
Administration, and for fiber it is actually the Department of 
Primary Industries. So for me, it is a lot of work managing 
three different regulators for a single crop.
    The United States, like I said, has done it in a different 
manner. So you came from a crop down, which I think is far 
superior. I think a lot of the challenges we have, while they 
seem significant or not, it is just a bit of clarity required 
for one specific segment. I think for food and for industrial 
uses, the U.S., we are very well set up for that. The 
challenges just become of--I always come from consumer or 
manufacturing background. They want to know the supply chain 
exists. Anyone of any size company who is going to use hemp, 
whether it be in car doors or building supplies, wants to know 
if they introduce a product to the market, they will have a 
controlled supply chain that will be there, and that is a big 
gap that we have today.
    Mr. Baird. Thank you very much. I am out of time. I would--
--
    The Chair. Thank you.
    Mr. Baird. I could spend another hour----
    The Chair. Yes.
    Mr. Baird.--asking--oh, you are going to say no. Okay. 
Thank you.
    The Chair. Thank you. I will just remind the witnesses, 
too, as you are answering questions, please be mindful of the 
time so that we can get all of the questions of the Members.
    I would now like to call on the gentlewoman from Ohio, Ms. 
Brown, for her 5 minutes.
    Ms. Brown. Thank you, Chair Plaskett and Ranking Member 
Baird, for holding this hearing today.
    The 2018 Farm Bill legalized the production of hemp and 
opened the door for creativity and opportunity for both growers 
and processors. In the years since the last farm bill, we have 
seen firsthand the importance of strong interagency 
communication and coordination, especially as it pertains to 
hemp production. For example, the USDA requires any laboratory 
testing hemp for the THC compliance to be registered with the 
Drug Enforcement Agency.
    Mr. Grignon, what are the impacts you have seen in certain 
areas of the country where there is no access to DEA-approved 
laboratory?
    Mr. Grignon. Well, I think some of the issues that we are 
running into is because there are only a few registered DEA 
labs, a lot of the THC testing is only in certain areas, so you 
have to literally wait. So you have to take the time to cut 
your samples or have your samples be cut, and they have to be 
processed and shipped over to the lab. Now, if there is not a 
lab in your state, you have to wait and go--basically a few 
states over, so there is basically a lack of testing capacity 
in our country right now to handle the hemp industry if we were 
to start to expand more.
    Ms. Brown. Thank you, Mr. Grignon. A streamlined approach 
obviously to regulating hemp products is critical. So, Dr. 
Phipps, can you speak to some of the complexities that arose 
after the 2018 Farm Bill as it pertains to the regulation of 
hemp and hemp-derived products?
    Dr. Phipps. Thank you for that question, Representative 
Brown. As you know, my background is primarily in how hemp can 
affect human nutrition, and so I would say that I can speak to 
the regulations affecting hemp as animal feed. And so we know 
that there has been a lot of difficulty in getting FDA approval 
of hemp as an animal feed. We know that there was a chicken 
application that went in. It came back with some feedback. I 
would say that one of the most difficult issues with that is it 
is costly and it is very unwieldy, the system, currently as it 
is. And so a possible solution to that could be infusing 
dollars into the FDA CVM in particular to streamline that 
process. Perhaps looking at what is being done in the European 
Union right now where they have hemp already approved in a 
variety of forms as animal feed and perhaps using that as a 
starting point in determining how we can streamline our 
processes.
    I would yield my time to anybody on the panel that can 
speak to some of the other complexities related to fiber and 
other parts of the process.
    Ms. Brown. Well, before you do that, I would just 
respectfully reclaim my time. I know that you, Dr. Phipps, have 
a very exciting project that was recently awarded, $10 million 
in funding from the National Institute of Food and Agriculture. 
And in your written testimony, you talk about the lack of 
consumer awareness around nutrient benefits of hemp products. 
How can the USDA and FDA do a better job of educating consumers 
in this space?
    Dr. Phipps. Sure. So we have an entire section of NIFA that 
is based on outreach and extension in the land-grants and 
through other projects. I would say, again, continuing to fund 
land-grant institutions who have a specific mission to 
providing that kind of education and outreach. There is work 
being done already, again, a partnership between the University 
of Delaware and University of Kentucky looking at what consumer 
knowledge currently is related to hemp versus marijuana, what 
are the nutrient values of hemp grain both from human 
consumption, as well as how they can benefit the food supply 
related to animal production. I would say continued funding 
into those areas, curriculum building from K-12 that can 
address some of these issues, that is another way that we can 
slow the rise of chronic disease in this country is to make 
sure that we start educating our young folks into ways that 
they can change their diets and their families' diets to be 
healthy. Thank you.
    Ms. Brown. Well, thank you, Dr. Phipps. I look forward to 
hearing from and hearing and working with my colleagues to 
strengthen the hemp production in the next farm bill. So thank 
you, Madam Chair. With that, I yield back.
    [Mr. Grignon's supplementary information is located on p. 
144.]
    The Chair. Thank you very much to the gentlewoman from 
Ohio.
    And at this time, I call on the Ranking Member of the full 
Committee on Agriculture, Mr. Thompson, for his 5 minutes.
    Mr. Thompson. Madam Chair, thank you so much, and thank you 
to all the panelists once again for your testimony.
    Mr. Wang, over the last 18 months my colleagues and I have 
been championing conservative natural climate solutions to help 
address climate change. We know our producers are part of that 
solution, a big part of that solution and not part of the 
problem. That being said, I am particularly interested in the 
work that Ecofibre is doing to make hemp a natural climate 
solution, particularly surrounding Hemp Black. Can you talk 
more about this work?
    Mr. Wang. Yes, thank you, Mr. Thompson, and thank you for 
that question. What we have been working on is--so when you 
start from the core part of the plant, we know it is carbon 
negative, it is one of the largest carbon sequesters, so I 
won't go into that topic. But of the plant, a large part of the 
fibers being used already for many different uses, and that 
makes up about 25 to 30 percent of the plant, which leaves a 
vast majority of the plant, the stalk, unused. And it is being 
used for a lot of lower-quality, low-grade uses such as plant 
bedding or animal bedding.
    So what the stalk has is a very high amount of carbon in 
it. And so we went through a lot of research and developed a 
carbonization process to actually create an equivalent of 
carbon black. And so for everything that is black or colored 
black in the world, right now, it is typically used by carbon 
black, which is the incomplete combustion of petroleum, which 
is a carbon-positive input. So the Hemp Black that we create 
with the hemp-based carbon is 100 percent biobased, as tested 
by the USDA as part of the BioPreferred Program. And it is a 
highly carbon-negative input. And so that input is carbon 
black, which can be used in bioplastics, it can be used in 
rubber, it can be used as a colorant in textiles or as an ink 
or a coating right now. So our focus right now is using it to 
make a lot of different plastic products, 25 percent biobased, 
everywhere from simple black shipping pallets, which is a big 
movement to shipping pallets to do that to black plastics used 
in agricultural purposes or construction purposes, to use it as 
the dyes as opposed to carbon black for something as simple as 
jeans that are black on that. So what we are really doing is 
finding a one-for-one replacement for an existing supply chain 
material that is used significantly across the world, and it is 
petroleum-based, and replacing with something that is plant-
based, which is hemp.
    So there is a pretty significant net carbon effect. And we 
use the term think negative because while the world wants to 
get to net-zero, most everything is carbon-positive, so you got 
to have something negative to get there. And the beauty of hemp 
is there are so many different uses of hemp that I only am 
covering sort of very narrow pathway to that. But because it is 
such a flexible crop to be used for so many different uses, you 
can actually have the growing being negative and actually 
permanently sequester carbon while you are doing it. And for 
us, the biggest thing is it has to be a one-for-one supply 
chain replacement because I would not expect manufacturers 
downstream to invest significant amounts of capital just 
because we want to put hemp into it. Number two, it has to be 
equal technical specs, which it is. And three, we have to make 
sure it is cost equal to or better than, and in due course with 
scale, I would assume that a petroleum-based carbon black/gray, 
hemp-based carbon black, we can get the hemp-based carbon black 
equal to or better on a cost structure than petroleum.
    Mr. Thompson. All right. Good. Well, thank you.
    Would other witnesses like to comment on how hemp can be 
used as a natural climate solution? Go ahead.
    [Mr. Grignon's supplementary information is located on p. 
144.]
    Ms. Greenberg. Yes, thank you, Representative, for the 
question. I think what Mr. Wang next to me described is very 
much how Colorado is thinking about the opportunities with 
regards to hemp. We are very focused on climate mitigation and 
the leadership role agriculture can play in solving our climate 
challenges that we have before us now. Hemp is a big part of 
that solution. I think we have a lot of opportunities, again, 
looking across diversifying supply chains, investing in the 
processing and manufacturing, and then going back to the farm 
and making sure our farmers have support around climate-smart 
agricultural production, to make sure we are looking at soil, 
water, and climate altogether and the markets that combine 
those things into a sustainable marketplace for our producers. 
Thank you.
    Mr. Thompson. Excellent. Any other witnesses care to 
comment on that?
    Mr. Wang. I just might add one more Mr. Thompson.
    Mr. Thompson. Please.
    Mr. Wang. The one thing that we are working on as well is 
mine site remediation because there is a lot of soil, as you 
know what happens on mine sites, and hemp is actually a 
phenomenal remediator of soil to bring it back to life again by 
putting the nutrients back in. So, from a soil standpoint, that 
has a significant opportunity for that.
    Mr. Thompson. Having represented now for some time the 
Pennsylvania 15th, it was the 5th district before that, but it 
is the district that has more abandoned mine sites than the 
other 434 districts added together, so that is that is a very 
exciting innovation you shared this morning.
    So thank you to all our witnesses. Madam Chair, thank you.
    The Chair. Thank you to the Ranking Member.
    At this time, I would like to recognize the gentlewoman 
from Maine, Ms. Pingree, for 5 minutes.
    Ms. Pingree. Thank you very much, Madam Chair. Thank you 
for holding this hearing and thank you to you and the Ranking 
Member for your concerns about the challenges that growers in 
states are facing in growing hemp, which is a promising crop, 
and we have a long ways to go before we have smoothed out all 
the issues.
    I think someone earlier mentioned my bill, the Hemp 
Advancement Act (H.R. 6645), and some of the problems I am 
going to bring up this morning I am trying to solve in that 
bill. But I want to discuss one in particular that seems 
frustrating. The existing DEA lab testing requirements plus the 
10 year ban on people with drug-related felony convictions 
receiving a hemp license basically treat hemp like a schedule I 
drug, which is ridiculous in my mind. And I have talked to some 
producers in Maine who have problems--where their employees are 
struggling to get fingerprints that are acceptable by the FBI 
for criminal history reports. One grower told us that it had to 
be printed five times before it finally worked. We have only 
one Post Office that does fingerprinting, which is in Portland, 
Maine. I can't make appointments there. The State Bureau of 
Identification does fingerprinting there in Augusta. We have a 
big rural state. We have growers all over the state. So I am 
just talking about some of the complications.
    My bill would remove this unjust 10 year ban and also 
removes the requirement about hemp testing be done in DEA labs, 
which I think has already come up.
    But, Ms. Greenberg, thank you for the work that you are 
doing in Colorado. Have growers in your state run into similar 
issues? And could you speak to how eliminating the DEA lab 
testing requirement plus this 10 year conviction ban could help 
our hemp growers?
    Ms. Greenberg. Absolutely. Thank you, Representative 
Pingree, and excellent questions. On the first question, the 
DEA labs, as I mentioned in my testimony earlier, this has been 
a big barrier for us. We have a state-of-the-art brand-new 
laboratory at our headquarters in Colorado. We have fantastic 
scientists, experts in their field. We are a state that has 
been regulating both marijuana and hemp successfully for many 
years and doing so separately and able to manage that through 
our labs across the state. So the fact that we are now 3 years 
into navigating our requests for certification with DEA and 
still have yet to receive it with almost a decade track record 
of success to us indicates that that is excessive in the 
regulatory structure and not necessary to creating a safe and 
reliable regulatory framework for regulating hemp in our 
states.
    On the second question on the 10 year ban, as I mentioned 
earlier, we feel strongly that hemp is a commodity crop. It is 
legal to produce and that we should not be criminalizing or 
intending to criminalize producers for producing a legal crop. 
I think with that framework that 10 year ban is something we 
would absolutely be interested in looking at. We are doing 
quite a lot of equity work as well throughout our state and 
making sure that folks who have not had access to producing for 
one reason or another have access to that now. Now that hemp is 
legal, it is a legal crop, and we want to make sure that we 
maintain that--within our regulatory structure as well.
    Ms. Pingree. Thank you. Thank you for the work you are 
doing, and thank you.
    The other thing that we are working on in the Hemp 
Advancement Act is to raise the level of THC threshold for hemp 
and the in-process hemp extract to make the rules more workable 
for growers and processors, also ensuring that final hemp 
products sold to consumers aren't intoxicating.
    Mr. Quarles and Ms. Greenberg, can you talk about producers 
that have had to destroy their entire crop due to the current 
THC threshold and how raising the threshold could help growers 
and processors, also has caused--unnecessary hardship to 
growers?
    Dr. Quarles. Yes, thank you for that question. Since the 
early days of bringing it back almost a decade ago, we have had 
to deal with what we commonly term hot hemp, hemp that exceeds 
the legal definition. And so we have had a struggle to 
determine how to do that both under the 2014 Farm Bill 
underneath the research side, and then again after 2018. And 
even today, with almost a decade of improved genetics, we still 
find varieties that consistently test hot. So one of the things 
we do is that we actually prohibit varieties that we know will 
test hot, and we don't consider it to be hemp, and so we try to 
prevent and mitigate on the front end. And then on the back 
end, if a crop were to exceed the \3/10\ of 1 percent 
threshold, we actually have an opportunity to retest that crop 
as well. And during the interim final rule, we advocated 
strongly that USDA allow growers to have a second testing 
opportunity, which they did include in the final rule. So that 
helps us out a little bit as well.
    For your question about raising THC, we at NASDA actually 
passed a policy on behalf of all the State Departments of 
Agriculture a couple of years ago that would advocate for an 
increase to one percent THC. We think that after a lot of 
conversations with law enforcement, as well as those on the 
ground producing the crop and in the labs testing it, that 
raising it to one percent would allow for us to have a little 
bit more flexibility, particularly on the research of genetics.
    Ms. Pingree. Thank you so much. I am out of time, but I 
want to thank the witnesses for your time today and the work 
that you are doing. Thanks so much.
    I yield back, Madam Chair.
    The Chair. Thank you very much. At this time, I would like 
to yield 5 minutes to Mr. Carbajal of California if he is 
available. Are you there Mr. Carbajal? You may begin. You are 
muted.
    Mr. Carbajal. Thank you, Madam Chairman, and sorry about my 
delay. Thank you to all the witnesses that have joined us 
today.
    We have made tremendous strides in the 2018 Farm Bill when 
hemp was legalized. I know the Agriculture Committee doesn't 
have jurisdiction over de-scheduling cannabis, but I hope that 
once we are able to work through that, this Committee can work 
to recognize cannabis as an agricultural product as well. 
Cannabis is already legal in California and several other 
states. Legalizing hemp has allowed this industry to start 
flourishing, as hemp can be used in a variety of products from 
CBD to clothing to food. This is a versatile product that has 
benefits for consumers and the economy. In this next farm bill, 
I hope we can continue finding ways to bolster research and 
production.
    Commissioner Greenberg, the decrease in registered hemp 
acres in Colorado from 2020 to 2022 is significant, falling 
from nearly 90,000 to less than 4,000. You note this is due to 
many factors, including supply chain disruptions, a surplus, 
the lack of infrastructure for food and fiber production from 
hemp. Have other crops been grown on this acreage that is not 
currently producing hemp? Which of these factors do you most 
attribute to the decline in registered acreage, and how can 
Congress help alleviate this?
    Ms. Greenberg. Thank you, Representative, for the question. 
The production in 2019 looked a lot different depending on 
where you were in the state. There were some existing farmers 
who were trying out hemp production as part of a much larger 
production and other commodities or other crops. There were 
other producers who came in who were maybe first-time hemp 
growers who put everything into a hemp business and rolled the 
dice on the 2019 market. So it really depends in terms of kind 
of which entry point a producer came in, in 2019, what that 
land is being used for now. We certainly continue to see plenty 
of land under production with other crops that was in hemp 
production in 2019.
    So, I think the primary driver of that sort of rise and 
fall within the course of a single season was sort of the fury 
or the fervor around the hemp production opportunities within 
that year, just tons of untapped opportunity, a lot of folks 
coming in at once, an unregulated marketplace, and a lack of 
diversity in market opportunities.
    So where I see us now, I think we are in a much more stable 
growth position. I think we have probably stabilized to a place 
that is more manageable based on just the maturity of markets. 
Right now, we are in a nascent phase of this industry, and I 
think as markets mature as we get more stable regulatory 
environments and we build up the supply chain processing and 
manufacturing opportunities, and then as we have discussed, 
look at those environmental opportunities as well where our 
hemp producers can tie in to climate markets or other 
marketplaces that are driving toward a carbon-neutral future, 
as all of those aspects develop, I think we are going to see a 
steady rise back toward production but in a more sustainable 
rate.
    Mr. Carbajal. Thank you for that very thorough answer.
    Dr. Phipps, in your testimony, you talked about a lack of 
incentives for hemp growers to partner with domestic buyers and 
processors. What kind of incentives would be helpful? Do you 
see Congress facilitating this connection? If so, what should 
that look like?
    Dr. Phipps. Thank you for your question. So yes, in my 
testimony, I mentioned that one of the stakeholder concerns 
that we see is a lack of incentives for growers to partner with 
producers. So, as has been spoken about previously, at the very 
beginning, there was a sharp rise in production of hemp and 
many growers were counting on partnerships with processors to 
be able to process their products. And so I think that if we 
can incentivize, as we fund processors to build infrastructure, 
we provide funding within that, that they can set aside to 
recruit growers and pay growers for their products. When that 
happens, we can build the network at the same time.
    Mr. Carbajal. Thank you very much. Madam Chair, I yield 
back.
    The Chair. Thank you very much to Mr. Carbajal. Thank you 
for your testimony.
    At this time, I would like to call the gentleman from 
Florida, Mr. ``Big Al'' Lawson.
    Mr. Lawson. Thank you, Madam Chair. Can you hear me?
    The Chair. I can hear you loud and clear, sir.
    Mr. Lawson. Okay, thank you. And welcome to the Members 
that are on this Committee today and before the Committee, and 
also give an honor to our Ranking Member, Congressman Baird, 
for this hearing that we have today.
    Many of the witnesses today mentioned massive financial 
barriers when entering the industrial hemp market, including 
the registration and testing fees and background checks. So 
this question is for Dr. Phipps. Can you speak more on to what 
are some of the effects within the land-grant university 
system, cooperative extension services that provide technical 
and financial assistance to historically underserved 
agriculture products, include new and beginning and small size 
businesses, veteran-owned and socially disadvantaged farmers 
and ranchers based on race and gender?
    Dr. Phipps. Thank you for that question. And as I mentioned 
earlier, the 1890 land-grants were specifically founded to make 
sure that we are equitably financing, educating producers, 
farmers, and consumers from underprivileged backgrounds. As a 
matter of fact, one of the other projects that I am working on 
is designed to grow healthy communities by touching on all 
aspects of the social determinants of health, so that includes 
building micro-incubator farms in low-access areas. It would 
include training in community and economic development and 
business development for those small farmers and helping them 
to get their products out into the value chain, and then also 
educating consumers in that area of the benefits of purchasing 
those items from those local farmers that are being developed.
    I think that if we can continue that work, certainly, we 
need to make sure that we are providing opportunities for 
farmers and producers and processors from historically 
disadvantaged communities to have access to funding in order to 
build infrastructure. In the past, there hasn't necessarily 
been equitable access to those competitive grants. We know that 
both colleges that serve historically disadvantaged 
communities, as well as producers and farmers, from 
disadvantaged communities, may not have professional grant 
writers. They may not have the ability or the infrastructure 
set up to be able to competitively apply for those grants. And 
so providing opportunities for that, whether that is earmarked 
funds specifically dedicated to them or whether that is 
providing assistance in the process of applying for and 
receiving those fundings and implementing those particular 
programs would be helpful.
    Mr. Lawson. Dr. Phipps, there was just one other thing that 
I will ask you. I am concerned about gender, especially for 
women. Have all of this industry development and STEM affected 
women who wanted to enter in this process of hemp development, 
especially in what I see is happening in the State of Florida?
    Dr. Phipps. So I can't speak to the State of Florida. I am 
in the State of Ohio. But I can speak as a woman who is in the 
field of agriculture and STEM. And you are correct. 
Historically, the fields of agriculture and STEM have been very 
dominated by men, dominated by White men. And even in the SUSHI 
Project that I am leading, there has been 32 that have been 
funded. These are those flagship programs of the USDA. Out of 
those 32, there have been only eight women that are lead on the 
projects. When we start layering on the additional things on 
top of gender such as race or ethnicity, we start to see that 
there is a significant under-representation of women receiving 
funding, of women farmers, Black women farmers, Brown women 
farmers that are entering the field. I certainly think that a 
review of funding processes of the way that we are recruiting, 
targeting recruitment of those individuals so that we can, I 
would say, bring back because women and women of color have 
always been involved in agriculture. They have always had a 
hand in growing the crops that feed their families and their 
communities. And so I think that targeted recruitment and 
targeted outreach and targeted funding to bring women, 
especially women of color, back into a typically otherwise 
dominated agriculture and STEM field is needed and important. 
And I thank you for the question.
    Mr. Lawson. Okay, thank you very much, Dr. Phipps, and it 
was very good what you said about gender, which is very 
important to me.
    Madam Chair, I am going to have to leave and go to 
Financial Services, but this is really a great hearing. I would 
like to follow-up with Dr. Phipps on some other issues that are 
related to gender. Thank you.
    The Chair. Thank you. Thank you very much for your 
insightful questions.
    As we close, I would like to first invite the Ranking 
Member to share any closing comments he may have.
    Mr. Baird. Thank you, Madam Chair. And I will make it very 
quick because we have votes, I recognize. But, we have heard a 
lot of great recommendations for the 2023 Farm Bill here today, 
and one that I would like to add is that the FDA hasn't really 
had any kind of regulatory framework for hemp-derived CBD, so I 
would encourage us to include that in our discussions about the 
2023 Farm Bill. And I thank you. I yield back.
    The Chair. Thank you, and I agree wholeheartedly with that 
assessment.
    As we close, I would like to first thank all our witnesses 
for their insightful testimony and their answers to our 
questions. Your expertise and knowledge are crucial for 
ensuring that the next farm bill does all it can to support 
producers and ensure the long-term success of the domestic hemp 
industry.
    Today, we heard an update from several stakeholders on the 
current state of hemp production. We also heard about what has 
worked for the USDA Domestic Hemp Production Program, and more 
importantly, what has not worked and needs improvement. I am 
personally excited to continue to work with our panel of 
witnesses and the producers they represent, as well as Members 
of our Committee, to make sure farmers have the tools, 
guidance, and assistance they need to support their businesses 
in their communities, as well as now understanding the 
processors and others in the supply chain as well.
    I would like to again thank our witnesses for being here 
today, as well as all our Members for giving this important 
topic the attention it deserves.
    Under the Rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplementary written responses from 
the witnesses to any questions posed by a Member.
    This hearing of the Subcommittee on Biotechnology, 
Horticulture, and Research is adjourned.
    [Whereupon, at 11:21 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
 Submitted Joint Statement by Hon. James R. Baird, a Representative in 
   Congress from Indiana; on behalf of Robert ``Bob'' Pearce, Ph.D., 
Professor of Agronomy, Department of Plant and Soil Sciences; and Tyler 
    B. Mark, Ph.D., Assistant Professor, Department of Agricultural 
                   Economics, University of Kentucky
    [Chair] Plaskett, thank you for the invitation and opportunity to 
provide written testimony to the Biotechnology, Horticulture, and 
Research Subcommittee of the House Committee on Agriculture. We 
represent the University of Kentucky (UK), 6th Kentucky Congressional 
District.
    Dr. Pearce is an Extension Professor in the Department of Plant and 
Soil Sciences and Interim Director of the University of Kentucky Hemp 
Program. He has been working on hemp best management practices since 
2016. He leads the national hemp grain and fiber variety trials for the 
S-1084: Industrial Hemp Production, Processing, and Marketing in the 
U.S. multi-state project and serves as the University of Kentucky 
representative on the FFAR Hemp Research Consortium. His research team 
has secured funding from USDA-ARS, NIFA, and multiple private 
companies.
    Dr. Mark is an Associate Professor in the Department of 
Agricultural Economics. He has been working on hemp economics since 
2014. His team at the University of Kentucky has been part of teams 
securing over $13.3 million in funding to evaluate all aspects of the 
hemp supply chain since 2014. These projects are funded through USDA-
ARS, AMS, ERS, and NIFA. Specifically, with my collaborators, we are 
developing the first national estimates of production costs for hemp, 
evaluating and providing producers feedback on contract requirements, 
assessing the economic impact of hemp production, evaluating various 
pricing strategies, conducting market channel assessments, and 
evaluating the demand for hemp products.
    Since the passage of the 2014 Farm Bill, much has been learned 
about the formation and accumulation of cannabinoids, including 
Tetrahydrocannabinol (THC), in Cannabis sativa. The total potential 
cannabinoids and the ratio between the many different cannabinoids are 
primarily determined by genetics. Plants expressing THC synthase genes 
produce THC predominantly and would typically be classified as 
marijuana. Plants that do not express THC synthase genes produce mostly 
other cannabinoids but often still produce small amounts of THC due to 
the non-specificity of other cannabinoid synthases. This can lead to 
these plants exceeding the current 0.3% THC threshold for hemp. The 
term cultivar describes a population of plants cultivated by selective 
breeding. In the aftermath of the 2014 Farm Bill, many cultivars 
available to growers were unstable (some still expressing THC synthase 
genes), leading to significant challenges for growers to produce 
compliant material. As the industry has developed, cultivars have begun 
to stabilize, making it possible for growers to manage cannabinoid 
levels better. However, a 0.3 percent limit on THC still presents some 
challenges for hemp growers and may limit the maximum concentration of 
cannabinoids such as CBD achievable while producing compliant material.
    The primary argument for increasing the THC level to 1% is to 
reduce the incidence of non-[compliance] and allow more opportunities 
for hemp production. Will increasing to 1% achieve this goal? 
Potentially yes, but as with many policy changes, there will be winners 
and losers to this change. This testimony aims to outline key 
considerations for the Committee as they discuss increasing the THC 
level to 1%. However, it should be noted that the information provided 
is from preliminary studies in these areas. Additional funding is 
needed to explore further the full implications of transitioning the 
hemp industry to a 1% THC rule. Additional state level and national 
data are needed on the percentage of acres testing above 0.3% THC, 
market demand, and regulatory frameworks are needed to understand the 
full implications of this change.
Consideration 1: Acreage, Producers, and Processors
    Increasing the THC limit to 1% will have implications across the 
hemp supply chain. Figure 1 shows results from pre-harvest compliance 
tests for the state of Kentucky from 2018-2021. The percentage of 
samples testing above 1% in Kentucky has ranged between a low of 0.2% 
in 2018 and 2.0% in 2019 and 2020. Key contributors to the differences 
between years are the hemp genetics planted and environmental factors 
(e.g., precipitation, stress degree days, soil 
conditions).1-2 *  
---------------------------------------------------------------------------
    \1\ Toth J.A., Stack G.M., Cala A.R., et al., Development and 
validation of genetic markers for sex and cannabinoid chemotype in 
Cannabis sativa L. GCB Bioenergy. 2020; 12:213222. https://doi.org/
10.1111/gcbb.12667.
    * Footnotes annotated with  are retained in Committee file.
    \2\ Jeong, Hoyeon & Appuhamilage, Buddhika Patalee Mallika & Mark, 
Tyler B., 2022. ``The Estimation of Yield of Industrial Hemp in 
Kentucky Using Spatial Analysis,''  2022 Annual Meeting, July 31-
August 2, Anaheim, California 322308, Agricultural and Applied 
Economics Association.
---------------------------------------------------------------------------
Figure 1: Kentucky Pre-Harvest THC Results 2018-2021 \3\
---------------------------------------------------------------------------
    \3\ Kentucky Department of Agriculture Hemp Program 2021 THC 
Summary.

------------------------------------------------------------------------
   Pre-Harvest THC
       Results            2018         2019         2020         2021
------------------------------------------------------------------------
.300% or less               81.0%        57.0%        50.0%        57.1%
.301-.399%                  14.0%        26.0%        22.0%        25.0%
0.400-0.999%                 5.0%        15.0%        26.0%        17.2%
1%+                          0.2%         2.0%         2.0%         0.7%
                     ---------------------------------------------------
  Total Tests                100%         100%         100%         100%
------------------------------------------------------------------------

    An increase in [allowable] THC levels would likely significantly 
decrease the number of acres and producers needed to meet the demand 
for floral hemp for cannabinoid production. Increasing the THC limit 
from 0.3% to 1% is a 233% increase in THC allowance. Considering only 
cannabidiol (CBD) production from floral hemp, this will significantly 
decrease the number of producers and licenses needed to support CBD 
demand in the United States. The ratio of CBD to THC is approximately 
25 to 1 so increasing THC to 1% would allow CBD concentration levels 
increase from a current maximum of 7.5% to as much as 25% in floral 
biomass.\1\ Reducing the number of producers will positively impact the 
processing sector. It will lower the processors' transaction costs 
primarily utilizing batch processing methods. Therefore, increasing the 
concentration of CBD going into the batch process will improve the 
processor's efficiency because they will need to source fewer pounds of 
floral material. In addition, processors will need to source floral 
material from a smaller number of producers, reducing their search 
costs for material.
    For the hemp industry's grain and fiber sectors, the increase to 1% 
allowable THC would potentially lower the production cost for these 
producers by reducing the need for compliance testing. Thus, improving 
hemp grain and fiber profitability prospects and allowing for more 
competition with traditional commodities for acreage.\4\ The increase 
in acreage would also be positive at the processing level through 
increased availability of grain and fiber lowering the processing costs 
for the sector over time as genetics and production practices improve 
through research.
---------------------------------------------------------------------------
    \4\ https://hemp.ca.uky.edu/.
---------------------------------------------------------------------------
Consideration 2: Is it 1% THC for floral material harvested or 1% for 
        finished products?
    The predominant hemp market is the production of floral hemp for 
the extraction of CBD, terpenes, and other extracts. These products are 
produced through their extraction from hemp flower. These cannabinoids, 
terpenes, and other extracts are concentrated during this process. So 
at the farmgate hemp will be 0.3% under current regulations but once 
extracted it can be concentrated up to the isolate level. Thus, 
consumers could be consuming levels of THC higher than 0.3%. As the 
Committee considers the 1% THC rule, there is a need to define if this 
is 1% THC in the biomass or 1% THC in the final product. These are 
significantly different regulations and will significantly impact the 
profitability and growth of the hemp industry. This line of research 
needs considerable research to evaluate the winners and losers 
depending on how an increase to 1% THC will impact the industry.
Consideration 3: International Trade
    International trade is an important component of the United States 
agricultural sector. To expand the hemp industry, especially CBD, 
United States hemp producers must look to the international market. 
Yes, some countries, such as Uruguay, Argentina, Jamaica, and Portugal, 
have relaxed THC laws. Depending on their CBD laws, these are potential 
trading partners where the United States hemp producers could see 
expansion. On the other hand, Singapore, United Arab Emirates, Turkey, 
Saudi Arabia, and the Philippines have some of the strictest THC laws. 
Thus trading hemp products containing THC will be problematic for trade 
negotiations with these countries and could impact current trade 
agreements. More research on the short- and long-term implications need 
to be evaluated.
Consideration 4: Hemp Market Confusion
    Consumers of hemp products across the United States struggle to 
differentiate between hemp and marijuana as the market currently 
stands. Since February 2020 through AMS-TM-FSMIP-G-20-004 a monthly 
survey has been conducted to evaluate consumer attitudes and 
preferences for hemp-derived products. This survey is particularly 
relevant for the CBD industry but not the grain and fiber industries. 
The survey asks a series of questions about what word comes to mind 
when they hear hemp. Overwhelmingly the answers are marijuana and 
cannabis.\5\ We also find that most consumers are more familiar with 
marijuana than hemp and that 40% of CBD consumers have euphoric 
effects. While CBD consumers should not have euphoric effects, this has 
been a consistent result within the survey. Thus, as a research team, 
we are working to find ways and funding to clearly provide the consumer 
education needed to differentiate hemp from marijuana. Increasing the 
allowable THC could have a negative impact on the industry as a whole 
and further confuse potential consumers. We are also finding that the 
confusion in the CBD industry is also impacting the grain and fiber 
industry as consumers don't understand the differences between hemp 
produced for the floral, grain, or fiber industries.
---------------------------------------------------------------------------
    \5\ https://www.udel.edu/academics/colleges/canr/departments/
applied-economics-and-statistics/affiliated-centers/hemp-demand-
research/.
---------------------------------------------------------------------------
    Another confusion exists with the emergence of Delta-8 THC in the 
marketplace. Delta-8 THC is a psychoactive drug that can be derived 
from hemp.\6\ This is a direct competitor to Delta-9 THC. The Delta-8 
market developed in response to lower demand for CBD than expected, 
excess supply floral biomass on the market that could be synthesized 
into Delta-8 THC, and the processors' need to find a product to provide 
cash flow as the wholesale price of CBD declined. USDA-FDA has provided 
consumer warnings about the use of Delta-8.\7\
---------------------------------------------------------------------------
    \6\ Melvin D. Livingston, Andrew Walker, Michael B. Cannell, and 
Matthew E. Rossheim, 2022: Popularity of Delta-8 THC on the Internet 
Across U.S. States, 2021 American Journal of Public Health 112, 296-
299, https://doi.org/10.2105/AJPH.2021.306586.
    \7\ https://www.fda.gov/consumers/consumer-updates/5-things-know-
about-delta-8-tetrahydro
cannabinol-delta-8-thc.
---------------------------------------------------------------------------
Consideration 5: Company Investment
    Since 2014 companies have been investing in hemp production and 
processing and have been working under the 0.3% THC rule. They have 
been investing in genetics and production practices to remain compliant 
with current regulations. They have constructed their business model, 
financing, and go-to-market strategies with the current regulatory 
framework. It is unknown at this point, how many companies will be 
impacted significantly if THC is increased to 1%, but it is likely the 
most dramatic impact will be on those companies and universities that 
have invested in the development of genetics to produce hemp varieties 
that produce less than 0.3% THC.
Conclusions
    The production of hemp in the United States is in its infancy, 
minimal data exists, and regulatory certainty is needed if the hemp 
industry is to reach its full potential. As the Committee considers the 
implications of increasing the allowable THC level from 0.3% to 1%, a 
number of considerations need additional research and a coordinated 
effort through USDA and FDA to clearly understand how the industry will 
be impacted. However, preliminary research suggests:

   increasing allowable THC from 0.3% to 1% will require fewer 
        acres and producers of floral hemp,

   increase the potential profitability of the floral hemp 
        extraction industry through reduced extraction costs,

   decreased acres testing hot initially as hemp breeders 
        adjust to 1% regulation within breeding programs,

   fiber and grain producers become more economically viable 
        due to reduced testing costs,

   impact of increasing allowable THC to 1% for the plant 
        material compared to the final product will have profoundly 
        different impacts,

   international trade could be impacted either positively or 
        negatively depending upon the trading partner and their laws,

   consumers are confused about the difference between hemp and 
        marijuana as Delta-8 has put the two industries in direct 
        competition,

   companies that have invested or have a business structure in 
        place to adhere to the current regulatory framework will 
        potentially be negatively impacted by a new regulatory 
        environment.
                                 ______
                                 
Supplementary Material Submitted by Marcus Grignon, Executive Director, 
                        Hempstead Project Heart
Insert 1
          Ms. Brown. . . . I look forward to hearing from and hearing 
        and working with my colleagues to strengthen the hemp 
        production in the next farm 
        bill. . . .

    Since the 2018 Farm Bill, many of us in the American hemp industry 
from underserved communities were under the assumption with hemp 
production being legal under the Agricultural Marketing Act of 1046 we 
would have no more issues with legitimacy as an agricultural commodity. 
As an underserved hemp producer and the head of an organization that 
works with many underserved communities, I can attest the legalization 
of hemp has not been a clear path for many of us. We still face issues 
with banks, insurance companies, and local law enforcement agencies 
throughout the United States.
    From my own experience, I have had issues with opening a bank 
account for my farming operation. I have been able to find a bank to 
work with me, but I am considered a medium risk bank account with 
restrictions. These restrictions are I must report ahead of any 
transactions going into my account to the President of the Bank. 
Further, I am not authorized to have any wire transfers going into and 
coming out of the bank account. While I accept the conditions for the 
bank account, I just want to be treated as any other farming entity 
that works with an agricultural commodity.
    During the last 4 years of hemp being legal, it has been difficult 
to find capital to support my farming enterprise. As the issue 
previously noted affects not just banking but seeking capital. One 
avenue to solve this issue is the community development financial 
institutions (CDFIs). With a CDFI's assistance on the development of an 
agricultural lending product, underserved communities can secure 
capital for their farming enterprise. The United States Department of 
Agriculture can lend to underserved communities, but we need to be 
denied first by another financial institution before seeking assistance 
from the department. Funding for CDFI's to develop agricultural lending 
products for hemp production will help underserved communities secure 
capital.
    When it comes to insurance, I have a difficult time finding an 
insurance company who will take my money and provide coverage for my 
business liability coverage. I have tried USAA and American Family 
Insurance. USAA will not work with hemp production companies and 
American Family Insurance has a structure for insurance coverage, but 
it mainly focuses on medical/recreational cannabis businesses. While I 
appreciate the structure American Family Insurance has for cannabis 
producers, it does not specify for hemp production, and I have had to 
explain none of the applications are applicable to my farming 
enterprise.
    The other underserved communities Hempstead Project Heart works 
with nationally have expressed concerns with similar banking and 
insurance issues for their hemp producers. Further, the various 51 
jurisdictions across all the states have different rules and 
regulations for hemp production. This causes a problem for many 
producers who want to transport their hemp products to another 
locality. In one state, the hemp product is accepted. In another state 
the hemp product is not accepted. It is important in the next 2023 Farm 
Bill a ``stamp of approval'' is created under USDA for all hemp 
products wherever they are produced in the U.S. are unhindered from 
being transported across state lines.
Insert 2
          Mr. Thompson. All right. Good. Well, thank you.
          Would other witnesses like to comment on how hemp can be used 
        as a natural climate solution? . . .

    Industrial hemp is a bio accumulator and bioremediator for the 
land. The long tap roots of the hemp plant dig down into the soil and 
pulls the heavy metals from the soil. Currently, there are various 
companies throughout the United States in the hemp industry who 
remediate the land with hemp. That is the first action. The second 
action is the heavy metals and hydrocarbons that are in the soil 
accumulate into the hemp fiber stalk. With these various chemicals and 
metals now inside the hemp plant, there is a process to turn these once 
land pollutants into fuel. There are various aerospace companies 
(https://greenaero.org) who work in the hemp industry on research and 
development currently able to create fuel from the remediated hemp 
fiber stalks. This fuel could be used for propane for heating or rocket 
fuel for space travel.
    When you look at hemp as a carbon sequester tool, there's benefits 
to produce hemp to act as a carbon sink. I am not talking about carbon 
markets or cap and trade mechanisms. I am referring to the ability to 
produce hemp through regenerative agriculture and pull carbon from the 
atmosphere to sink said carbon in the soil. There has been research 
conducted over the past 4 years on this concept and Draw Down Hemp 
(https://drawdownhemp.org/) has quantified 16 individual hemp products, 
each with the potential to sequester and/or avoid anywhere from .1 to 
1.5 gigatonnes of CO2e per year at scale.
Further Material Submitted by Honovi Trudell, Support Staff for 
        Hempstead Project
    Hemp is the forefront solution to the world's most pressing 21st 
century problems. Climate change, sustainability, economic stability, 
clean energy production, hunger, and material shortages would all be 
addressed and solved by Industrial Hemp technology. The current 
identity of this crop has neglected to incorporate the scientific 
knowledge of Hemp to create real world products that better human and 
[E]arth-based life.
    Hempstead Project Heart (Hempstead) will change that. This is a 
summary of various scientific studies conducted in various nations that 
consistently and unbiasedly proven the sustainability of this 
Industrial crop. This entry is focused on the Biofuel research 
conducted for Hempstead to immediately begin operations in the 
production of Industrial Hemp biofuel production for commercial 
purposes.
    Biomass currently supplies about 12-13% of the global energy 
supply. This is without the use of Industrial Hemp. The use of 
Industrial Hemp as a biofuel will catapult the use Bioenergy production 
as its sustainability and economic benefits cannot be ignored.
    The durability of Industrial Hemp; its ability to grow in multiple 
soil environments, \3/4\ of American mainland is suitable for its 
growth,\1\ (albeit arctic regions) with minimum water requirements or 
nutritional inputs for its survival, (not optimal yields) make it a 
logical solution for sustainable energy production with worsening 
drought conditions. The use of Industrial Hemp will reverse negative 
climate effects through its un-paralleled carbon absorption rates. 
Studies have shown between 7-22 tons of C02 absorption per 
hectare of Hemp are regularly reported. The immediate use of Industrial 
Hemp is necessary to reverse the growing damage to [E]arth's atmosphere 
from other unsustainable practices. Furthermore, growing Industrial 
Hemp for fuel consumption on infertile grounds not only improves that 
soils health, but preserves the health of already fertile soil for 
food/material, which Industrial Hemp also produces.
---------------------------------------------------------------------------
    \1\ F.F. Elliot. ``Economics of Hemp.'' United States Department of 
Agriculture. Bureau of Agricultural Economics. (1941).
---------------------------------------------------------------------------
    The greater the biomass of the crop, the greater the yields. 12" a 
week of growth have been regularly documented, annually reaching 
16.\2\ * Our research over the past 3 years has shown with the right 
soil health, hemp fiber can grow 14 tall in less than 60 days. The 
rapid growth of this crop acts as an immediate climate solution which 
allows preservation of forests and other endangered environments.
---------------------------------------------------------------------------
    \2\ Ahmad Alcheikh. ``Advantages and Challenges of Hemp Biodiesel 
Production: A Comparison of Hemp vs. Other Crops Commonly used for 
biodiesel production.''  University of Gavle. Gavle, Sweden. (2015).
    * Editor's note: the master's thesis is retained in Committee file.
---------------------------------------------------------------------------
    Biodiesel requires no modifications to existing diesel engines. The 
production of biodiesel through transesterification with vegetable/
animal fat and alcohol produces a clean fuel which does not produce 
sulfuric acid as chemical diesel does. Industrial Hemp Biodiesel is 
clean fuel ready for use. Hemp requires minimal water, minimal 
fertilization, with few diseases that do not usually affect yields. 
Biodiesel yields from Hemp have been untapped because no organization 
has so far dedicated to obtaining true results. The conversion of 
Cannabis Sativa L. seed oil into biodiesel has a high rate of 
conversion that is greater than 99.5% with a total product yield of 
over 97%, making it extremely effective in preventing product loss to 
saponification as the biodiesel is created.\3\
---------------------------------------------------------------------------
    \3\ Ibid.
---------------------------------------------------------------------------
    Further, Sulfur ppm of Hemp is 0.4, compared to soybean 1.1 and 
rapeseed 2.4. Estimated calculation of Industrial Hemp puts fuel yields 
207 gallons per acre to Rapeseeds 102 and Soybeans 56.\4\ The yields 
are double that of Rapeseed and nearly four times that of Soy based on 
which is currently the most used crop for biodiesel. Palm Oil is said 
to yield 508 gallons per acre, but is a highly destructive crop, only 
grown in specific tropical regions in the world. It has contributed to 
the vast destruction of endangered rain forests and further use of oil 
palm trees encourages this destruction/reliance on foreign aid. The 
fuel yield for Hemp is an estimate as no company has dedicated to this 
in real practice, as Hempstead will. Hemp is deliberately left out of 
the equation, despite being a clear and logical solution, due to 
private interest from other companies that know Hemp is the strongest 
competitor for economic production.
---------------------------------------------------------------------------
    \4\ Ibid.
---------------------------------------------------------------------------
    Mixing Biodiesel with current petroleum blends has an immediate 
market for current existing fuels. B20 (20% Biofuel) which can be 
adjusted to B100 to eliminate greenhouse emissions as we lead the 
transition to a C02 neutral, and negative, energy climate.
    The ecological and economic benefits of this crop equal a multi-
billion-dollar industry that has not yet been tapped. The 
unconstitutional yet current legal restrictions constricting Industrial 
Hemp and thus the national and economic security of this nation are 
being uplifted, and significant progress has been made towards the 
recognition of this crop as an Industrial powerhouse since the 2018 
Farm Bill. Now is the most important time to invest in sustainable 
projects that will create economic boom for communities involved and 
the 2023 Farm Bill is the perfect policy mechanism to create thriving 
hemp economies throughout the United States.
    A secondary product of the hemp biodiesel is the use of hemp 
biochar. Hemp biochar uses organic compounds as a catalyst and replaces 
harmful chemical fertilizers typically used in farming. This allows the 
crop to maximize its improvements to soil health and absorption of 
atmospheric C02 to form a beneficial and healthy 
relationship with the natural environment. Hempstead created biochar 
with our hemp fiber and are studying the effects of the organic 
compounds on our research plot. Our hemp industry partner, Western 
Fiber, has a USDA research grant to study hemp biochar through the 
University of California-Merced.
    Hempstead's leadership is un-paralleled, our statements are backed 
by decades of scientific and mathematical research. The $2.1 trillion 
annual revenue of oil and gas in domestic control can come from the 
rural, urban, and Tribal communities producing hemp for biodiesel 
instead of the OPEC. All that's needed now is real world creation of 
products. What Hemp ultimately creates is a superior fuel that can be 
harvested in a few months' time, in soil no other crop can grow in, 
with limited water, and immediately offer economic boom as demand for 
our what we produce is extremely high.
                                 ______
                                 
                          Submitted Questions
Questions Submitted by Hon. Kim Schrier, a Representative in Congress 
        from Washington
Response from Kate Greenberg, Commissioner, Colorado Department of 
        Agriculture
    Question 1. Ms. Greenberg, we've seen a lot of success with the 
regulatory framework set up by the 2018 Farm Bill and outlined in the 
final 2021 USDA rule, but the multi-layered data reporting and other 
aspects from the rule have created some challenges for states. For 
example, hemp farmers have to separately report their acreage to FSA 
and the Washington State Department of Agriculture (WSDA), and 
according to WSDA, many local FSA offices didn't even know they were 
part of this requirement, ultimately creating confusion for everyone. 
Can you tell us about what aspects of the final USDA rule present 
compliance challenges for states? How could we incorporate flexibility 
into the regulatory structure going into the 2023 Farm Bill?
    Answer. Colorado producers are experiencing difficulty with Farm 
Service Agency (FSA) reporting as county offices seem to have varying 
knowledge of the Agricultural Market Service (AMS) requirement. The 
Colorado Department of Agriculture (CDA) holds monthly meetings with 
the FSA Regional Office to help facilitate compliance with hemp 
registrants. Both CDA and FSA are assisting hemp producers with 
reporting, and yet we have not fully addressed the problem.
    The USDA Final Rule  990.3(a)(1) requires states to collect, 
maintain and report to the Secretary relevant, real-time information 
for each producer licensed to produce Hemp under the State Plan. Under 
 990.7 the FR instructs ``All producers licensed to produce hemp under 
the USDA-approved state or Tribal plan shall report hemp crop acreage 
to FSA and shall provide, at a minimum the following information: (a) 
street address, GPS, (b) Acreage dedicated to the production of hemp 
and (c) License or authorization identifier in a format prescribed by 
USDA.'' This requirement is redundant and can be achieved through the 
USDA-approved State Plan and states can include it in their monthly 
report to the USDA.
    Another challenge for Colorado is the mandatory testing of all 
lots. Due to limited state resources, CDA has implemented state-
certified labs and authorized third-party sampling agents. This has 
added additional levels of regulation and much higher costs to 
producers for sampling and testing. Allowing for certified seed in 
[lieu] of testing and a return to random and risk-based sampling based 
on intended use and compliance issues would reduce the burden for 
farmers and regulators.

    Question 2. Ms. Greenberg, despite the authorizations in the 2014 
and 2018 Farm Bills, hemp is still an emerging and developing market. 
While hemp farmers can legally sell their crops, there is still a lot 
to be done to develop domestic markets and increase market access for 
their crop. There are still very few processing and manufacturing 
opportunities for textiles and infrastructure, limiting what farmers 
are able to do with their crop. Therefore, there is significant value 
in increasing the market space for our farmers. This could look like 
funding for new processing opportunities for sustainable hemp product 
manufacturing. How can we continue to grow and incentivize hemp 
processing for textile and infrastructure uses in the next farm bill?
    Answer. The hemp processing industry is relatively nascent in the 
United States. There are various ways the Government can spur 
development and innovation in the hemp processing sector. The first is 
by providing access to capital via USDA loans with terms that are 
favorable to new and expanding businesses that are operating in an 
unproven landscape. Traditional lenders often look at these businesses 
as high risk, but in order to be successful, they need access to 
competitive rates and terms that will allow the business and industry 
to grow.
    One of the specific areas Congress can assist the industry is by 
allocating an earmarked resource to finance hemp research and 
development projects and encouraging innovation through financing 
incubators. Accelerators and pitch contests attract bright minds with 
novel business ideas and have proved to be highly effective in the IT 
sector and other emerging industries. Hemp has the potential to play an 
important role in agriculture, carbon sequestration, the food industry 
as well as material science and thus deserves Federal support for 
research and development projects.
    In addition to loans, there is a need for grants to lower the 
barrier to entry into the hemp processing industry as well as provide 
seed capital to get processing businesses and infrastructure up and 
running, especially in rural areas close to hemp fiber production to 
reduce transportation costs and support the rural economy.
    Beyond providing financial assistance directly to hemp processors, 
financial incentives in the form of tax credits for the use of hemp in 
end products will help jump-start the industry by providing for robust 
demand for hemp fiber. Strong demand will help decrease the uncertainty 
and make private investment in hemp processing and infrastructure more 
attractive.

                                  [all]