By: Paul Stevenson
As mandated by the 2018 Farm Bill, the United States Department of Agriculture (“USDA”) has produced an interim final rule to establish the domestic hemp production program (“USDA plan”). To conform with the USDA plan, the Texas Department of Agriculture (“TDA”) has proposed its own hemp production rules and regulations (“TDA plan”) to the Texas Register. These proposed rules were published on Friday, December 13, 2019, and will be open to public comment for thirty (30) days. If dissatisfied with any provision of the TDA plan, it is highly recommended to send your concerns to TDA during this 30-day window for public comment.
Once USDA’s final rules are enacted, Texas will submit its final hemp production plan to USDA, and upon approval, hemp producers may apply to legally grow and cultivate hemp in Texas. TDA anticipates the legalization of hemp production in Texas by March of 2020.
In this Series, we will discuss application and license requirements for hemp producers, methods and regulations for sampling and testing hemp, harvest matters, violations of the TDA plan, hemp transportation rules, and hemp seed requirements.
Texas hemp producers must understand what is required for licensure to grow and handle hemp. It is imperative to remain in full compliance with TDA’s provisions in order to maintain licensure.
Part I: License Requirements
Ineligibilities Under the Plan
Before getting into the complexities of the TDA plan, it is important to note who is ineligible to acquire a hemp production license. First, any person under the age of 18 is ineligible for licensure under the TDA plan. Additionally, a person who has had a hemp license revoked is ineligible under the TDA plan for five years from the revocation date. See 4 TAC § 24.9(b). Under the TDA plan, if a person has a felony conviction relating to a controlled substance, they are automatically restricted from participating for 10 years from the time of their conviction. TDA imposes an additional restriction that a person with a controlled substance felony conviction cannot be a “governing person of a business entity that holds a License . . .” Id. at § 24.9(c). However, an exception applies for a person who was already legally producing hemp under the 2014 Farm Bill, and whose felony conviction occurred prior to the passage of the 2018 Farm Bill (December 20, 2018). See id. Lastly, a person who materially falsifies their license application information will be ineligible to participate in the TDA plan.
License Application Requirements for Hemp Producers
Under the TDA plan, any person or business entity seeking to produce, cultivate, or store hemp must annually submit a completed license application to TDA and must pay the required application, renewal, or modification fee. These fees will be in an amount established by TDA. Licenses will not be issued unless the completed applications are sent online to TDA, all required fees have been paid, there is no falsified information, and “the applicant has completed a Department mandatory orientation course.” Id. at § 24.8(d). Moreover, a license shall not be issued unless the applicant’s criminal history confirms that none of the “key participants” covered by the license have been convicted of a controlled substance felony. See id. The TDA plan defines a “key participant” as the following:
[A] sole proprietor, a partner in a general partnership, a general partner in a limited partnership, or a person with executive managerial control in an entity. A person with executive managerial control includes persons such as a trustee, independent or dependent executor or administrator of an estate, chief executive officer, managing member, manager, president, vice president, general partner, chief operating officer and chief financial officer, or their equivalents. This definition does not include non-executive employees such as farm, field, or shift managers that do not make financial planning decisions and that do not vote or exercise control of an entity. Id. at § 24.1(41).
Additionally, a license will not be issued to an applicant whose license has been terminated or suspended.
TDA’s license application requirements are specific and must be strictly adhered to. Under the TDA plan, for each license application, the following information is required:
- full name, Texas address, telephone number, and email address;
- if the applicant is submitting an application on behalf of an entity, the full name of the entity, the principal Texas business location address, the full names, titles, addresses, and emails of key participants, the full name, title, and email of the applicant who will have signing authority, and the Texas taxpayer ID number;
- street address and geospatial location including GPS for each facility where hemp will be cultivated or stored;
- maps depicting each location where hemp will be cultivated or stored, with appropriate designations for entrances, field boundaries, and specific locations corresponding to the geospatial location or GPS coordinates;
- proof of ownership or control over the location where hemp will be cultivated or stored; and
- all other information required by the Department. Id. at § 24.8(e).
It is important to note that if hemp producers make any material changes to their application’s information (e.g., addition of a new location of hemp cultivation, a change in key participants, etc.), a license modification is mandatory.
Hemp producers must annually renew their licenses before they expire since there is no automatic renewal. Thankfully, under the TDA plan, the renewal application process is identical to that of the initial application process.
License Holder Requirements and Restrictions
Hemp license holders must adhere to the conditions and terms required by TDA to maintain continuing licensure. If a licensed hemp producer fails to comply with TDA’s procedures and requirements, enforcement action may be imposed, including administrative penalties, mandatory corrective action plans, application denial, license revocation, and/or further civil or criminal action by other state and federal agencies.
Under the TDA plan, hemp license holders must consent to entry and inspection, with or without cause or advance notice, by TDA or U.S. authority of all hemp locations listed in any application. See id. at § 24.13(a). Additionally, hemp license holders, at their own expense, and in accordance with DEA regulations, must destroy any hemp material in excess of the acceptable hemp THC level, any hemp plant in a location not licensed by TDA, and any hemp plant unaccounted for under TDA reporting requirements. See id. at § 24.13(b). Hemp license holders shall not assign, sell, or transfer their licenses nor interplant hemp with any other crop, unless express written approval is given by TDA. Moreover, they must comply with all TDA restrictions regarding the movement of hemp plants and shall have the appropriate TDA-issued transport manifest available for inspection when moving hemp. If hemp license holders have any interaction with U.S. authority, they must, within 24 hours, inform TDA of the interaction via phone call and, within three days, describe the matter in writing to TDA. Theft of any plants or materials containing cannabis must also be reported to TDA. Lastly, hemp license holders shall report to USDA and/or Farm Service Agency, their license numbers, all addresses and locations where their hemp will be produced, the acreage or square footage to be dedicated to hemp production, and “the total acreage or square footage of hemp planted, harvested and if applicable, disposed.” Id. at § 24.13(k).
Prior to handling or producing hemp, and in addition to the above requirements, license holders must obtain “lot permits” from TDA. “Lot permits” are documents issued by TDA “authorizing a license holder to produce or handle a hemp crop within a lot.” Id. at § 24.1(51). Furthermore, TDA defines a “lot” as
[A] contiguous area in a facility, field, greenhouse, or indoor growing structure containing the same variety or strain of cannabis throughout the area. Id. at § 24.1(46).
To acquire these lot permits, hemp license holders must submit their “[l]icense number, geospatial location of the lot where the hemp variety will be planted, the facility where the lot is located, and anticipated dates of cultivation.” Id. at § 24.17(a)(1). Any change in the hemp variety lot’s geospatial location will be considered by TDA to be a new lot.
TDA also establishes certain restrictions on hemp license holders. Under the TDA plan, cannabis that is not hemp shall not be produced, and any hemp that is produced, must be on an approved application location. Additionally, TDA states that “hemp shall be physically segregated from other crops unless prior approval is obtained in writing from the Department.” Id. at § 24.14(c). Uniquely, TDA mandates that applicants and license holders not include on their applications any real property “that is not owned or completely controlled by the applicant or license holder, to produce hemp.” Id. at § 24.14(d). Under the TDA plan, there is no current definition explaining what “completely controlled” means. Due to the ambiguity of this provision, hemp producers and others in the Texas hemp industry should raise concerns during the 30-day window for public comment. TDA further states the following restrictions:
(e)A license holder shall not produce or handle hemp or other cannabis on real property owned by or leased from:
(1)a person who is ineligible for licensure under the Department’s hemp program; or
(2)a person whose application or renewal application for participation in the Department’s hemp program was denied, or whose license was terminated or revoked. Id. at § 24.14(e).
This provision might create insurmountable burdens for hemp license holders leasing land from an ineligible person or a person who becomes ineligible under the TDA plan. These potential issues appear to be out of license holders’ control, so it is important to reemphasize that hemp license holders and others in the hemp industry seeking clarity on unclear provisions such as this one should address all concerns during the 30-day window open for public comment.
For a hemp license holder who chooses to produce and/or handle hemp in a facility other than the one specified by geospatial location in the original application, she must pay a fee and “register the new facility by submitting a facility addition or modification request form and obtain written approval from the Department for the new facility.” Id. at § 24.16(a). If the geospatial location of a formerly registered facility changes, a hemp license holder must pay a fee, submit a facility addition or modification request form, and get written approval from TDA for the modified facility. See id. at § 24.16(b). Once a hemp license holder receives approval from TDA, she may grow, handle, and/or produce hemp at the new or modified facility. See id. at § 24.16(c).
TDA appears to adopt USDA’s regulations on reporting and recordkeeping matters. Basically, for a minimum of three years, hemp license holders must maintain and make available for inspection by TDA and U.S. authorities all reports and records regarding the acquisition, handling, production, disposal, and transport of hemp and hemp seeds. See id. at § 24.18. TDA will have access to submitted confidential data and business information and may share this information with applicable U.S. authorities; however, this data and information may be prevented from being disclosed by making a “separate written communication to the Department specifically identifying the information sought to be protected by the license holder.” Id. at § 24.18(c).
Preview of Part II:
In Part II of this Series, we will explore the sampling and testing requirements imposed by TDA on hemp license holders.