NOTICES OF PROPOSED RULES

R68-32

Agriculture and Food

Plant Industry

R68-32. Sale and Transfer of Industrial Hemp Waste to Medical Cannabis Cultivators

05/31/2022

NOTICE OF PROPOSED RULE

TYPE OF RULE: Amendment

Utah Admin. Code Ref (R no.):

R68-32

Filing ID 54536

Agency Information

Contact person(s):

Please address questions regarding information on this notice to the agency.

General Information

2. Rule or section catchline:

R68-32. Sale and Transfer of Industrial Hemp Waste to Medical Cannabis Cultivators

3. Purpose of the new rule or reason for the change (Why is the agency submitting this filing?):

These changes are needed to implement changes made with the passage of S.B. 190 during the 2022 General Session.

4. Summary of the new rule or change (What does this filing do? If this is a repeal and reenact, explain the substantive differences between the repealed rule and the reenacted rule):

Clarifying changes are made to definitions in Section R68-32-2. Changes are made throughout this rule to remove references to industrial hemp cultivation because S.B. 190 removed it from the Department of Agriculture and Food's (Department) authority. Changes are made throughout this rule to restrict the transfer of industrial hemp waste to a medical cannabis cultivator except under limited circumstances, consistent with legislative intent. A limit on the amount of waste that may be received by a medical cannabis cultivator each year is set.

Fiscal Information

5. Provide an estimate and written explanation of the aggregate anticipated cost or savings to:

A) State budget:

These changes will not impact the state budget. The decreased industrial hemp waste transfers will not change the cost of the Department managing the industrial hemp or medical cannabis programs.

B) Local governments:

These changes will not impact local governments because they do not participate in the medical cannabis or industrial hemp programs.

C) Small businesses ("small business" means a business employing 1-49 persons):

These changes could have a limited impact on small businesses in Utah that are industrial hemp licensees that are no longer able to transfer product into the medical cannabis program. The Department estimates that one licensee may lose $80,000 in revenue from transfers due to this change during 2022. Future years should not be impacted because the licensee should not grow industrial hemp just to sell it to medical cannabis cultivators.

D) Non-small businesses ("non-small business" means a business employing 50 or more persons):

These changes should not impact non-small businesses because they do not operate as industrial hemp licensees.

E) Persons other than small businesses, non-small businesses, state, or local government entities ("person" means any individual, partnership, corporation, association, governmental entity, or public or private organization of any character other than an agency):

Other persons should not be impacted by this change because they do not operate as industrial hemp licensees or manage the industrial hemp or medical cannabis programs.

F) Compliance costs for affected persons (How much will it cost an impacted entity to adhere to this rule or its changes?):

Compliance costs for affected persons will not change because the fees charged and management of the industrial hemp and medical cannabis programs will not change.

G) Comments by the department head on the fiscal impact this rule may have on businesses (Include the name and title of the department head):

This rule may have a limited impact on businesses in Utah who are no longer able to transfer industrial hemp waste into the medical cannabis program. Craig W. Buttars, Commissioner

6. A) Regulatory Impact Summary Table (This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts will be included in narratives above.)

Regulatory Impact Table

B) Department head approval of regulatory impact analysis:

The Commissioner of the Utah Department of Agriculture and Food, Craig W Buttars, has reviewed and approved this fiscal analysis.

Citation Information

7. Provide citations to the statutory authority for the rule. If there is also a federal requirement for the rule, provide a citation to that requirement:

Subsection 4-41a-501(5)

Public Notice Information

9. The public may submit written or oral comments to the agency identified in box 1. (The public may also request a hearing by submitting a written request to the agency. See Section 63G-3-302 and Rule R15-1 for more information.)

A) Comments will be accepted until: 05/31/2022

10. This rule change MAY become effective on: 06/07/2022

NOTE: The date above is the date the agency anticipates making the rule or its changes effective. It is NOT the effective date. To make this rule effective, the agency must submit a Notice of Effective Date to the Office of Administrative Rules on or before the date designated in Box 10.

Agency Authorization Information

Agency head or designee, and title: Craig W. Buttars, Commissioner

Date: 04/15/2022

R68. Agriculture and Food, Plant Industry.

R68-32. Sale and Transfer of Industrial Hemp Waste to Medical Cannabis Cultivators.

R68-32-1. Authority and Purpose.

[1) ]Pursuant to Subsection [4-41a, 4-41a-102, and Subsections 4-2-103(1)(i) and 4-41a-603(3)]4-41a-501(5), this rule establishes the procedures governing the sale of [industrial hemp waste]a cannabinoid concentrate by an industrial hemp [cultivator or ]processing facility to a cannabis cultivation facility, including procedures for sale approval[, extraction], transportation, recordkeeping, testing, and inspection and recall.

R68-32-2. Definitions.

1) "Batch" means a quantity of:

a) cannabis extract produced on a particular date and time, following clean up until the next clean up during which the same lots of cannabis are used; or

b) cannabis product produced on a particular date and time, following clean up until the next clean up during which cannabis extract is used[; or].

[ c) cannabis flower from a single strain and growing cycle packaged on a particular date and time, following clean up until the next clean up during which lots of cannabis are being used.]

2) "Cannabinoid" means any:

a) naturally occurring derivative of cannabigerolic acid (CAS 25555-57-1); or

b) any chemical compound that is both structurally and chemically similar to a derivative of cannabigerolic acid.

3) "Cannabis" means any part of the marijuana plant.

4) "Cannabinoid concentrate" means the product of any chemical or physical process applied to naturally occurring biomass that concentrates or isolates the cannabinoids contained in the biomass.

5) "Cannabis cultivation facility" means a person licensed by the department that:

a) possesses cannabis;

b)i) grows or intends to grow cannabis; or

ii) acquires or intends to acquire industrial hemp waste from [a holder of an industrial hemp cultivator license under Title 4, Chapter 41, Hemp and Cannabinoid Act, or ]an industrial hemp processor; and

c) sells or intends to sell cannabis to a cannabis cultivation facility or a cannabis processing facility.

6) "Cannabis product" means a product that:

a) is intended for human use; and

b) contains cannabis or tetrahydrocannabinol.

7) "Certificate of analysis" (COA) means a document produced by a testing laboratory listing the quantities of the various analytes for which testing was performed.

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

9) "Final product" means a reasonably homogenous cannabis product in its final packaged form created using the same standard operating procedures and the same formulation.

10) "Industrial hemp" means any part of the cannabis plant, whether growing or not, with a concentration of less than 0.3% tetrahydrocannabinol by dry weight.

[ 11) "Industrial hemp product" means a cannabinoid extract derived from industrial hemp with a THC concentration of less than 0.3% by dry weight.]

1[2]1) "Industrial hemp waste" means;

(a) a cannabinoid [extract]concentrate[ above 0.3% total THC derived from verified industrial hemp biomass]; or

(b) [verified ]industrial hemp biomass[ with a total THC concentration of less than 0.3% by dry weight].

1[3]2) "Inventory Control System" means the system described in Section 4-41a-103.

[ 14) "Lot" means the quantity of:

a) flower produced on a particular date and time, following clean up until the next clean up during which the same materials are used; or

b) trim, leaves, or other plant matter from cannabis plants produced on a particular date and time, following clean up until the next clean up.]

R68-32-3. Sale of Industrial Hemp Requirements.

1) [Industrial hemp, industrial hemp product, or i]Industrial hemp waste [may]shall only be sold by an [industrial hemp cultivator or ]industrial hemp processing facility to a cannabis cultivation facility if:

a) the industrial hemp waste is derived from industrial hemp biomass that has been certified as industrial hemp by a state department of agriculture or the U.S. Department of Agriculture; and

b) the [industrial hemp cultivator or ]industrial hemp processing facility has records to substantiate the certification[; and

c) the records are available for inspection by the department].

[ 2) If an industrial hemp cultivator or industrial hemp processing facility intends to sell industrial hemp, industrial hemp waste, or industrial hemp product that is derived from industrial hemp biomass that was purchased out of state:

a) the out of state seller shall provide proof that the biomass was certified as industrial hemp by a state department of agriculture or the U.S. Department of Agriculture to the industrial hemp cultivator or industrial hemp processing facility; and

b) the industrial hemp cultivator or industrial hemp processing facility shall keep record of the certification.]

2) A cannabis cultivation facility may not receive more than 120 kilograms of industrial hemp waste in a single license year.

R68-32-4. Sale of Industrial Hemp - Notification and Approval.

1) Within ten days of the sale of [industrial hemp, industrial hemp product, or ]industrial hemp waste by an [industrial hemp cultivator or ]industrial hemp processing facility to a cannabis cultivation facility, the industrial hemp [cultivator or ]processing facility shall:

a) notify the department of the potential sale in writing;

b) provide the department with a [certificate of analysis]COA showing that the biomass from which the [industrial hemp, industrial hemp product, or ]industrial hemp waste was derived was certified industrial hemp by a state department of agriculture or the U.S. Department of Agriculture; and

c) provide the department with a [certificate of analysis]COA or other documentation of test results showing that a representative sample of the [industrial hemp, industrial hemp product, or ]industrial hemp waste has been tested by a licensed cannabis testing laboratory as required by Subsection 4-41a-501(5)(a)(i).

2) The department will approve the sale following review of the records of the[ industrial hemp cultivator or] industrial hemp processing facility to ensure compliance with this rule.

3) Upon approval of the sale, the department will issue a certificate to the[ industrial hemp cultivator or] industrial hemp processing facility allowing the sale to proceed.

4) No industrial hemp waste[, industrial hemp product, or industrial hemp] may be sold by an [industrial hemp cultivator or ]industrial hemp processing facility unless the[y] industrial hemp processing facility has[ have] a license in good standing with the department.

5) The department [will]may not approve the sale of [industrial hemp extract]cannabinoid concentrate with a THC concentration above 0.3%[ if the extract was purchased outside of the state].

R68-32-5. Transportation.

1) [Prior to]Before transportation, industrial hemp waste shall meet the testing requirements of Subsection 4-41a-501(5)(a)(i) and Rule R68-29.

2) A printed certificate of sale shall accompany every transport of industrial hemp waste.

[ 3) Each transport of industrial hemp waste shall be recorded in the Industrial Hemp Transportation Permit Log.]

[4]3) The certificate of sale may not be voided or changed after departing from the original [industrial hemp cultivator or ]industrial hemp processing facility.

[5]4) The receiving cannabis cultivation facility shall ensure they are given a copy of the certificate of sale.

[6]5) The receiving cannabis cultivation facility shall ensure that the industrial hemp waste received is as described in the certificate of sale and shall record the amounts received into the inventory control system.

[7]6) The receiving cannabis cultivation facility shall document [at the time of receipt ]any differences between the quantity specified in the certificate of sale and the quantities received in the inventory control system.

[8]7) During transport, the industrial hemp waste shall be:

a) shielded from the public view;

b) in a secure container; and

c) temperature[ ]-controlled if perishable.

[9]8) A cannabis cultivation facility shall contact the department within 24 hours if a vehicle transporting industrial hemp waste is involved in an accident that involves product loss.

R68-32-6. Recordkeeping Requirements.

1) Following the purchase of industrial hemp waste from an [industrial hemp cultivator or ]industrial hemp processing facility, a cannabis cultivation facility shall ensure that each [lot or ]batch of industrial hemp waste has a unique identification number in the inventory control system.

2) A cannabis cultivation facility shall maintain a record of each purchase of industrial hemp waste, including:

a) a copy of the certification that the industrial hemp waste is derived from certified industrial hemp; and

b) if applicable, a copy of the record documenting that the extraction of the cannabinoid extract that qualifies as industrial hemp waste took place in Utah.

3) Each record shall be made available for inspection by the department.

R68-32-7. Testing Requirements.

1) [Each lot or batch of industrial hemp, industrial hemp product, or i]Industrial hemp waste purchased by a cannabis cultivation facility shall be tested by [l]a licensed cannabis testing laboratory pursuant to the requirements of Section R68-29-3 [prior to]before transfer of the [industrial hemp, cannabinoid concentrate, or ]industrial hemp waste.

2) Testing shall be documented on a [certificate of analysis]COA and recorded in the inventory control system.

3) Final products derived from [industrial hemp, industrial hemp product, or ]industrial hemp waste are subject to the same testing requirements as other cannabis products.

[ 4) United States Department of Agriculture (USDA) or state equivalent certified industrial hemp biomass may be transferred to a medical cannabis cultivator if it meets the requirements of Rule R68-29.]

R68-32-8. Inspection and Recall.

1) The department has the right to conduct a random inspection of industrial hemp processing facilities[, industrial hemp cultivators,] and medical cannabis cultivators that are subject to this rule, including an audit of the following to ensure compliance with Utah state law, rules, and this rule:

a) the records of an industrial hemp processing facility that has sold industrial hemp waste;

[ b) the records of an industrial hemp cultivator that has sold industrial hemp waste;] and

[c]b) the records of a cannabis cultivation facility that has purchased industrial hemp waste.

2) Inspection may take place at any time during normal business hours.

3) [A product]Industrial hemp waste that is identified as out of compliance may be subject to recall and destruction by the department.

R68-32-9. Violations.

1) Violations of this rule include:

a) sale or transfer of [industrial hemp, industrial hemp product or ]industrial hemp waste without notifying the department;

b) sale of [industrial hemp]cannabinoid [biomass ]concentrate with a THC level greater than 0.3%[ by dry weight];

c) a medical cannabis facility allowing industrial hemp waste into the facility without entering it into the inventory control system;

d) a medical cannabis facility allowing industrial hemp waste into the facility without testing;

e) a facility not keeping and maintaining each record required by this rule;

f) a facility falsifying a record required to be kept under this rule;

g) a facility denying the department access to the records; and

h) [transporting industrial hemp, industrial hemp product, or ]transporting industrial hemp waste to a cannabis cultivation facility without a certificate of sale.

2) The department shall assess fines of:

a) $3,000 - $5,000 for public safety violations;

b) $1,000 - $5,000 for regulatory violations; and

c) $500 - $5,000 for licensing violations.

3) The department shall calculate fines based on the level of violation and the adverse effect or potential adverse effect at the time of the incidents giving rise to the violation.

4) The department may enhance or reduce the penalty based on the seriousness of the violation.

KEY: industrial hemp waste, industrial hemp processing facility, cannabis cultivation facility

Date of Last Change: [August 9, 2021]2022

Authorizing, and Implemented or Interpreted Law: [4-2-103(1)(i); 4-41a; 4-41a-102; 4-41a-603(3)]4-41a-501(5)