PRO15 Colorado’s Industrial Hemp Program December 14, 2015

Where It All Began…… Nov 2012 Voters approve Amendment 64 legalizing recreational marijuana and Industrial Hemp. Legislature approves Industrial Hemp Act giving CDA jurisdiction over the registration and cultivation of Industrial Hemp. Summer 2013 U.S. Department of Justice issues Cole Memorandum Farm Bill authorizes Industrial Hemp R&D at Institutions of Higher Education. Spring 2014 first registrations for the production of Industrial Hemp approved in Colorado Production, harvest and sale of Industrial Hemp begins within CO.

What is Industrial Hemp? Colorado Industrial Hemp Act The term ‘industrial hemp’ means a plant of the genus cannabis and any part of the plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis. Constitutionally if it is over 0.3% delta-9 THC concentration it is marijuana and it is not Industrial Hemp.

U.S. DOJ Cole Memorandum Summary Prevent drugged driving Preventing the distribution of Cannabis to minors Prevent violence and firearms use in the cultivation and distribution of Cannabis Prevent growing or possession of Cannabis on public lands Preventing the revenue from Cannabis to go to criminal elements Preventing the diversion of Cannabis to other states Preventing state authorized Cannabis activities to be used as a cover or pretext for illegal activities

Why is the Cole Memorandum Important? Addressing the concerns the U.S. Dept. of Justice expressed in the Cole Memorandum is important for the Industrial Hemp program because it demonstrates that Colorado is handling Industrial Hemp responsibly though implementation of adequate rules to insure compliance. It is through the Cole Memorandum that the Department works with the DEA to address concerns regarding compliance with our Registrants.

Agriculture Act of 2014 (The Farm Bill) Sec of the 2014 federal Farm Bill opened the door for universities and state departments of agriculture to begin cultivating industrial hemp for limited purposes. Specifically, the law allows universities and state departments of agriculture to grow or cultivate industrial hemp if: “ (1) the industrial hemp is grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research; and (2) the growing or cultivating of industrial hemp is allowed under the laws of the State in which such institution of higher education or State department of agriculture is located and such research occurs.”The law also requires that the grow sites be certified by—and registered with—their state. The law also requires that the sites used by universities and agriculture department be certified by—and registered with—their state. Source:National Confederation of State Legislatures Congress authorized states to set up programs to defined the criteria for Industrial Hemp as a plant of Cannabis sativa that has a is important as it defines (a) Notwithstanding the Controlled Substances Act, the Safe and Drug-Free Schools and Communities Act, chapter 81 of title 41, United States Code, or any other Federal Law, an institution of higher education or State department of agriculture may grow or cultivate industrial hemp if (1) the industrial hemp is grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research and (2) the growing or cultivating of industrial hemp is allowed under the laws of the State in which such institutions of higher education or State department of agriculture is located and such research occurs.

Who set 0.3% as the THC Limit? UN Office on Drugs and Crime and most international trade agreements use the upper generally recognized limit of 0.3% THC. Canada and Australia use 0.3% THC. Much of the European Union uses 0.2% THC. The 2014 Farm Bill uses 0.3% THC. And the voters of Colorado defined Industrial Hemp as 0.3% THC and below in the states Constitution.

Why is the 0.3% THC Threshold Important for Colorado’s Industrial Hemp Industry? From a purely economic perspective it is vital to Colorado’s Industrial Hemp Industry to maintain the 0.3% THC limit to comply with federal law that defines DOJ and DEA intervention involvement, to allow our state Universities to provide research and extension services, and to maximize the market size once the product becomes federally legal. Authorization above 0.3% THC could limit exports due to international trade agreements or other states limits that match the federal guideline so the market becomes limited to in state. It would also preclude Universities from participating in seed testing, seed certification, extension and research because they would be working in marijuana outside of the Farm Bill, jeopardizing their federal funding.

How can I tell marijuana from Industrial Hemp? Visually they look the same. The only difference is the level of delta-9 THC concentration which can only be determined through laboratory analysis.

Industrial Hemp vs Marijuana THC content less than 0.3% Anything with a THC concentration of 0.3% - 0.9% is considered to have “only a small drug potential” but is legally not industrial hemp THC content between 5 – 10% THC may be as high as 25% THC at a level of 1% is considered the threshold for marijuana to have some intoxicating potential. However, any material with a THC above 0.3% is legally marijuana Sources: Recommended methods for identification and analysis of cannabis and cannabis products. Manual for use by National Drug Analysis Laboratories. UNODC (United Nations Office on Drug and Crime) 2009 Small, E. and D. Marcus Hemp: A new crop with new uses for North America. P In J. Janick and A. Whipkey (eds), Trends in new crops and new uses. ASHS Press, Alexandria, VA. Industrial Hemp Marijuana

Why is it important to understand who regulates and the penalties? There has been an ongoing misunderstanding that the CDA has the authority to grant waivers for the cultivation or use of plant material that exceeds 0.3% THC. Our waver authority is limited to penalties imposed under the Industrial Hemp Act. Jurisdictional control of material that exceeds 0.3% THC, remains with local, state and federal law enforcement. The CDA has no legal authority to allow cultivation, transportation or processing of any Cannabis above 0.3% THC. The CDA can waive civil penalties, revocation or suspension of a registration for violating the registration and rules but all criminal penalties are the jurisdiction of the appropriate law enforcement (local, state and federal).

Lessons from 2014 and 2015: What have we seen and what did we learn.

What changes have we seen in the industry? In 2014 the first year hemp could be grown legally under a state registration we saw mostly small outdoor operations, limited agronomic expertise, many were under capitalized and a significant number registered purely for a historic certificate with no intent to plant has already shown a shift in the industry. Outdoor production has increased significantly and indoor space registered has exploded in the market. The size of individual growing sites has increased. Agronomic practices are improving and independent consultants are entering the market. Businesses seem to be better funded and production plans are better developed. Venture capitalist, investors and processors are approaching the market.

Who are our registrants? In 2014 the program had 131 total registrants holding 259 registrations on total acres. As of Nov 18 th, 2015 the program had 166 total registrants holding 301 registrations on 3657 acres of outdoor production and 570,980 sqft of indoor production also saw increased participation by institutions of higher education. Three Universities registered and began working on Industrial Hemp research; Colorado State University imported 17 varieties and began agronomic research, the University of Colorado began working on gnome mapping and potential applied sciences, and Adam’s State started a multifaceted economic study of the crop.

Where are the fields? More than half of Colorado’s 69 counties have a registered land area committed to hemp production. We see a significant number of fields located in Larimer and Boulder counties. We also see a large number of registrants in Delta and Weld counties as well as in the San Luis and Arkansas valleys but registered land areas are spread across the entire state. Some of the increase in average size of the production area is probably attributed to the migration to more traditional rural farming areas. Last year the largest field was 17 acres. In 2015 that would not even qualify as one of the 10 largest fields.

What are our registrants doing with the crop? The Department only collects information on use through disposition statements when harvest notification is submitted and for purposes of monitoring market developments. Registrants disposition statements have included cosmetic and body care products, dietary supplements and food products, fiber, pulp products, insulation and building materials, and CBD extraction. Have we seen it all? Certainly not!!!!! There is interest in composite materials, biofuels…..

How has sampling and inspection gone? Through a risk/random selection process the CDA has sampled a significant portion of the crop both inside and outside this year. We have also visited sites to confirm ‘Did Not Plant’ reports. As of mid Nov. only 8% of the tests had exceed 0.3%THC down from 31% in And in 2 years only two tests have exceeded 1.0% for waiver consideration. While there is a lot of misinformation being circulated on the web (Free the Farmer 2016, Condemned for Public Safety by CO Dept. of Ag,…), compliance rates have significantly improved over last year. * So if there is one take away message it is that the few people who misrepresent the scale of the problem to push their personal agendas hurt the entire industry by painting the problem as something it simply isn’t.

Does that mean it has gone smoothly? 2015 has brought some new challenges that did not surface in The Department has faced registrants who issued threats, failed to communicate when tests exceeded THC thresholds, and an increase visibility in smuggling activities of seed (which jeopardize property through seizure laws). These and other challenges have forced the Department to summary suspend a registration, move toward revocation of others and contact law enforcement for assistance and potential criminal enforcement. As a result the Department will be implementing additional Rules to protect the program and registrants who are in compliance from those that are abusing the system has also brought visits from the DEA to verify the CDA’s compliance and registrant’s compliance.

So, what does 2016 bring? Look at rule and legislative changes necessary to more effectively address the situations we’ve encountered this year. Continue to work with the state institutions of higher education on research to support the Industrial Hemp industry. Finalize the voluntary program to allow registrants to take samples to the private state certified MED labs. Develop a CDA Approved Certified Seed program to include the same standards involved in other agricultural crops are applied to varieties that have proven to produce mature plant material below 0.3% THC across Colorado’s broad climatic conditions.

Questions?