No. 43684 (New Rule): Rule R68-27. Cannabis Cultivation

(New Rule)

DAR File No.: 43684
Filed: 04/30/2019 04:04:18 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This proposed rule sets forth the licensing and operation requirements for individuals seeking to cultivate medical cannabis in accordance with Title 4, Chapter 41a, Cannabis Production Establishments.

Summary of the rule or change:

This proposed rule sets forth the licensing requirements for those interested in competing for a cannabis cultivation facility license. It establishes the facility requirements, as well as the additional requirements for the operation plan. This proposed rule establishes minimum requirements for storage and handling of cannabis and the uses and storage of pesticides, fertilizers, and other agricultural chemicals that may be used in the facility. In addition, this proposed rule establishes violation categories with the range of fines that may be assessed for violations.

Statutory or constitutional authorization for this rule:

Subsection 4-41a-404(3)
Subsection 4-41a-103(5)
Subsection 4-41a-302(3)(b)(ii)
Subsection 4-41a-701(2)
Subsection 4-41a-405(2)(b)(iv)
Subsection 4-2-103(1)(i)
Subsection 4-41a-801(1)

Anticipated cost or savings to:

the state budget:

As this is a new program, the state will have the significant startup cost of hiring personnel and buying equipment necessary to effectively run the medical cannabis program. The Department of Agriculture and Food (Department) will need to hire and train employees to inspect these facilities. In addition to inspectors, the Department will need to hire administrative staff to help issue the agent registration cards, to do background checks for all employees, and those with 2% or greater financial or voting interest in the cannabis cultivation facility. The inspector will need to be out doing quarterly inspections of the facility and will need the equipment necessary to conduct the inspection. In total the cost of the employees is estimated at $360,449.57 for the first year. In addition to the cost of the employees there is $35,000 cost for the equipment and training for these employees to effectively regulate this product. Transportation cost are anticipated at $3,600. Additionally, the Department will need to help with the purchase and upkeep of the electronic verification system as required by Title 4, Chapter 41a. The Department anticipates contributing at least $165,000 to maintaining the system as it is key to the program. Total cost in the first year are than anticipated to be $563,549.57. In the second year, the Department anticipates that cost will stay much the same with a slight increase in the amount of inspections that are necessary as more of the facilities reach their capacity. There will need to be increased time spent on reviewing records for pesticide or fertilizer use, as well as maintaining of records in the inventory control systems and electronic verification system. Due to the increased review of records and inspections, the cost of employees will be $364,816.52. The other cost will remain the same. The total cost of the second year is anticipated to be $567,916.52. It may be necessary to hire more inspectors as the program grows in the third year, but the Department anticipates that the cost for the program will remain similar to the second year in the third year. The Department anticipates an application fee of $10,000 for each applicant. In addition, the successful cannabis cultivation facility will have a $100,000 licensing fee. By statute, the Department may not issue more than ten cannabis cultivation licenses. While the Department cannot anticipate the number of entities who will apply for a license, it is anticipated that there will be at least ten interested parties. Thus, the amount of revenue generated could be at least $1,100,000 in application and licensing fees for the first year. The licensee will not have to pay the application fee after having successfully received a license. The revenue for years two and three will decreased to $1,000,000.

local governments:

Local governments may experience an increase in law enforcement cost do to the nature of the crop being grown. However, the Department cannot adequately estimate the cost or benefits to local governments.

small businesses:

This rule allows for the growth of a controlled substances in the state of Utah. This is a new and controlled industry in the state. As it has not been allowed before, the proposed rule does not place any additional cost to the business aside from the anticipated application fee of $10,000 and the licensing fee of $100,000.

persons other than small businesses, businesses, or local governmental entities:

This proposed rule allows for the growth of medical cannabis in the state. It will allow for qualified patients to have access to a quality-controlled product. However, due to the nature of the industry, it is impossible for the Department to estimate the costs or benefits to the consumer.

Compliance costs for affected persons:

There will be a $10,000 application fee for all those who chose to apply for a license. Those who are awarded the license will then have a $100,000 licensing fee. Due to this being a controlled substance and still federally illegal, there has been no prior legal growing in the state. Therefore, the only cost to the affected persons is the application and licensing fees. All other costs are the costs of engaging in the growing of medical cannabis.

Comments by the department head on the fiscal impact the rule may have on businesses:

This is a newly created program which will allow the growth of a controlled substance for medical use. It is necessary for the Department to ensure the safe growing, processing, and transportation of this product for the safety of the qualified patients. The application and licensing fees are necessary for the department to run the program effectively to ensure that qualified patients receive a quality product.

Kerry Gibson, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Agriculture and Food
Plant Industry
350 N REDWOOD RD
SALT LAKE CITY, UT 84116-3034

Direct questions regarding this rule to:

Robert Hougaard at the above address, by phone at 801-538-7187, by FAX at 801-538-7189, or by Internet E-mail at rhougaard@utah.gov
Melissa Ure at the above address, by phone at 801-538-4976, by FAX at , or by Internet E-mail at mure@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/14/2019

Interested persons may attend a public hearing regarding this rule:

06/05/2019 02:00 PM, Dept. of Agriculture and Food, 350 North Redwood Road, Salt Lake City, UT

This rule may become effective on:

06/21/2019

Authorized by:

Kerry Gibson, Commissioner

RULE TEXT

Appendix: Regulatory Impact Analysis for Small and Non - Small Businesses

Fiscal Costs

FY 2020

FY 2021

FY 2022

State Government

$563,549.57

$567,916.52

Local Government

Small Businesses

$1,110,000

$1,000,000

$1,100,000

Non-Small Businesses

Other Person

Total Fiscal Costs:

$1,673,549.57

$1,567,916.52

Fiscal Benefits

State Government

$1,110,000

$1,000,000

Local Government

Small Businesses

Non-Small Businesses

Other Persons

Total Fiscal Benefits:

$1,110,000

$1,000,000

Net Fiscal Benefits:

$ - 563,549.57

$ - 567,916.52

*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 for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non - Small Businesses are described below.

Appendix 2: Regulatory Impact to Non - Small Businesses

Title 4, Chapter 41a,only allows for the issuance of 10 cannabis cultivation facility licenses. This proposed rule will allow for the controlled growing cannabis to provide to qualified patients. As the cultivation of cannabis has previously been illegal under state law, the full impact to these businesses cannot be estimated as the necessary data is not available to the Department.

The Commissioner of the Department of Agriculture and Food, Kerry Gibson, has reviewed and approved this fiscal analysis.

R68. Agriculture and Food, Plant Industry and Conservation.

R68-27. Cannabis Cultivation.

R68-27-1. Authority and Purpose.

1) Pursuant to sections 4-41a-103(5), 4-41a-302(3)(b)(ii), 4-41a-404(3), 4-41a-405(2)(b)(iv), 4-41a-701(2), 4-41a-801(1), and 4-2-103(1)(i), this rule establishes the application process, qualifications and requirements to obtain and maintain a cannabis cultivation license.

R68-27-2. Definitions.

As used in the rule:

1) "Applicant" means any person or business entity who applies for a cannabis cultivation facility license.

2)a) "Cannabis" means any part of a marijuana plant:

b) "Cannabis" does not mean, for purposes of this rule, industrial hemp.

3) "Cannabis cultivation facility" means a person that:

a) possesses cannabis;

b) grows or intends to grow cannabis; and

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

4) "Cannabis production establishment agent registration card" means a registration card that the department issues that:

a) authorizes an individual to act as a cannabis production establishment agent; and

b) designates the type of cannabis production establishment for which an individual is authorized to act as an agent.

5) "Department" means the Utah Department of Agriculture and Food

6) "Indoor cannabis cultivation" means cultivation of cannabis within a fully enclosed secure indoor facility or greenhouse with rigid walls, a roof, and doors.

7) "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, leaver, or other plant matter from cannabis plants produced on a particular date and time, following clean up until the next clean up.

8) "Outdoor cannabis cultivation" means an open or cleared ground fully enclosed at the perimeter by a securable, sight obscure wall or fence at least eight feet high.

R68-27-3. Cannabis Cultivation Facility License.

1) A cannabis cultivation license allows the licensee to propagate, cultivate, harvest, trim, dry, cure, and package cannabis into lots for sale or transfer to a cannabis production facility.

2) A cannabis cultivation facility may produce and sell cannabis plants, seed, and plant tissue culture to other licensed cannabis cultivation facilities.

3) An applicant shall be a resident of the State of Utah, as defined by Utah State Tax Commission rules.

4) A complete application shall include the required fee, statements, forms, diagrams, operation plans, and other applicable documents required in the application packet to be accepted and processed by the department.

5) Prior to approving an application, the department may contact any applicant and request additional supporting documentation or information.

6) Prior to issuing a license, the department shall inspect the proposed premises to determine if the applicant complies with state laws and rules.

7) The department may conduct face-to-face interviews with an applicant if needed to determine the best qualified applicant for the number of licenses that will be issued.

8) The license shall expire on December 31st.

9) A license may not be sold or transferred.

R68-27-4. Cannabis Cultivation Facility Requirements.

1) A cannabis cultivation facility operating plan shall contain a blue print of the facility containing the following information:

a) for indoor cannabis cultivation, the square footage of the areas where cannabis is to be propagated;

b) for indoor cannabis cultivation, the square footage of the areas where cannabis is to be grown;

c) the square footage of the areas where cannabis is to be harvested;

d) the areas where cannabis is to be dried, trimmed and cured;

e) the square footage of the areas where cannabis is to be packaged for wholesale;

f) the total square footage of the cultivation facility;

g) the square footage and location of areas to be used as storerooms;

h) the location of the toilet facilities and hand washing facilities;

i) the location of a break room and location of personal belonging lockers; and

j) the location of the areas to be used for loading and unloading of cannabis products for transportation.

2) For outdoor cannabis cultivation, the operating plan shall contain a detailed aerial photograph of the area on which the following information is shown:

a) the area where cannabis to be propagated; and

b) the area where cannabis is to be grown.

3) A cannabis cultivation facility operating plan shall detail the drying and curing methods to be used by the cannabis cultivation facility.

4) An outdoor cannabis cultivation facility shall outline the measures to be taken to ensure that product is kept from deterioration and contamination.

5) A cannabis cultivation facility shall have written emergency procedures to be followed in case of:

a) fire;

b) chemical spill; or

c) other emergency at the facility

6) A cannabis cultivation facility operating plan shall include:

a) a pest management plan;

b) when and how fertilizers are to be applied during the production process;

c) water usage and waste water disposal; and

d) a waste disposal plan.

7) A cannabis cultivation facility shall have a written plan to handle potential recall and destruction of cannabis because of contamination.

8) A cannabis cultivation facility shall use a standardized scale which is registered with the department when cannabis is:

a) packaged for sale by weight;

b) bought and sold by weight;

c) weighed for entry into the inventory control system.

9) A cannabis cultivation facility shall ensure that sanitary conditions are maintained on the premises including proper and timely removal of all litter and waste.

10) The cannabis cultivation facility shall compartmentalize all areas in the facility based on function.

11) A cannabis cultivation facility shall limit access to the compartments to appropriate agents.

R68-27-5. Security Requirements.

1) At a minimum, each cannabis cultivation facility shall have a security alarm system on all perimeter entry points and perimeter windows.

2) At a minimum, a licensed cannabis cultivation facility shall have complete video surveillance system:

a) with minimum camera resolution of 640 x 470 pixels or pixel equivalent for analog; and

b) that retains footage for at least 45 days.

3) All cameras shall be fixed and placement shall allow for the clear and certain identification of any person and activities in controlled areas.

4) All entrances and exits, or ingress and egress vantage points shall be recorded.

5) All cameras shall record continuously.

6) For locally stored footage, the surveillance system storage device shall be secured in the facility in a lockbox, cabinet, closet, or secured in another manner to protect from employee tampering or criminal theft.

7) For footage stored on a remote server, access shall be restricted to protect from employee tampering.

8) Controlled areas included an area within an indoor or outdoor room or area where cannabis is propagated, grown, harvested, dried, trimmed, or stored or where cannabis waste is being moved, processed, stored, or destroyed.

9) Any gate or entry point must be lighted in low-light conditions.

10) All visitors to a cannabis cultivation facility shall be required to have a properly displayed identification badge issued by the facility at all times while on the premises of the facility.

11) All visitors shall be escorted by a facility agent at all times while in the facility.

12) A log shall be kept showing:

a) the full name of each visitor entering the facility;

b) the badge number issued;

c) the time of arrival;

d) the time of departure, and

e) the purpose of the visit.

13) The visitor log shall be maintained for a minimum of one year.

14) The visitor log shall be made available to the department upon request.

R68-27-6. Inventory Control.

1) Every cannabis plant that reaches eight inches in height with a root ball shall be issued a unique identification number in the inventory control system, which follows the plant through all phases of production.

2) Every cannabis plant, lot of usable cannabis trim, leaves, and other plant matter, test lot, and harvest lot shall be issued a unique identification number in the inventory control system.

3) Unique identification numbers cannot be reused.

4) Each cannabis plant, lots of usable cannabis trim, leaves, and other plant matter cannabis products, test lots, harvest lots, and process lot that has been issued a unique identification number shall have a physical tag with the unique identification number.

5) The tag shall be legible and placed in a position that can be clearly read and kept free from dirt and debris.

6) The following shall be reconciled in the inventory control system at the close of business each day:

a) movement of seedling or clone to the vegetation production area;

b) when plants are partially or fully harvested or destroyed;

c) when cannabis is being transported to other facilities;

d) all samples used for testing and the testing results;

e) a complete inventory of all cannabis, cannabis seeds, plant tissue, seedlings, clones, plants, trim or other plant material;

f) weight of all harvested cannabis plants immediately after harvest;

g) weight and disposal of post-harvest waste materials;

h) the identity of who disposed of the waste and the location of waste receptacle; and

i) theft or loss, or suspected theft or loss, of cannabis.

7) A receiving cannabis cultivation facility shall document in the inventory tracking system any cannabis received, and any differences between the quantity specified in the transport manifest and the quantities received.

8) For plants under eight inches, the cultivation facility shall keep record of:

a) the number of cannabis seeds or cuttings planted;

b) the date on which they were planted;

c) the date the plants were moved into the vegetation area and tagged;

d) the strain of the seeds or cuttings;

e) the number of plants grown to maturity;

f) the number of plants disposed of; and

g) the date of disposal.

R68-27-7. Cannabis Cultivation Facility Agents.

1) A cannabis cultivation facility shall apply to the department for a cannabis cultivation facility agent on a form provided by the department.

2) An application is not considered complete until the background check has been completed and the facility has paid the fee.

3) The cannabis production establishment agent registration card shall contain:

a) the agent's full name;

b) the name of the cannabis cultivation establishment;

c) the type of cannabis production establishment;

d) the job title or position of the agent; and

e) a photograph of the agent.

4) A cannabis cultivation facility is responsible to ensure that all agents have received the department approved training as specified in Utah Code 4-41a-301.

5) A cannabis cultivation facility agent shall have a properly displayed identification badge which has been issued by the department at all times while on the facility premises or while engaged in the transportation of cannabis.

6) All cannabis facility agents shall have their state issued identification in their possession to certify the information on their badge is correct.

7) An agent's identification badge shall be returned to the department immediately upon termination of their employment with the cannabis cultivation facility.

R68-27-8. Pesticide and Fertilizer Use

1) A cannabis cultivation facility shall maintain:

a) the material safety data sheet for all pesticides, fertilizers, or other agricultural chemicals used in the production of cannabis which shall be accessible to all agents;

b) the original label or a copy thereof for all pesticides, fertilizers, or other agricultural chemicals used in the production of cannabis; and

c) a log of all pesticides, fertilizers, or other agricultural chemicals used in the production of cannabis.

2) Pesticides approved by the department may be used in the production, processing, and handling of cannabis.

3) Pesticides, fertilizers, and other agricultural chemicals are to be stored in a separate location apart from cannabis.

4) Pesticides shall be used consistent with the label requirements.

5) Commercial fertilizers registered with the department under the Utah Fertilizer Act may be used in the production and handling of cannabis

6) Cannabis exposed to unauthorized pesticides, soil amendments, or fertilizers is subject to destruction at the cost of the cannabis cultivation facility.

R68-27-9. Transportation.

1) A printed transport manifest shall accompany every transport of cannabis.

2) The manifest shall contain the following information:

a) the cannabis production establishment address and license number of the departure location;

b) physical address and license number of the receiving location;

c) strain name, quantities by weight, and unique identification numbers of each cannabis material to be transported;

d) date and time of departure;

e) estimated date and time of arrival; and

f) name and signature of each agent accompanying the cannabis.

3) The transport manifest may not be voided or changed after departing from the original cannabis cultivation facility.

4) A copy of the transport manifest shall be given to the receiving cannabis production establishment.

5) The receiving cannabis establishment shall ensure that the cannabis material received is as described in the transport manifest and shall record the amounts received for each strain into the inventory control system.

6) The receiving cannabis establishment shall document at time of receipt any differences between the quantity specified in the transport manifest and the quantities received in the inventory control system.

7) Cannabis shall be:

a) shielded from the public view during transportation;

b) secured during transportation; and

c) temperature controlled if perishable during transportation.

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

9) Only the registered agents of the cannabis cultivation facility may occupy a transporting vehicle.

R68-27-10. Recall Protocol.

1) The department may initiate a recall of cannabis or cannabis products if :

a) evidence exists that pesticides not approved by the department are present on or in the cannabis or cannabis products;

b) evidence exists that residual solvents are present on or in cannabis or cannabis products;

c) evidence exists that harmful contaminants are present on or in cannabis or cannabis products; or

d) the department believes or has reason to believe the cannabis or cannabis products are unfit for human consumption.

2) A cannabis cultivation facility's recall plan shall include, at a minimum:

a) designation of at least one member of the staff who serves as the recall coordinator;

b) procedures for identifying and isolating product to prevent or minimize distribution to patients;

c) procedures to retrieve and destroy product; and

d) a communications plan to notify those affected by the recall.

3) The facility must track the total amount of affected cannabis or cannabis product and the amount of affected cannabis or cannabis product returned to the facility as part of the recall.

4) The cannabis cultivation facility shall coordinate the destruction of the cannabis or cannabis product with the department and allow the department to oversee the destruction of the affected product.

5) The department shall periodically check on the progress of the recall until the department declares an end to the recall.

6) A cannabis cultivation facility shall notify the department before initiating a voluntary recall.

R68-27-11. Minimum Requirements for the Storage and Handling of Cannabis.

1) All storage areas shall provide adequate lighting, sanitation, temperature, humidity, space, equipment, and security conditions for the storage of cannabis.

2) All stored cannabis shall be at least six inches off the ground.

3) All cannabis shall be stored away from all other chemicals, lubricants, pesticides, fertilizers, or other potential contaminants.

4) Cannabis that is outdated, damaged, deteriorated, misbranded, adulterated shall be stored separately until it is destroyed.

R68-27-12. Cannabis Waste Disposal.

1) Solid and liquid wastes generated during cannabis cultivation shall be stored, managed, and disposed of in accordance with applicable state laws and regulations.

2) Wastewater generated during the cannabis production and processing shall be disposed of in compliance with applicable state laws and regulations.

3) Cannabis waste generated from the cannabis plant, trim, and leaves is not considered hazardous waste unless it has been treated or contaminated with a solvent, or pesticide.

4) All cannabis waste shall be rendered unusable prior to leaving the cannabis cultivation facility.

5) Cannabis waste, which is not designated as hazardous, shall be rendered unusable by grinding and incorporating the cannabis plant waste with other ground materials so the resulting mixture is at least fifty percent non-cannabis waste by volume or other methods approved by the department before implementation.

6) Materials used to grind with cannabis fall into two categories:

a) compostable; or

b) non-compostable.

7) Compostable waste is cannabis waste to be disposed of as compost or in another organic waste method mixed with:

a) food waste;

b) yard waste; or

c) vegetable based grease or oils.

8) Non-compostable waste is cannabis waste to be disposed of in a landfill or another disposal method, such as incineration, mixed with:

a) paper waste;

b) cardboard waste;

c) plastic waste; or

d) soil.

9) Cannabis waste includes:

a) cannabis plant waste including roots, stalks, leaves, and stems;

b) excess cannabis or cannabis products from any quality assurance testing;

c) cannabis or cannabis products that fail to meet testing requirements; and

d) cannabis or cannabis products subject to a recall.

R68-27-13. Change in Operation Plans.

1) A cannabis cultivation facility shall submit a notice, on a form provided by the department, prior to making any changes to:

a) ownership or financial backing of the facility;

b) the facility's name;

c) a change in location;

d) any modification, remodeling, expansion, reduction or physical, non-cosmetic alteration of a facility; or

e) change in square footage or acreage of cannabis intended to be cultivated.

2) A cultivation facility may not implement changes to the approved operation plan without department approval.

3) The department shall respond to the request for changes within 15 business days.

4) The department shall approve of requested changes unless approval would lead to a violation of the applicable laws and rules of the state.

5) The department shall specify reason for the denial of approval for a change to the operation plan.

R68-27-14. Renewals.

1) A cannabis cultivation facility shall submit a notice of intent to renew and the licensing fee to the department by December 1st.

2) If the licensing fee and intent to renew are not submitted by December 31st the licensee may not continue to operate.

3) The department may take into consideration violations issued in determining license renewals.

R68-27-15. Violations Categories.

1) Public Safety Violations: $3,000 - $5,000 per violation. This category is for violations which present a direct threat to public health or safety including, but not limited to:

a) use of unapproved pesticides or unapproved agricultural soil amendments;

b) cannabis sold to an unlicensed source;

c) cannabis purchased from an unlicensed source;

d) refusal to allow inspection;

e) failure to comply with testing requirements;

f) a test result for high pesticide residue in the cannabis produced or cannabis product ;

g) unauthorized personnel on the premises;

h) permitting criminal conduct on the premises; or

i) engaging in or permitting a violation of the Utah Code 4-41a.

2) Regulatory Violations: $1,000 - $5,000 per violation. This category is for violations involving this rule and other applicable state rules including, but not limited to:

a) failure to maintain alarm and security systems;

b)failure to keep and maintain records;

c) failure to maintain traceability;

d) failure to follow transportation requirements;

e) failure to follow the waste and disposal requirements;

f) engaging in or permitting a violation of Utah Code 4-41a or this rule; or

g) fa ilure to maintain standardized scales.

3) Licensing Violations: $500 - $5,000 per violation. This category is for violations involving licensing requirements including, but not limited to:

a) an unauthorized change to the operating plan;

b) failure to notify the department of changes to the operating plan;

c) failure to notify the department of changes to financial or voting interests of greater than 2%;

d) failure to follow the operating plan as approved by the department;

e) engaging in or permitting a violation of this rule or Utah Code 4-41a; or

f) failure to respond to violations.

4) The department shall calculate penalties 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.

5) The department may consider enhancing or reducing the penalty based on the seriousness of the violation.

KEY: marijuana, cannabis cultivation facility

Date of Enactment or Last Substantive Amendment: 2019

Authorizing, and Implemented or Interpreted Law: 4-41a-404(3); 4-41a-103(5); 4-41a-302(3)(b)(ii); 4-41a-701(2); 4-41a-405(2)(b)(iv); 4-2-103(1)(i); 4-41a-801(1)