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By: Micah Bucy
On January 13, 2017, a collection of hemp-based businesses filed a petition[1] with the United States Ninth Circuit Court of Appeals (“Ninth Circuit”) seeking a declaration that the Drug Enforcement Administration (“DEA”) has once again overstepped by promulgating a rule that lists and tracks “marijuana extract” as a drug separate from marijuana which already appears as a Schedule 1 Drug.
One of the petitioners, the Hemp Industries Association, is not new to seeking judicial review of the DEA’s penchant for rulemaking when it comes to hemp-based products; in fact it was the lead plaintiff in a 2003 case[2] before the Ninth Circuit which successfully invalidated a DEA rulemaking that sought to ban all products containing tetrahydrocannibinols (“THC”), including hemp-based products. [3] The 2003 case concerned the promulgation of a DEA rule without first undergoing a notice and comment period as required by the Administrative Procedures Act. The DEA justified the decision to forego a notice and comment period on the basis that the issued rule simply “interpreted” the Controlled Substances Act (“CSA”) and other existing DEA regulations, and that the new interpretive rule—a ban on all products containing any trace amount of THC—was already on the books. Ultimately, the Ninth Circuit ruled that the DEA did not simply interpret existing statutes and agency rules, but rather acted in a legislative capacity because it created rights, imposed obligations, or otherwise effected a change in existing law pursuant to the authority Congress had delegated to the agency. The Court’s finding that the rule was legislative in nature was significant because such a finding triggered the requirement that all interested parties (e.g. the hemp industry) be provided with a notice and comment period; and, because no such period was provided prior to the issuance of this rule, the Court was compelled to invalidate the rule.
Turning to the DEA rule at issue in the petition filed late last week by the Hemp Industry Association, the rule creates a new Administration Controlled Substances Code Number (“Code Number”) for “Marihuana Extract” that will allow DEA and DEA-registered entities to track quantities of this material separately from quantities of marijuana.[4] Prior to January 13, 2017, the effective date of this new rule, the DEA regulations ascribed Code Numbers to THC and marijuana separately but did not provide a separate Code Number for marijuana extract, such as hemp, but instead lumped such marijuana extracts in under the Code Number for marijuana. As of the effective date, marijuana extract is listed separately from marijuana as a Schedule I drug and it is given its own Code Number, Code Number 7350. The DEA justifies this new rule on the basis that it will bring tracking efforts of a Schedule I drug in line with a treaty, the Single Convention on Narcotic Drugs (“Single Convention”), of which the United States was a signatory in 1961.[5] Specifically, the Single Convention separately accounts for cannabis and cannabis extracts, whereas, until last week, the DEA lumped marijuana extract under the larger umbrella of marijuana because the former is a derivative of the latter. This effort to single out marijuana extract from marijuana is worrisome for the hemp industry because it could result in unwanted and unauthorized government enforcement on the industry.
Hemp, which has numerous uses, including clothing, construction materials, paper, biofuel, and food, had been illegal in the United States dating all the way back to 1937 and the Marijuana Tax Act (which was eventually invalidated, repealed, and replaced with the CSA in 1970). But in 2014, Congress amended the Federal Farm Act and included a provision legitimizing industrial hemp research and permitting colleges/universities or a State Department of Agriculture to grow and cultivate hemp for research or agricultural uses if state law permitted.
Approximately two short months after Governor Wolfe signed Act 16 legalizing medical marijuana in Pennsylvania, he signed Act 92 which allows for properly registered individuals to grow, cultivate, and/or market industrial hemp. Governor Wolfe commented on the Act saying: “William Penn himself was an advocate of hemp growth, and in 1683, one of the first laws passed by the General Assembly in Pennsylvania was a law to encourage every farmer to grow hemp.” The Governor continued, “The U.S. industrial hemp industry has been estimated at over $500 million in annual retail sales and is still growing. Supporting this industry in Pennsylvania is a smart investment in the commonwealth’s economy.”[6]
Although the DEA presents its new rule under a guise of a simple re-classification and re-numbering of a substance already included and being tracked as a schedule I drug, the fear the hemp industry has of the DEA’s new rule seems justified. Whether the DEA operates in accordance with its stated justification for the new rule remains to be seen, but the unintended, or perhaps intended, consequence of singling marijuana extract out as a separate Schedule I drug is that other federal agencies as well as state and local enforcement agencies may home in on hemp-based products and thereby frustrate Congress’ 2014 authorization to grow and cultivate hemp-based products. But for the time being, in Pennsylvania, in light of Governor Wolfe’s stated enthusiasm and support of the hemp industry, would-be growers and cultivators can probably rest easy that state-level enforcers are unlikely to slow down the industry. As for DEA and other federal-level enforcers, perhaps the pending Ninth Circuit challenge will have the same effect.
[1] As of the date of this blog post, a copy of the petition could not be obtained from the federal courts’ website, www.pacer.gov. It is expected that copies of the petition will eventually be available through the PACER website.
[2] Hemp Industries Assoc., et al. v. DEA, 333 F.3d 1082 (9th Cir 2003), available at https://law.resource.org/pub/us/case/reporter/F3/333/333.F3d.1082.01-71662.html#fn1.
[3] The text of the DEA rule at issue and ultimately invalidated in the 2003 case can be found in the Notice of Proposed Rulemaking found at 66 F.R. 51,530.
[4] The text of the Final Rule is available at https://www.federalregister.gov/documents/2016/12/14/2016-29941/establishment-of-a-new-drug-code-for-marihuana-extract
[5] The Single Convention on Narcotic on Narcotic Drugs treaty of 1961 is available at https://www.unodc.org/pdf/convention_1961_en.pdf.
[6] Governor Wolf’s comments are available at https://www.governor.pa.gov/governor-wolf-signs-fifteen-bills-into-law-including-ica-ethics-reform-and-industrial-hemp-regulation/.
