An Act to legalize the growth and production of industrial hemp and derivative products in the state, and to declare an emergency.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That a NEW SECTION be added:

38-35-1. Industrial hemp defined.

For the purposes of this chapter, industrial hemp or hemp, is the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than three-tenths of one percent on a dry weight basis.

Section 2. That a NEW SECTION be added:

38-35-2. Purchasing or obtaining industrial hemp--License required--Penalty.

No person may purchase or obtain industrial hemp material for planting, propagation, or producing unless the person has a license as provided by this chapter. The person is responsible for anyone working under the person's license for all sections of this chapter. Only a person licensed to grow or produce industrial hemp under this chapter may possess any part, stalk, leaf, bud, flower, or seed of an industrial hemp plant. Any person who possesses industrial hemp material who is not licensed under this chapter is guilty of a Class 4 felony.

Section 3. That a NEW SECTION be added:

38-35-3. Application for licensure--Procedure--Criminal history check--Promulgation of rules.

Any person desiring to grow or produce industrial hemp shall apply to the Department of Agriculture for a license on a form prescribed by the department in rules promulgated pursuant to chapter 1-26.

The person applying for a license shall include the name and address of the applicant, and the legal description of the land area to be used to grow or produce industrial hemp. If the land area is to be used to grow hemp, the land area must be at least five contiguous acres. If the applicant is the lessee and is not the landowner of the land area, the name and address of the landowner shall be included on the application.

Except for employees of the South Dakota Department of Agriculture, the South Dakota Agricultural Experiment Station, or the South Dakota State University Extension Service involved in research and extension-related activities, the department shall require each applicant and landowner, if the applicant is the lessee of the land area, for initial licensure and each license renewal thereafter to submit to a statewide and nationwide criminal history record check through fingerprint checks by the Division of Criminal Investigation and the Federal Bureau of Investigation. All costs associated with the criminal history record check are the responsibility of the applicant. Criminal history records provided to the department under this section are confidential. However, the department may disclose information received under to this section with law enforcement. The department may use the records only in determining an applicant's eligibility for licensure.

Section 4. That a NEW SECTION be added:

38-35-4. Industrial hemp licensure program fund--Purpose--Expenditures.

There is hereby created within the state treasury the industrial hemp licensure program fund, into which all license fees, inspection fees, and other fees or revenue paid to the state from the operation of the industrial hemp program shall be deposited. All moneys in the fund created by this section shall be used for the purpose of administering the industrial hemp program. Interest earned on money in the fund shall be deposited into the fund. Expenditures from the fund shall be appropriated through the normal budget process.

Section 5. That a NEW SECTION be added:

38-35-5. License issuance--Fee--Denial or suspension--Contested case.

If the applicant has completed the application process to the satisfaction of the Department of Agriculture, the department shall issue the license. A license issued under this chapter is valid for fifteen months. An application for a license under this section shall be submitted to the department any time before the purchase of industrial hemp products, including hemp seed or viable propagation material. The department shall assess each licensee a fee not to exceed three hundred fifty dollars. The department shall deposit fees collected under this chapter in the industrial hemp licensure program fund.

The department may deny or suspend a license to any person who:

(1) Violates any provisions of this chapter;

(2) Violates any rules set forth by the United States Department of Agriculture regarding industrial hemp;

(3) Provides false or misleading information in connection with any application required by this chapter;

(4) Has been convicted of a felony relating to a controlled substance or marijuana under state or federal law within the previous ten years; or

(5) Has been convicted of a felony relating to a controlled substance or marijuana under state or federal law since the most recent criminal history background check.

Any person denied a license under this section or has a license suspended under this section may request a hearing before the secretary pursuant to chapter 1-26.

Section 6. That a NEW SECTION be added:

38-35-6. Planting--Documentation to be filed--Contents.

Within thirty days of planting, each licensee under this chapter shall file with the Department of Agriculture documentation indicating that the seeds planted were of a type and variety certified to have no more than three-tenths of one percent tetrahydrocannabinol.

Section 7. That a NEW SECTION be added:

38-35-7. Entrance by department--Inspection, confiscation, and disposal--Costs--Liability for destruction.

The Department of Agriculture may enter on any land or area where hemp is grown, stored, or produced for the purposes of inspections, sample collection, testing, or investigation for the purposes of enforcing this chapter. Any hemp found to be in violation of this chapter is subject to confiscation and disposal by the department. Any costs arising from the confiscation and disposal shall be the responsibility of the grower, producer, or owner of the hemp. The department is not liable for any destruction of hemp or hemp products carried out under this chapter. If a violation occurs, the grower shall be given, in writing, a copy of the results.

Section 8. That a NEW SECTION be added:

38-35-8. Promulgation of rules.

The Department of Agriculture shall promulgate rules, pursuant to chapter 1-26, to:

(1) Establish inspection, testing, and transportation requirements in accordance with guidance from the United States Department of Agriculture;

(2) Establish criteria and procedure for denial or suspension of a license under this chapter;

(3) Make any modifications or additions to the industrial hemp licensure program in order to comply with any rules and regulations regarding hemp implemented by the United States Department of Agriculture; and

(4) Establish an inspection fee not to exceed two hundred fifty dollars, moneys from which shall be placed in the industrial hemp licensure program fund.

Section 9. That a NEW SECTION be added:

38-35-9. Testing samples--Exceeding concentration--Destruction of crop.

If a test sample reveals a delta-9 tetrahydrocannabinol concentration of at least three-tenths of one percent but not more than five-tenths of one percent on a dry weight basis, the licensee's hemp crop may be retested by a laboratory approved by the Drug Enforcement Administration and if upon the retesting, the delta-9 tetrahydrocannabinol concentration exceeds three-tenths of one percent, the entire crop shall be destroyed by a Drug Enforcement Administration registered reverse distributor, or a law enforcement officer authorized under the Controlled Substances Act (21 U.S.C. § 802(6)).

Section 10. That a NEW SECTION be added:

38-35-10. State hemp production plan--Submission to United States Department of Agriculture--Establishment of program.

The Department of Agriculture shall develop a state hemp production plan and submit the plan to the United States Department of Agriculture for approval of a program to license and grow industrial hemp in South Dakota within thirty days of the passage of this Act. The department shall establish a program to license growth or production of industrial hemp once approval is received by the United States Department of Agriculture.

Section 11. That a NEW SECTION be added:

38-35-11. Transportation--Inspection by law enforcement--Purposes--Penalty.

Any law enforcement officer may require any person transporting industrial hemp to stop any vehicle transporting the product for the purposes of inspection of appropriate licensure or paperwork under § 38-35-13. The law enforcement officer may collect a sample of the product for the purpose of testing for any concentration of tetrahydrocannabinol that exceeds three-tenths of one percent. The sample collected by law enforcement may not exceed eight ounces. It shall be a Class 2 misdemeanor to transport industrial hemp without appropriate licensure or paperwork from a federal or state authority.

Section 12. That a NEW SECTION be added:

38-35-12. Transportation--Permit--Duration of permit--Required documentation--Exception.

An industrial hemp transportation permit is required to transport industrial hemp. The licensee shall apply for an industrial hemp transportation permit on a form provided by the Department of Agriculture. A permit issued under this section is valid for fifteen months. A request for an industrial hemp transportation permit shall be submitted to the department at least five business days prior to the transport. Any licensee transporting or delivering industrial hemp shall have a dated invoice, bill of lading, or manifest in their possession during the entire time the licensee is transporting or delivering industrial hemp unless the hemp is being transported ten miles or less from where the crop was originally grown. The invoice, bill of lading, or manifest shall include the following information:

(1) The licensee's name and address;

(2) The specific origin and destination of the industrial hemp being transported; and

(3) The quantity of industrial hemp being transported.

Section 13. That a NEW SECTION be added:

38-35-13. Rules of United States Department of Agriculture.

All applicants and licensees shall abide by the any rules set forth by the United States Department of Agriculture.

Section 14. That § 22-42-1 be AMENDED:

22-42-1. Definitions.

Terms used in this chapter mean:

(1) "Controlled drug or substance," a drug or substance, or an immediate precursor of a drug or substance, listed in Schedules I through IV. The term includes an altered state of a drug or substance listed in Schedules I through IV absorbed into the human body;

(2) "Counterfeit substance," a controlled drug or substance which, or the container of labeling of which, without authorization, bears the trade‑mark, trade name, or other identifying mark, imprint, number, or device, or any likeness thereof, of a manufacturer, distributor, or dispenser other than the person or persons who manufactured, distributed, or dispensed such substance and which thereby falsely purports or is represented to be the product of, or to have been distributed by, such other manufacturer, distributor, or dispenser;

(3) "Deliver" or "delivery," the actual or constructive transfer of a controlled drug, substance, or marijuana whether or not there exists an agency relationship;

(4) "Dispense," to deliver a controlled drug or substance to the ultimate user or human research subject by or pursuant to the lawful order of a practitioner, including the prescribing, administering, packaging, labeling, or compounding necessary to prepare the substance for such delivery, and a dispenser is one who dispenses;

(5) "Distribute," to deliver a controlled drug, substance, or marijuana. Distribution means the delivery of a controlled drug, substance, or marijuana;

(6) "Manufacture," the production, preparation, propagation, compounding, or processing of a controlled drug or substance, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis or by a combination of extraction and chemical synthesis. A manufacturer includes any person who packages, repackages, or labels any container of any controlled drug or substance, except practitioners who dispense or compound prescription orders for delivery to the ultimate user;

(7) "Marijuana," all parts of any plant of the genus cannabis, whether growing or not, in its natural and unaltered state, except for drying or curing and crushing or crumbling. The term includes an altered state of marijuana absorbed into the human body. The term does not include industrial hemp as defined in § 38-35-1, fiber produced from the mature stalks of such plant, or oil or cake made from the seeds of such plant;

(8) "Practitioner," a doctor of medicine, osteopathy, podiatry, dentistry, optometry, or veterinary medicine licensed to practice his profession, or pharmacists licensed to practice their profession; physician's assistants certified to practice their profession; government employees acting within the scope of their employment; and persons permitted by certificates issued by the Department of Health to distribute, dispense, conduct research with respect to, or administer a substance controlled by chapter 34-20B;

(9) "Precursor" or "immediate precursor," a substance which the Department of Health has found to be and by rule designates as being a principal compound commonly used or produced primarily for use, and which is an immediate chemical intermediary used or likely to be used, in the manufacture of a controlled drug or substance, the control of which is necessary to prevent, curtail, or limit such manufacture;

(10) "Schedule I," "Schedule II," "Schedule III," and "Schedule IV," those schedules of drugs, substances, and immediate precursors listed in chapter 34-20B;

(11) "Ultimate user," a person who lawfully possesses a controlled drug or substance for that person's own use or for the use of a member of that person's household or for administration to an animal owned by that person or by a member of that person's household.

Section 15. That § 34-20B-1 be AMENDED:

34-20B-1. Definitions.

Terms as used in this chapter mean:

(1) "Administer," to deliver a controlled drug or substance to the ultimate user or human research subject by injection, inhalation, or ingestion, or by any other means;

(2) "Agent," an authorized person who acts on behalf of or at the direction of a manufacturer, distributor, or dispenser and includes a common or contract carrier, public warehouseman, or employee thereof;

(3) "Control," to add, remove, or change the placement of a drug, substance, or immediate precursor under §§ 34-20B-27 and 34-20B-28;

(4) "Counterfeit substance," a controlled drug or substance which, or the container or labeling of which, without authorization, bears the trademark, trade name, or other identifying mark, imprint, number, or device, or any likeness thereof, of a manufacturer, distributor, or dispenser other than the person or persons who manufactured, distributed, or dispensed such substance and which thereby falsely purports or is represented to be the product of, or to have been distributed by, such other manufacturer, distributor, or dispenser;

(5) "Deliver" or "delivery," the actual, constructive, or attempted transfer of a controlled drug, substance, or marijuana whether or not there exists an agency relationship;

(6) "Department," the Department of Health created by chapter 1-43;

(7) "Dispense," to deliver a controlled drug or substance to the ultimate user or human research subject by or pursuant to the lawful order of a practitioner, including the prescribing, administering, packaging, labeling, or compounding necessary to prepare the substance for such delivery, and a dispenser is one who dispenses;

(8) "Distribute," to deliver a controlled drug, substance, or marijuana. A distributor is a person who delivers a controlled drug, substance, or marijuana;

(9) "Hashish," the resin extracted from any part of any plant of the genus cannabis, commonly known as the marijuana plant;

(10) "Imprisonment," imprisonment in the state penitentiary unless the penalty specifically provides for imprisonment in the county jail;

(11) "Manufacture," the production, preparation, propagation, compounding, or processing of a controlled drug or substance, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis or by a combination of extraction and chemical synthesis. A manufacturer includes any person who packages, repackages, or labels any container of any controlled drug or substance, except practitioners who dispense or compound prescription orders for delivery to the ultimate consumer;

(12) "Marijuana," all parts of any plant of the genus cannabis, whether growing or not; the seeds thereof; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant or its seeds. The term does not include industrial hemp as defined in § 38-35-1, fiber produced from the mature stalks of the plant, or oil or cake made from the seeds of the plant, or the resin when extracted from any part of the plant or cannabidiol, a drug product approved by the United States Food and Drug Administration;

(13) "Narcotic drug," any of the following, whether produced directly or indirectly by extraction from substances of vegetable origin or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis:

(a) Opium, coca leaves, and opiates;

(b) A compound, manufacture, salt, derivative, or preparation of opium, coca leaves, or opiates;

(c) A substance (and any compound, manufacture, salt, derivative, or preparation thereof) which is chemically identical with any of the substances referred to in subsections (a) and (b) of this subdivision;

except that the term, narcotic drug, as used in this chapter does not include decocainized coca leaves or extracts of coca leaves, which extracts do not contain cocaine or ecgonine;

(14) "Opiate" or "Opioid," any controlled drug or substance having an addiction-sustaining liability similar to morphine or being capable of conversion into a drug having such addiction-forming or addiction-sustaining liability;

(15) "Opium poppy," the plant of the species papaver somniferum L., except the seeds thereof;

(16) "Person," any corporation, association, limited liability company, partnership or one or more individuals;

(17) "Poppy straw," all parts, except the seeds, of the opium poppy, after mowing;

(18) "Practitioner," a doctor of medicine, osteopathy, podiatry, optometry, dentistry, or veterinary medicine licensed to practice their profession, or pharmacists licensed to practice their profession; physician assistants certified to practice their profession; certified nurse practitioners and certified nurse midwives to practice their profession; government employees acting within the scope of their employment; and persons permitted by certificates issued by the department to distribute, dispense, conduct research with respect to, or administer a substance controlled by this chapter;

(18A)(19) "Prescribe," an order of a practitioner for a controlled drug or substance.

(19)(20) "Production," the manufacture, planting, cultivation, growing, or harvesting of a controlled drug or substance;

(20)(21) "State," the State of South Dakota;

(21)(22) "Ultimate user," a person who lawfully possesses a controlled drug or substance for personal use or for the use of a member of the person's household or for administration to an animal owned by the person or by a member of the person's household;

(22)(23) "Controlled substance analogue," any of the following:

(a) A substance that differs in its chemical structure to a controlled substance listed in or added to the schedule designated in schedule I or II only by substituting one or more hydrogens with halogens or by substituting one halogen with a different halogen; or

(b) A substance that is an alkyl homolog of a controlled substance listed in or added to schedule I or II; or

(c) A substance intended for human consumption; and

(i) The chemical structure of which is substantially similar to the chemical structure of a controlled substance in schedule I or II;

(ii) Which has a stimulant, depressant, or hallucinogenic effect on the central nervous system that is substantially similar to or greater than the stimulant, depressant, or hallucinogenic effect on the central nervous system of a controlled substance in schedule I or II; or

(iii) With respect to a particular person, which such person represents or intends to have a stimulant, depressant, or hallucinogenic effect on the central nervous system that is substantially similar to or greater than the stimulant, depressant, or hallucinogenic effect on the central nervous system of a controlled substance in schedule I or II;

However, the term, controlled substance analogue, does not include a controlled substance or any substance for which there is an approved new drug application.

Section 16. Whereas, this Act is necessary for the support of the state government and its existing public institutions, an emergency is hereby declared to exist, and this Act shall be in full force and effect from and after its passage and approval.