Iowa Hemp Act (2024): Using the Iowa Administrative Procedures Act to Shape Rules Regulating Liquid Consumable Hemp Products

On June 3, 2024, the Des Moines Register published an article that explained some brewers of consumable hemp products believe draft proposed administrative rules written by the Department of Health and Human Services (“DHS”) misinterpret Iowa’s new hemp law. This blog briefly explains Iowa’s new hemp law, the rulemaking process, and options for brewers who believe DHS’s proposed administrative rules improperly interpret such law.

Iowa’s New Hemp Laws

On May 17, 2024, Governor Kim Reynolds signed House File 2605, which will change Iowa’s law regulating hemp and hemp products on July 1, 2024. Among other things, the new law regulates the amount of THC in consumable hemp products being distributed, exported, imported, or offered for sale, or sold in the State of Iowa. Specifically, under the new law, the maximum THC for consumable hemp products is the lesser of:

• Three-tenths of one percent on a dry weight basis; or
• Four milligrams per serving and ten milligrams per container on a dry weight basis. 

If the THC amount in a product exceed both of these amounts, the product cannot be sold in Iowa as a consumable hemp product.

Notably, the statute does not define “serving.” As a result of the legislature’s failure to define “serving,” brewers intended to update their packaging for THC beverage such that a container that contained 12 ounces and 10mg of THC would have 2.5 servings. However, the draft proposed rules issued by DHS have defined “serving” for purposes of liquid consumable hemp products. Under this definition, liquid consumable hemp products must be packaged in a container that holds a minimum of 12 fluid ounces and each 12 ounces could contain up to 4mg of THC. Therefore, every beverage that has more than 4mg of THC per 12 ounces would be illegal to produce or sell. According to the Des Moines Register article, “Iowa-based brewers argue that’s not what the law intended.” So, what are the brewers’ options?

Agency Rulemaking Process

Iowa law (Iowa Administrative Procedure Act, Ch. 17A) requires each government agency to follow specific procedures and timelines when drafting and adopting administrative rules. Relevant for this blog are the following.

First, the agency must provide a notice of intended action. The notice of intended action will set forth a time and place that interested persons can submit data, view or arguments about the proposed rules in writing.  If timely requested in writing by twenty-five interested persons or by an association having not less than twenty-five members, the agency must give interested persons an opportunity to make oral presentation.

Second, the agency is required to provide a job impact statement to the administrative rules coordinator prior to the notice of intended action.  Any concerned private sector employer can submit information to the agency relating to a jobs impact statement. 

Third, if asked to do so by an interested person, either prior to adoption or within 30 days thereafter, the agency is required to issue a concise statement of the principal reasons for and against the rule adopted, incorporating therein the reasons for overruling considerations urged against the rule.

Fourth, the agency is required to perform and provide a regulatory analysis if the rule would have a substantial impact on small business and if, within 32 days of the notice of intended action, a written request for analysis is submitted to the agency by at least 25 persons signing the request who each qualify for as a small business or by an organization representing at least 25 such businesses. “Small business” is defined as an entity to which all of the following apply:

1. Is not an affiliate or subsidiary of an entity dominant in its field of operation.

2. It has either twenty or fewer full-time equivalent positions or less than one million dollars in annual gross revenues in the preceding fiscal year.

Brewers’ Options

DHS has not yet released the proposed rules to the general public so the brewers should continue to work with DHS to shape the rules to effectuate the legislature’s intent prior to the DHS issuing its notice of intended action and the draft rules.

Brewers should also provide a jobs impact statement to DHS before the notice of intended action.

When DHS issues the notice of intended action, brewers should submit written comments about the rules and request in writing the DHS explain the basis for declining to make any suggested changes. 

Within 32 days of the DHS’ notice of intended action, at least 25 brewers who qualify as a small business should submit a written request to DHS to perform a regulatory analysis on the impact its rules will have on small business. If, as the Des Moines Register article states, the rule “would have severe financial implications” on businesses producing THC beverages, the DHS and/or the Administrative Rules Review Committee may consider changing the rules. Indeed, Iowa Code § 17A.4B(2) requires the DHS to “take steps to minimize the adverse impact on jobs and the development of new employment opportunities due to implementation of the rule.”

Finally, brewers who have concerns about the rules should talk with the legislators who are members of the administrative rules review committee. 

Conclusion

The Iowa Administrative Procedures Act provides the public with many tools to shape the rulemaking process. Brewers who believe the DHS’ proposed rules regarding THC beverages are inconsistent with the legislature’s intent and will have a negative impact on jobs and business should not be afraid to use these tools.