The Executive Commissioner of the Texas Health and Human Services Commission (HHSC), on behalf of the Department of State Health Services (DSHS), proposes an amendment to §300.104, concerning the manufacturing and processing of hemp products for smoking.

BACKGROUND AND PURPOSE

The proposed amendment to §300.104 will remove the prohibition of "distribution" and "retail sale" of hemp products for smoking.

House Bill 1325, 86th Legislature, Regular Session, 2019, established Texas Health and Safety Code, Chapter 443, Manufacture, Distribution, and Sale of Consumable Hemp Products (CHPs). Texas Health and Safety Code §443.204(4) prohibits "the processing or manufacturing of a consumable hemp product for smoking."

On June 24, 2022, as a result of Texas Dep't of State Health Servs. v. Crown Distrib. LLC, 647 S.W.3d 648 (Tex.2022), the Texas Supreme Court upheld the ban on the manufacturing and processing of consumable hemp products for smoking within the state of Texas. The amendment complies with the ruling in Texas Dep't of State Health Servs. v. Crown Distrib. LLC and Texas Health and Safety Code §443.204(4).

SECTION-BY-SECTION SUMMARY

The proposed amendment to §300.104 deletes the words "distribution" and "retail sale" from the prohibition of hemp products for smoking. The proposed amendment also revises the title of the rule to "Manufacturing and Processing of Hemp Products for Smoking" for consistency with the rule text.

FISCAL NOTE

Donna Sheppard, Chief Financial Officer, has determined that for each year of the first five years that the rule will be in effect, enforcing or administering the rule does not have foreseeable implications relating to costs or revenues of state or local governments.

GOVERNMENT GROWTH IMPACT STATEMENT

DSHS has determined that during the first five years that the rule will be in effect:

(1) the proposed rule will not create or eliminate a government program;

(2) implementation of the proposed rule will not affect the number of DSHS employee positions;

(3) implementation of the proposed rule will result in no assumed change in future legislative appropriations;

(4) the proposed rule will not affect fees paid to DSHS;

(5) the proposed rule will not create a new rule;

(6) the proposed rule will not expand, limit, or repeal an existing rule; and

(7) the proposed rule will not change the number of individuals subject to the rule.

(8) DSHS has insufficient information to determine the proposed rule's effect on the state's economy.

SMALL BUSINESS, MICRO-BUSINESS, AND RURAL COMMUNITY IMPACT ANALYSIS

Donna Sheppard, Chief Financial Officer, has also determined that there will be no adverse economic effect on small businesses, micro-businesses, or rural communities. Despite the lawsuit and temporary injunction, the manufacturing and processing of CHPs for smoking is prohibited by Texas Health and Safety Code §443.204(4). A small business manufacturing hemp for smoking that obtained a CHP License from DSHS while litigation was pending should not now be counted as an economic loss either to the small business or to a rural community. The prohibition of manufacturing and processing is in H.B. 1325 that established Texas Health and Safety Code, Chapter 443 in 2019. The lifting of the regulatory prohibition of retail sale should encourage more small businesses to participate and have, if any, a positive effect on small businesses and rural communities.

LOCAL EMPLOYMENT IMPACT

The proposed rule will not affect a local economy.

COSTS TO REGULATED PERSONS

Texas Government Code §2001.0045 does not apply to this rule because the rule is necessary to protect the health, safety, and welfare of the residents of Texas.

PUBLIC BENEFIT AND COSTS

Dr. Timothy Stevenson, Associate Commissioner, Consumer Protection Division, has determined that for each year of the first five years the rule is in effect, the public benefit will be alignment of an agency rule with statutory authority and clarity as to the legality of economic activity related to hemp.

Donna Sheppard has also determined that for the first five years the rule is in effect, there are no anticipated economic costs to persons who are required to comply with the proposed rule. Many, if not most, of the firms engaged in the distribution or retail sale of consumable hemp products for smoking also either distribute or sell at retail non-smokable products such as Cannabidiol (CBD) oil or CBD gummies, with the result that many distributors and retailers of hemp products for smoking already have the Food Wholesaler License (distributors) or the Retail Hemp Registration (retailers). While there are undoubtedly unregistered retailers of consumable hemp products for smoking in Texas, it is likely that most of those are also retailers of other CHPs.

TAKINGS IMPACT ASSESSMENT

DSHS has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

PUBLIC COMMENT

Written comments on the proposal may be submitted to Joe Williams, Texas Department of State Health Services, Consumable Hemp Products Program, P.O. Box 149347, Mail Code 1987, Austin, Texas 78714-9347; 1100 West 49th Steet, Austin, Texas 78756-3199; or by email to dshshempprogram@dshs.texas.gov.

To be considered, comments must be submitted no later than 31 days after the date of this issue of the Texas Register. Comments must be (1) postmarked or shipped before the last day of the comment period; (2) hand-delivered before 5:00 p.m. on the last working day of the comment period; or (3) emailed before midnight on the last day of the comment period. If last day to submit comments falls on a holiday, comments must be postmarked, shipped, or emailed before midnight on the following business day to be accepted. When emailing comments, please indicate "Comments on Proposed Rule "22R119" in the subject line.

STATUTORY AUTHORITY

The amendment is authorized by Texas Health and Safety Code, Chapter 443, which provides that the Executive Commissioner of HHSC may adopt rules for the efficient enforcement of Texas Health and Safety Code, Chapter 443; and Texas Government Code §531.0055, which provides that the Executive Commissioner of HHSC shall adopt rules for the operation and provision of health and human services by DSHS, and for the administration of Texas Health and Safety Code, Chapter 1001.

The amendment implements Texas Government Code §531.0055 and Texas Health and Safety Code, Chapters 443 and 1001.