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South Dakota governor and lawmakers disagree on costs of legalizing hemp

South Dakota Governor Kristi Noem gives her first budget address to lawmakers at the state Capitol in Pierre, S.D. in January 2019.
South Dakota Governor Kristi Noem gives her first budget address to lawmakers at the state Capitol in Pierre, S.D. in January 2019.James Nord/Associated Press

PIERRE, S.D. — South Dakota lawmakers and Governor Kristi Noem floated vastly different cost estimates for legalizing industrial hemp on Tuesday, presenting a final hang-up to the resolution of their year-long dispute.

The governor’s office argued that the legalization of industrial hemp would fundamentally change how the state enforces its marijuana laws and required an expansion of staff, drug testing, and law enforcement across three state agencies. Lawmakers cast it as an agricultural program similar to other crops that would require oversight by just one person and part-time testing by law enforcement.

The divergence could threaten the Republican governor’s concession to go against her better judgement and sign a bill to legalize industrial hemp this year, but only if it meets her requirements, including funding for the program.

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Representative Oren Lesmeister, a Democrat from Parade and a proponent of hemp, said the governor’s office inflated the numbers based on a false presumption that drug cases would “sky-rocket” as a result of an industrial hemp program. He charged that the governor is using the high estimates as a tactic to thwart the bill.

“It is how she wants to kill hemp,” he said.

On Tuesday morning, Noem told a legislative committee that the program would need $3.5 million to cover the cost of 15 full-time positions, new testing equipment, four police dogs, and expanded drug storage space for the state’s drug lab and Highway Patrol.

Lawmakers' estimates were more frugal: $250,000 for the program, with about $80,000 of that covered by licenses and fees paid by hemp farmers and processors.

Noem's staffers indicated that the lower estimate would not meet her demands for the hemp program.

The governor vetoed a bill to legalize hemp last year and made it clear she intended to veto the proposal this year because it could lead to the legalization of marijuana. But just before the session began, she changed her position and said she would allow industrial hemp if it is regulated by “four guardrails” to provide for enforcement, regulation, transportation permitting, and funding.

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The governor's office helped write this year's bill, and it meets the first three requirements.

Secretary of Health Kim Malsam-Rysdon said hemp legalization would create an immediate need to expand the state’s drug testing lab storage space and equipment to determine if the THC levels in hemp rise above the 0.3 percent allowed by federal Department of Agriculture guidelines. THC is the compound that produces a high in marijuana.

The legislator’s estimate is based on information from neighboring states such as Montana and Nebraska that rely on tests that only determine if cannabis has THC levels above 1 percent or send samples to out-of-state labs.

House Majority Leader Lee Qualm, the Platte Republican who introduced the hemp bill this year, remained upbeat, saying he didn't think Noem would veto the bill and that hemp supporters would be meeting with the governor's office on Wednesday to work on the numbers.

“I know we can cover it the first year for fairly minimal costs,” he said. “And then we'll have to revisit it next year and see what happens.”

Qualm said farmers may not be able to plant a hemp crop this year, depending on weather conditions and how long it takes to get the state's plan approved by the USDA. He also pointed to a possible variable in the state's drug enforcement plans: referendums on recreational and medical marijuana that will be on the November ballot.

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Legislative leaders in the Senate have said they want to see the funding issue settled before voting on the hemp legalization bill.