OLYMPIA — Washington Gov. Jay Inslee signed a bill Friday loosening restrictions on growing and processing hemp, though farmers still will need to buy a license from the state and submit harvested plants for testing.

For the first time, Washington farmers will be able to get seeds without federal approval and produce hemp for CBD oil. The bill also eliminates a 4-mile buffer between hemp and marijuana fields that made much of Washington off-limits to hemp.

Industrial Hemp Association of Washington lobbyist Bonny Jo Peterson said she was elated with the outcome. “Under this bill, hemp will take off,” she said. “It is completely go time.”

Washington has 11 licensed hemp growers, compared to about 750 in Oregon. Washington was more cautious about getting ahead of federal law and also gave marijuana growers the right to displace hemp farmers to prevent cross-pollination.

Taking effect immediately, Senate Bill 5276 responds to a change in how the federal government classifies hemp.

The 2014 Farm Bill allowed states to license hemp farmers and processors, but kept hemp on the list of federally controlled substances, restricting interstate commerce and putting farmers at risk of running afoul of their bankers.

The 2018 Farm Bill took hemp off the illicit drug list, though it still requires states to regulate hemp to keep it from becoming a cover crop for marijuana.

Under the new rules, the Washington State Department of Agriculture projects that licensing farmers, inspecting fields and testing the THC levels in plants will cost $206,000 a year. Almost 90% of the money will go for personnel and administrative overhead. 

The department has not yet set fees to support the revamped program. Currently, a license to grow hemp costs $300 a year, plus a $450 application fee.

The department reports that with so few growers, the program is running a deficit. To keep fees from soaring this year, the Legislature appropriated $212,000 to subsidize hemp oversight for one more year.

Hemp reputedly has thousands of uses. The most lucrative one is CBD oil, made from the flower and marketed as a health supplement. Harvested seeds also are processed into products for human consumption. 

Hemp Northwest CEO Tonia Farman said the Hood River-based company has bought seeds harvested in North Dakota and Minnesota because Oregon farmers are growing for CBD oil.

Farman said she hoped Washington grain farmers will embrace growing hemp for seeds.

“The challenge and the fear is that everyone wants to go running to where the money is and that’s the CBD flower,” she said.

The agriculture department lists 17 licensed hemp processors in Washington. “There’s not a shortage of markets,” Farman said. “I definitely encourage farmers to reach out to different processors.”

The agriculture department expects more farmers to apply for a license now that the 4-mile buffer has been eliminated, a spokesman said Monday.

The rule was imposed to prevent cross-pollination. It also made the risk-taking inherent in growing hemp even riskier. Even if a hemp farmer planted first, a marijuana grower could have come along and claimed the territory.

Under SB 5276, the agriculture department and state Liquor and Cannabis Board will review the risks of cross-pollination. If there is a conflict, the farmer there first stays.

Farmers will be able to obtain seeds from wherever they want. They will have to report the source to the agriculture department, however.

In line with the Farm Bill, the state will not license anyone convicted of a drug felony in the past 10 years to grow hemp.