Hemp comes home: legal hemp has returned to Kentucky. Will the feds step aside and let the industry flourish?

• Author: Kobell, Rona

IN A FORMER tobacco warehouse in Kentucky's horse country, a silver-haired seventh-generation hemp farmer sits with his business partners. As Andrew Graves, the chairman of Atalo Holdings, leads a discussion of seed varietals and soil consistencies, the group snacks on hemp nuts, grabbed in handfuls from a sack. In the warren of rooms just behind them, oils drip from stills as lab techs figure out formulas for supplements and vapors.

No one in the room is younger than 50. No one talks about marijuana, and honestly, they'd rather you not bring it up either.

Kentucky's new face of hemp looks remarkably like the old one. A really old one. For much of its history, the Bluegrass State grew hemp, otherwise known as Cannabis sativa--the same root that produces marijuana, though hemp doesn't share its psychoactive properties. (Marijuana's active ingredient is THC, which can get you high. Hemp's is cannabidiol, or CBD, which can't. The plant does contain a trace amount of THC, but not enough to get anyone stoned.) Kentucky grew more hemp than any other state; by 1850, it was producing more than 40,000 tons.

Kentuckians spun the fibrous stalks into rope, clothing, shoes, and American flags. Hemp seeds became a food, and hemp oil became a base for medicines and salves. In 1938, Popular Mechanics touted hemp as a "billion dollar crop" and estimated it could produce more than 25,000 products.

A decade later, nearly all the hemp was gone. The Marihuana Tax Act of 1937 required farmers to buy an expensive "stamp" for the right to grow cannabis, whether or not it was the kind that can make you high. Most Kentucky farmers couldn't afford it and turned to tobacco; nationwide, farmers turned to corn, soybeans, and other commodity crops. (Popular Mechanics might have had an early deadline, or else they didn't get the memo about the tax.) A brief reprieve came in World War II, when the government lifted the tax because the Navy needed rope and sails for its ships. One government film, Hemp for Victory, declared it American farmers' patriotic duty to grow hemp. The U.S. Department of Agriculture even gave the seed to the prospective farmers, which it forced Graves' grandfather to sell to them at way below its value.

When the war ended, the stamp came back. By then DuPont was making synthetic fibers like Nylon for less than the labor costs to process and dry hemp, and the market went bust. In 1970, President Richard Nixon designated both hemp and marijuana Schedule I drugs, the government's category for the most dangerous controlled substances. There they remain today. Hemp, a plant as likely to produce a high as a cup of radishes, is as dangerous as heroin, according to the feds.

The Graves family hemp fields became tobacco farms. But Graves, who grew up hearing hemp stories from his father and grandfather, never lost hope that he would one day grow his own. He knew that there was a market for hemp products: Foreign-grown hemp was being used to produce door panels for BMWs, high-end clothing and housewares for Giorgio Armani and Ralph Lauren, and insulation for homebuilding. With a coalition of Kentuckians that included Tea Partiers, university researchers, Louisville businessmen, Lexington tobacco farmers, and Sierra Club activists, he pushed in Frankfurt and Washington for a law legalizing hemp.

Three years ago, they got it--sort of. The 2014 farm bill authorized state...