WSLCB - Board Meeting
(March 17, 2021)

Here are some observations from the Wednesday March 17th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Director Rick Garza introduced Board Chair David Postman at his first board meeting who offered insight into his experience and priorities at the agency.
  • Garza welcomed the newly appointed chair and confirmed that Postman’s six year term on the board started on March 15th (audio - 3m).
    • Garza described Postman as a “respected figure in state government and regional news business” highlighting a “26 year career as an award-winning journalist in Oregon, Alaska, and Washington, including 14 years working as a political reporter for the Seattle Times.”
      • In 2007, Postman received two awards from the Society of Professional Journalists: third place for Comprehensive Coverage (single day) and first place for Best Web Log (Specialized) for his Seattle Times series, “Postman on Politics.”
      • See Postman’s last political coverage from the 2008 election.
    • Between 2008 and 2012, Postman was the Senior Communications Director for Vulcan, Inc., a company that handles the business and philanthropy efforts of Microsoft co-founder Paul Allen.
    • In 2012, Postman went to work for Governor Jay Inslee as Director of Communications and then Chief of Staff from January 2015 to November 2020.
      • Learn more about Postman’s tenure as chief of staff, and statements he’d made regarding medical cannabis and cannabis use in bars as Director of Communications.
    • “I can also share with you that we are getting a true talent and respected professional in David,” Garza said. Having known the man for several years, he stated that Postman had been “instrumental in all the different policy decisions the Governor has made over his first two terms.” Postman had worked with leadership “on LCB business,” Garza added, including as a “a key part of the LCB’s effort to help get Washington’s regulated cannabis system off the ground.” He indicated Postman had been engaged with federal authorities who helped develop the Cole Memorandum which recommended initial guidelines for state-level cannabis legalization and regulation.
    • “You will find him to be bright, open minded, engaged, an intuitive thinker, and a good listener,” Garza concluded.
  • Postman acknowledged a “steep learning curve ahead” and was appreciative of having been able to talk to the other board members, Russ Hauge and Ollie Garrett, before taking on leadership of WSLCB. He said he was “excited and really honored” to work at the agency because WSLCB was “held in really high regard” throughout state government (audio - 6m).
    • He called the implementation of cannabis legalization “an extraordinary effort” especially so soon after the voter approved privatization of retail liquor sales in 2011 which had necessitated “reinventing” the agency. Postman said WSLCB “came through stronger each time.”
      • Learn more about the results of liquor privatization from research by the Washington Policy Center and a 2015 report by the Forecasting and Research Division of the Washington State Office of Financial Management (OFM).
    • Postman found federal officials were “not welcoming” of the conversation on cannabis regulation in Washington state, but talks yielded agreeable expectations in part because WSLCB staff “address[ed] a long list of issues that the [U.S.] Attorney General” had as well as concerns from the Western Washington U.S. Attorney at that time. He believed WSLCB had “proven, I think, to the country, that you can run a safe, professional market for legal cannabis.”
    • In his few days as the head of the agency, Postman said “there’s so many things going on,” and “the public should know just how committed LCB staffers are...to the work they do and finding new ways to do it and be innovative. And to be open.” He shared that a “strong value” of his was “openness in government” due to his journalism “roots...and I think LCB has been a model for that...and they will continue to.”
    • Postman announced “the top priority” was diversity, equity, and inclusion (DEI) both among agency staff and in their external responsibilities since “everything touches that...we have to keep working on that and I’m confident we will.”
      • WSLCB must implement a social equity retail application period following guidance from the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF).
      • On March 16th, Garza noted the agency’s intention of hiring someone for a dedicated DEI position at WSLCB “as soon as we have a budget” approved by the legislature (audio - 3m).
        • In the Senate, SB 5092---the 2021-2023 fiscal biennium operating budget bill---was scheduled for a public hearing in the Washington State Senate Ways and Means Committee (WA Senate WM) on Friday March 26th.
        • In the House, a proposed substitute for HB 1094 would be released on Friday March 26th at 3pm and published prior to a public hearing in the Washington State House Appropriations Committee (WA House APP) on Saturday March 27th.
    • Postman said he was benefiting from former “Chair [Jane] Rushford [doing] such an incredible job for six years...and throughout her career in state government.” He had observed the agency from his “perch” in Governor Inslee’s office, “but it’s really different once you’re able to really get in the agency...and see the depth of the changes that she was able to make” from changes in agency processes, to “how you live that life of equity,” to ensuring that “everybody has a safe workplace. To be open to critics and to be able to do that with the cool head that Chair Rushford always had” was her legacy at WSLCB and “big shoes” for Postman to fill. He thanked the staff for their work and candidly expected that “they will need to continue to educate me as we go.”

• Following comments by two tribal representatives, the Board approved a cannabis compact with the Nooksack Indian Tribe establishing the conditions for cannabis license ownership in their territory.
  • Director of Legislative Relations and Tribal Liaison (“since last summer”) Chris Thompson presented board members with the proposed Tribal Marijuana Compact with the Nooksack Indian Tribe (audio - 6m). 
    • He began by pointing out that his update on the compact during the prior board caucus had been “fairly detailed” (audio - 15m).
      • Thompson’s caucus presentation included a tutorial for Postman’s benefit on the ability of sovereign tribal nations to enter into cannabis compacts with the State of Washington “concerning the commercial production, processing, and sale of marijuana.” He mentioned various features compacts could include, like accredited testing laboratories or research licensing or a medical cannabis program, and other state entities who had to review compacts before they could be presented to the Tribe’s leaders and WSLCB. Thompson outlined the vetting process and compact template used by WSLCB. The agency was empowered to act as the State’s representative in negotiations prior to final approval by a tribe’s governing entity, the board and director, and the governor.
      • The most recent compact approved was in November 2020 when the Confederated Tribes of the Chehalis Reservation became the 17th of the 29 federally-recognized tribes in Washington to enter into one of the arrangements.
    • Thompson said the Nooksack compact was "pretty close to our standard template,” authorizing cannabis retail, production, and processing but not including “research or testing lab activities” and “at this point no medical program” nor retail endorsements for medical cannabis. An initial location had been identified for the tribe’s first store, Thompson reported, and besides notifying the State 30 days prior to operation, a “courtesy notice” to neighboring cities and county government was “envisioned in the compact.” Production and processing licensing would require a 90 day notice to the State and similar courtesy notice though no license of that kind had been planned.
    • Thompson said the tax provisions within the document were standard, and while the state “excise tax plus state and local sales tax” on the cannabis didn’t apply, a tribal tax rate “must at least equal 100% of the state tax.” Tribal and WSLCB enforcement agencies could conduct premise checks and compliance checks on sales to minors, he indicated, in addition to normal “dispute resolution,” mediation, and termination provisions if needed.
    • As for the “very minor differences” between the Nooksack and the Chehalis compact, Thompson identified that a cannabis business not owned by the Nooksack Indian Tribe would be required to obtain written consent from the tribal council as a precondition for being issued a license by WSLCB. Should the Tribe not respond within 20 days to a request for a non-Nooksack owned license “then non-consent is assumed” by the agency. In contrast, the Chehalis agreement would have WSLCB representatives obtain that Tribe’s permission rather than the license applicant, he told the Board.
    • WSLCB staff had sought two revisions to the Nooksack’s draft of the compact following the input of the Washington State Office of the Attorney General (WA OAG). First, WA OAG asked to have the Tribal tax rate be linked to the State tax rate to avoid having “a discrepancy created” in the event State taxes were changed. Next, Thompson said there was “no provision in the Tribal code against delivery” of cannabis “outside indian country.” While not a “present concern” he viewed transportation of cannabis beyond Nooksack borders as an issue of Washington state “law and regulation” and hoped the code would be updated to reflect that.
    • Postman asked about the requirement that businesses be tribally owned or secure permission before WSLCB issue licenses: “is that in any other compact in the state today?” Thompson said it had shown up before in “all the compacts, basically” but the difference was the “party needing to obtain permission from the Tribe.” While in most compacts WSLCB approached to secure approval, under the Nooksack agreement an existing licensee “could seek to change its location” to their sovereign nation (audio - 2m).
  • Nooksack Tribal Council Member Bob Solomon provided his view of the compact, saying he’d worked with Garza closely on other retail issues on behalf of the tribe and found “a really good relationship for, for both sides here.” He said he looked forward to the revenue generated by the compact (audio - 2m).
  • Senior tribal attorney Charles Hurt thanked the Board and confirmed that the Nooksack Indian Tribe was only considering one retail location and under their code, all cannabis businesses had to be owned and operated by the Tribe. He added that all the proceeds from cannabis sales beyond “standard operating expenses” would go towards funding government operations for the Tribe as well as for expanding “programs, primarily in the social services area” (audio - 2m).
  • With no further questions on the compact, Board Members voted to approve the document and Postman wished the Tribe “best of luck...I hope that it proves successful for you.” Next, the compact goes to Governor Inslee’s desk for final approval (audio - 1m).

• Policy and Rules Manager Kathy Hoffman provided a cannabis rulemaking update as the agency looked to find a replacement for Policy and Rules Coordinator Casey Schaufler.
  • Hoffman offered a review of cannabis rulemaking in place of Schaufler (audio - 1m) having explained at the March 16th board caucus that the agency had begun searching for a new cannabis policy and rules coordinator (audio - 2m).
  • Quality Control (QC) Testing and Product Requirements (audio - 2m, Rulemaking Project) 
    • Having completed the review of public comments received on the last Supplemental CR-102, Hoffman relayed that staff were drafting a “responsive document” to address common themes and obstacles identified throughout the deliberative dialogue events on the topic.
    • She expected the document to be ready in “the next two weeks” after which staff would again review the QC proposed rules to find areas to “align revisions within our statutory authority” while being mindful of a potential traceability program redesign.
    • Agency representatives had been working with Washington State Office of Regulatory Innovation and Assistance (ORIA) to contract an economist to “create a new small business economic impact statement (SBEIS),” Hoffman said, though a timeline for the project’s future had yet to be established. 
      • Read the September 2020 SBEIS on the project.
  • Tier 1 Expansion (audio - <1m, Rulemaking Project) 
    • Hoffman said WSLCB would be “releas[ing] the [tier 1 licensee] survey results in report form in the coming weeks” and were still looking to develop a proposal “that considers all the elements of our authorizing environment.”
  • Criminal History (audio - 1m, Rulemaking Project)
    • An internal team at the agency had begun meeting to “discuss conceptual rule revisions and schedule one, perhaps two, listen and learn sessions,” Hoffman said. She “tentatively” anticipated listening sessions on April 19th and May 10th, and presuming that timeline, “we’ll be able to bring a proposal to you in mid-to-late June” with possible final adoption of any changes in “early-to-mid August.”
  • Vitamin E Acetate (audio - 1m) 
    • “On the horizon,” Hoffman expected to bring forward a CR-101 “by the end of the month” to cross reference the Washington State Board of Health (SBOH) “permanent prohibition on vitamin E acetate” in vapor products with the WSLCB “processor and retailer rules.” Hoffman deemed the rulemaking project “highly technical...and we don’t anticipate scheduling any listen and learn sessions.”
      • At publication time, emergency rulemaking last extended on January 6th allowed the agency to ban the compound’s presence in vapor items.
  • Postman inquired about the process WSLCB used for creation of a SBEIS to which Hoffman answered that the agency used a system defined in the Regulatory Fairness Act (audio - 3m).
    • The process was intended to show whether the economic implications for licensees from a new rule or rule change “exceeds the threshold that are described in statute” she said. If the threshold was exceeded, staff were required to prepare a SBEIS.
    • Hoffman noted that since WSLCB didn’t employ an economist they could put in a request to ORIA where a “pool of economists” could choose to “bid on that statement of work” and be contracted by the agency temporarily.
    • Even with a “redesign” of the QC rules, Hoffman was under the impression they would still “increase the costs of compliance to our licensees.”