WA House COG - Committee Meeting
(March 25, 2021)

Here are some observations from the Thursday March 25th Washington State House Commerce and Gaming Committee (WA House COG) work session.

My top 3 takeaways:

• Washington State Liquor and Cannabis Board (WSLCB) Director Rick Garza began by outlining his role on the leadership team of the Cannabis Regulators Association (CANNRA).
  • Garza wanted to address WA House COG members prior to their scheduled work session on March 26th at 10am (“Examining the future of the cannabis industry in Washington state") so that he could “update the committee about the work we are doing with other states” through CANNRA (audio - 1m, video).
    • Garza talked about his work with CANNRA at WSLCB meetings on February 2nd and March 16th.
  • He discussed the progenitor Regulators Roundtable events which provided representatives from legal cannabis states with a means to connect and share information. He noted the first event in 2017 “was hosted by the LCB here in Olympia” with Washington, Colorado, Alaska, and Oregon represented. Garza said “the roundtable continued to add additional members at subsequent meetings in Portland, Boston, Denver, Juneau, Baltimore, as well as a virtual conference in August 2020. The purpose was to “share best practices and learn from each other as new states came on board,” he explained, noting a supermajority of states had legalized medical or adult use cannabis, or decriminalized some cannabis activities (audio - 1m, video).
    • Garza told colleagues about the last virtual Roundtable in September 2020.
    • Prior to CANNRA’s formation, an internal WSLCB email in February 2020 described suggested discussion topics for the next Roundtable, indicating staff at the time considered the following issues, amongst others, particularly “needed/relevant to our agency.”
      • Tracker update
      • Illicit market tracking
      • High potency products
      • Excipients/flavorings
      • Advertising/Marketing requirements
      • [Cannabidiol] CBD and other cannabinoids
  • In November 2020, CANNRA was announced as comprised of 19 states “to better share institutional knowledge and regulatory best practices.” CANNRA’s membership had since grown to “26 member states plus Washington, D.C.,” he stated, in order to provide “policy makers and regulatory agencies the resources to make informed decisions when considering approaches to cannabis regulation” (audio - 2m, video). 
    • He explained that the group was non-partisan, consisted “solely” of government regulators (“not open to industry”), and would not take a “position for or against legalization” of cannabis. CANNRA strove to provide a “much needed forum for regulators” to “engage with each other to identify and develop best practices, create model policies that safeguard public health and safety, and promote regulatory certainty for those in the industry.”
    • Garza noted that Senator Sam Hunt, the Council of State Governments (CSG) incoming National Chair, had “reached out to us almost, over a year ago” to see whether CANNRA would become “affiliated” with CSG. Hunt relayed that many CSG members “were looking to engage with the cannabis regulators because many other state legislators were looking at legalization for adult use or medical cannabis.” Garza confirmed that CANNRA had affiliated with CSG in the “last month.”

• Garza went over the top four of eight priorities for CANNRA outlined in a letter from the organization to congressional leadership.
  • The February 18th letter from CANNRA President Norman Birenbaum to the Speaker of the House of Representatives, the House Minority Leader, and the Majority and Minority leaders of the U.S. Senate listed protections for current legal state systems as their top priority. Garza said the letter aimed to inform congress of CANNRA’s existence, offered “three pages of issues states view as priorities now,” made members available to federal officials “as a resource to help,” and indicated “there are important areas of cannabis policy CANNRA believes warrant additional consideration.”
  • Protection of State Legal Frameworks (audio - 1m, video)
    • Garza commented that CANNRA’s top concern was “to ensure that the federal regulatory framework” wasn’t in “conflict with existing state programs.” He remarked that in 2020 CANNRA members had met with officials from agencies including the U.S. Food and Drug Administration (FDA), the National Institute on Drug Abuse (NIDA), the Tobacco Trade Bureau (TTB), and the National Highway Traffic Safety Administration (NHTSA). Garza relayed, “Each of these agencies is looking to CANNRA to inform them and looking for resources among the states.”
      • In 2011, prior to state-level cannabis legalization, the U.S. Department of Justice (DOJ) confirmed U.S. Attorneys had the ability to arrest and prosecute government employees facilitating state medical cannabis programs. This resulted in condemnation of the position by groups including the American Civil Liberties Union (ACLU). DOJ officials attempted to clarify their at times confusing position until a federal lawsuit in 2011 from Arizona officials regarding implementation of their medical marijuana law elicited further clarification that prosecutions weren’t imminent.
      • Following legalization of adult use cannabis in Washington and Colorado, the Cole Memorandum offered DOJ guidance on what state-level cannabis regulations should strive for to avoid intervention by the DOJ. While the memo was subsequently rescinded in 2018, it remains the polestar for cannabis regulators.
  • Interstate Commerce (audio - <1m, video) 
    • Garza said CANNRA was prioritizing interstate commerce because, “should a federal system exist, the states need to be able to move product across state lines---including across states that have not legalized---without fear of prosecution.”
      • On February 3rd, Idaho senators adopted Senate Joint Resolution 101 which would provide voters with the opportunity to approve an “an amendment to the Idaho Constitution prohibiting the production, manufacture, transportation, sale, delivery, dispensing, distribution, possession, or use of certain psychoactive drugs.” Boise State Public Radio noted that the sponsor, Senator Scott Grow, referred to Idaho as the “last foxhole” in the region and intended to “Let Idahoans choose whether they want to live in a drug-free state – free from drug culture – or not.” At publication time, the resolution had not been taken up by the Republican-controlled House.
  • Banking (audio - 1m, video) 
    • Garza called attention to former congressman and newly elected Lieutenant Governor Denny Heck who was a longtime advocate of improving cannabis business banking, claiming the Washington cannabis sector “enjoys more access to banking than any other state.” He was similarly grateful for the work of former Washington State Department of Financial Institutions (DFI) Director Scott Jarvis “in helping to get state chartered banks and credit unions to accept...state cannabis businesses. All other states continue to struggle with these services.” Garza expected that “you will hear tomorrow...from the committee staff on the SAFE Banking Act and the MORE Act.”
      • See the Update on Federal Legislation Related to Cannabis prepared by legislative staff for the March 26th WA House COG work session.
      • See also the American Bankers Association position on cannabis businesses and the American Bar Association February 2020 article Cannabis Banking: Proceed with Caution.
  • Social and Economic Equity (audio - 1m, video) 
    • “Fourth and not last is social and economic equity within state cannabis system[s],” Garza said, believing CANNRA could “serve as a resource for efforts in motion for equity thus far” and was “already making an impact on emerging issues.”
    • Garza said WSLCB Board Member Ollie Garrett “and staff learned about efforts in other states trying to address diversity and social equity within the cannabis industry” when traveling to a Regulators Roundtable in Boston hosted by the Massachusetts Cannabis Control Commission and former Commissioner Shaleen Title. They found “that the agencies alone cannot resolve the equity issue within the systems they regulate.” He credited this interaction as the source for Garrett and the agency’s choice to develop request legislation which created a social equity program at WSLCB as well as the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) “which is currently developing recommendations for the state on this important issue.”
      • In 2017, Massachusetts established the first statewide equity program for their cannabis industry, followed by other jurisdictions including Portland and California in 2018. By 2019, a half dozen states and numerous localities had enacted some form of equitable cannabis business development.
      • In September 2020, Garrett talked about being inspired by equity policy possibilities at the Marijuana: Justice, Equity, Reinvestment Conference in New York in 2018, a subject she discussed at the WSLCB Cannabis Advisory Council (CAC) meeting in January 2019. She commented that the conference helped motivate her and agency staff to develop request legislation which culminated in the social equity program and WA SECTF. Former Tribal Liaison Brett Cain compiled the agency’s initial research into social equity programs outside Washington. 

• Garza said WSLCB staff intended to organize two new external work groups following the legislative session to address delta-8-tetrahydrocannabinol (delta-8-THC) and federal cannabis legalization.
  • Delta-8-THC Work Group (audio - 1m, video)
    • Garza talked about “states working together in the emergence of delta-8” which he said was a “chemically-derived derivative” of cannabidiol (CBD) with psychoactive effects “estimated to be between 50 and 75% potency of today’s THC products.” Since federal hemp legalization in 2018, he claimed “a major market of innovation sprang up in CBD and its derivatives.” He suggested lawmakers "Google it and you will see" numerous “pop up” businesses specializing in a “quasi-legal market" for CBD and delta-8-THC.
    • Garza said unnamed “experts tell us that delta-8 is the first of many that will follow as psychoactive compounds that we’ll see in the future.” He reported that WSLCB planned to establish a work group composed of representatives from the cannabis industry, the Washington State Department of Health (DOH) and the Washington State Department of Agriculture (WSDA). The work group focus would be “to address delta-8 and other psychoactive derivatives leveraged on information from CANNRA discussions.”
      • Learn about the background of WSLCB engagement with delta-8-THC through Garza’s more expansive comments during the March 16th Board Caucus, incidentally David Postman’s first public meeting as Board Chair.
  • Federal Legalization Work Group (audio - 1m, video) 
    • With an increasing likelihood of national cannabis legalization, Garza said “some of the major cannabis brands in Canada have shared with us that major trade organizations are being formed in anticipation of the lifting of prohibition, such as the U.S. Cannabis Council” (USCC). He had also “been told” that several U.S. Senators “within the next months will issue a draft to possibly deschedule cannabis” from the federal Controlled Substances Act. “While the Biden Administration is perceived as moderate to conservative on cannabis, the industry believes the leadership and work is going to come from Congress,” Garza said.
      • Learn more about the formation and membership of the USCC.
    • To prepare for this, WSLCB staff would form another work group “to prepare our industry and state for the lifting of federal prohibition of cannabis," which the agency expected would occur “within the next two to four years.” He added that Oregon passed legislation in 2019 in anticipation of legal interstate commerce and assured the committee that “Washington and other states will be looking at similar strategies to ensure that we are ready.”
  • Chair Shelley Kloba offered her gratitude to Garza for taking the initiative to reach out to the committee before the following day’s work session and asked a clarifying question about the agency work groups (audio - <1m, video).
    • Kloba asked Garza to verify that the work groups mentioned would be separate entities. He responded that they were, though the groups “may include many of the same folks. But I see the preparation for legalization federally with the industries and others a little differently than I see tackling the issue of all these new cannabinoids that are being introduced.” Garza also expected that WSLCB would “look to see if we can do some rulemaking around delta-8 if we have the authority to do that." He expected legislation would be prepared for the 2022 legislative session to “to bring all cannabinoids under the regulatory authority” of the agency similar to the Oregon Liquor Control Commission (OLCC) rulemaking Effort to Limit Unchecked Use of Delta-8-THC, Other Artificially-Derived Cannabinoids (audio - 2m, video).
      • See OLCC’s recent presentation Delta-8-THC: Regulatory Issues Presented by Artificially Derived Cannabinoids.
    • Kloba commented that she was “very excited” to see the CANNRA letter included a call for increased cannabis research. She said a “theme” she’d been “hammering on” since joining WA House COG was more research so lawmakers could “make the best possible decisions.” Kloba suggested “joint meetings with CSG and CANNRA” could help inform legislators around the country (audio - 2m, video).
  • Representative Melanie Morgan, a WA SECTF Co-Chair, inquired about how the task force and/or its members could collaborate with the work groups Garza mentioned. He answered that WA SECTF’s work on social equity was already valuable to the agency, adding that "when I say stakeholders I mean everybody" can become part of the work groups if they’re interested. He committed to “make sure that, that everyone’s a part of that discussion” (audio - 1m, video).

Here are some observations from the Thursday March 25th Washington State House Commerce and Gaming Committee (WA House COG) meeting.

My top 2 takeaways:

• SB 5372 ("Concerning hemp processor registration and a hemp extract certification”) was presented during a policy committee executive session.
  • SB 5372 was amended and passed by the Washington State Senate (WA Senate) on March 9th. WA House COG hosted a public hearing on the legislation on March 19th.
  • WA House COG Counsel Kyle Raymond refreshed the committee on the bill’s effects, stating that “this is the bill that allows hemp processors to register with the [Washington State] Department of Agriculture” (WSDA). He told lawmakers the bill would “allow hemp processors to obtain a hemp extract certification from” WSDA to ensure exports “to other states for use as a food ingredient complies with Washington inspection and sanitation requirements” (audio - 1m, video).
    • Learn more about the WSDA Food Safety Program.
    • As amended, the bill would also permit the Washington State Liquor and Cannabis Board (WSLCB) “to test samples represented as hemp obtained from a location licensed for marijuana production or processing for the sole purpose of validating THC content.”
  • The bill fiscal note projected:
    • One-time costs for the WSLCB of $18,000
    • Expenditures for WSDA of $197,200 for the first biennium and $154,800 in subsequent biennia.
    • Revenue generated for WSDA was reported to be “indeterminate at this time.” Staff projected the cost of extract certification would be $4,000 annually, as compared to the $1,200 annual fee for a hemp production license and $1,281 for a cannabis license.

• Committee members unanimously agreed to recommend passage of the bill without modification.
  • Vice Chair Emily Wicks made a motion to approve the legislation “with a due pass recommendation” and confirmed there were no amendments to consider (audio - 1m, video).
  • Chair Shelley Kloba took a moment to call for passage of the bill, saying it was “a bill that will really be good for our small business, and well, businesses of any size who are in the hemp business.” She said the bill would provide hemp processors “certification, registration, you know, authority that they need to access markets outside of the state.” Kloba added that she wanted to support the ability to “sell fabulous Washington agricultural products anywhere in the world” (audio - 1m, video).
  • Assistant Ranking Minority Member Kelly Chambers threw her support behind the bill as “Washington grows a lot of things really well, including hemp” and she believed hemp businesses in the state should have the option to export their crop (audio - <1m, video).
  • WA House COG members voted unanimously to recommend the bill’s passage (audio - 2m, video).
  • The bill was sent to the Washington State House Appropriations Committee (WA House APP), however, the Washington State House Rules Committee (WA House RUL) “relieved the committee of further consideration.” As a result, no fiscal committee considered the bill as amended on the Senate floor.
  • To avoid the opposite house cutoff, the bill needed to be scheduled for floor action in the WA House before Sunday April 11th at 5pm - and was considered by representatives on Tuesday April 6th.