WSLCB - Board Meeting
(June 9, 2021)

Here are some observations from the Wednesday June 9th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Several people offered remarks on the Joints for Jabs vaccination campaign---including representatives of two of the three retailers who requested the program---eliciting a response from Board Chair David Postman.
  • Daniela Bernhard, Uncle Ike’s Co-Owner and Washington CannaBusiness Association (WACA) member (audio - 4m)
    • Bernhard was grateful Governor Jay Inslee and the board had authorized the campaign, even as she’d witnessed "mixed reactions to the program." Finding the “motivating incentive” of free cannabis to be a "great idea" for those still uncertain about coronavirus vaccination, she pointed out this was not the first occasion cannabis retailers were “contributing members of society...as an industry sector we’re often overlooked for how we invest in our neighborhoods and communities.” Unfortunately, Bernhard said she was “disappointed that our legal and heavily-regulated sector continues to be treated differently than our peer-sectors in Washington.” She found that “others regulated by the LCB have been given far more ability to serve their community in this program and increase vaccination numbers.”
    • “Uncle Ike’s received communications just this morning from two different vaccinating authorities,” she reported, “sharing that their legal departments won’t allow them to set up operations in cannabis shops or be directly associated with the offer of free joints at all.” Bernhard said that “establishing a clinic inside a regulated cannabis facility is fraught with challenges” from security requirements to logistical constraints of some retail premises. Moreover, “the shorter window and, you know, the limited allowance makes it far less likely that this program would be successful in its goal of increasing vaccinations,” she argued.
      • The alcohol incentive began May 15th and will end June 30th. The Joints for Jabs campaign began June 7th and will end July 12th.
    • Bernhard appreciated “that cannabis consumers are being respected in this way.” But she found “the challenges and limitations to the success of this public health effort” frustrating since “we’re as safe, regulated, and community-based as a local brewery and we believe adults that prefer cannabis over alcohol should have equal opportunity and the same access to incentives.”
    • She considered the requirement to host sites in stores "almost punitive...given its logistical difficulties and time constraints in comparison to the ease of the program extended to alcohol businesses.” If regulators were “trusting adults driving with their vaccination cards to get a pint of beer and then responsibly get to their next destination we can also trust that, you know, adults will pick up a joint and enjoy it later in a legal setting.” Bernhard added her hope that “the LCB will work with the governor’s office to revise this program for success.” 
  • Jim Mullen, The Herbery Co-Owner and Chief Operating Officer; WACA President (audio - 6m)
    • Mullen explained that his business welcomed the Joints for Jabs program to “expand access to vaccinations for more people” and remained “committed to strengthen[ing] public health and safety and to ensure the fullest possible community and economic recovery.” However, he considered the requirement that vaccinations be administered on-site led to "a myriad of questions left unanswered" that the WSLCB Enforcement officer they worked with had to "check back with Olympia" on before answering.
    • Mullen had begun reaching out to the Washington State Department of Health (DOH), Kaiser Permanente, and Providence Health & Services. He had learned the DOH Care-A-Van “requires a 30 day advanced notice,” so the service could only have been used for the last week before the program expired. Should the agency release further information on Joints for Jabs, he asked that it cover:
      • “Specific [Americans with Disabilities Act] ADA concerns that we must address”
      • Contact information for county public health entities and “who the LCB has coordinated with already”
      • “A list of cities or counties that are willing to participate or not”
      • “Can the shots be administered in a parking lot” like previous outdoor DOH vaccination sites
      • Should a vaccine requiring multiple doses be offered, “can someone receive a second joint when they come back for a second shot”
    • Mullen recommended the program be extended until Labor Day so that “people could come back to our facility to get the second shot.” Since officials had “extended a lot of opportunity for the liquor” licensees, he asked “what we could do to kind of get at some equal footing” such as only asking customers to "show us your vaccine card" to receive complimentary cannabis.
  • Jim MacRae, Straight Line Analytics (audio - 4m)
    • While indicating he had been complimentary of the program online, MacRae concurred with Bernhard’s comments and recognized the formidable program restrictions. Comparing allowance conditions “side-to-side with the allowance conditions for alcohol as it relates to vaccinations,” he had found the largest difference was the requirement for on-site administration of vaccines.
      • The allowances for the program require that “Any vaccine clinic held inside a licensed retail location must comply with all age restriction requirements for the cannabis retailer” and the allowances do “not supersede any state or local health rules and regulations, and licensees must ensure compliance with local heath jurisdiction rules and regulations associated with such clinics.”
    • Several of the conditions “make it hard to simply have one of these” vaccine drives, MacRae stated, such as local government restrictions and “public health and safety ramifications of this.” Having received his second dose of Covid vaccine, he said he could go to "literally thousands of alcohol establishments," show his vaccine card, “and get free drinks.” In contrast, the Joints for Jabs program was limited to one joint “per person” or “possibly two, if, if they can figure it out that way,” MacRae reasoned. As cannabis was “the safer of the two alternatives”---which he called “unambiguous in the science”---MacRae advised Postman to “look at who in the organization put those poison pills” in the program.
  • Postman responded to comments on the Joints for Jabs program, agreeing with remarks that agency staff should find answers to the topics raised by Mullen, even if the answers were from another agency (audio - 7m).
    • He expressed skepticism that allowance conditions required vaccine sites  to be indoors, “in fact, the vision we had was a drive through.” Postman took issue with the description of the on-site condition as “punitive,” noting the idea “came to us from someone in the leadership of WACA.” He felt the program was allowed “with the proper controls around public health” and respected the “current regulated environment that the retailer operates in.” Postman indicated that this attitude had been shared by many in agency leadership and they had “moved very quickly to make that happen.”
    • Postman viewed the differences between the incentives for alcohol and cannabis as reflective of the legality of the substances and differences in policy, especially around on-site consumption of alcohol versus “take out, essentially” for cannabis. He agreed that MacRae had a point about receiving multiple servings of alcohol, and wished they “could punch the card” to stop the possibility, but on-site service limitations were designed to “stop overserving, or serving of minors, or anything else.” Postman believed they’d recognized regulatory differences while permitting incentives “in some fashion.” He added that they had never expected all cannabis or alcohol licensees to be able to use their respective programs.
    • One of the “important differences” between the alcohol and cannabis incentives that Postman emphasized had gone unmentioned was to grant “the cannabis retailers a relief on taxes that we did not give on the alcohol side.” This saved participating retailers from paying “a larger percentage of, of the taxes,” he noted, giving “the cannabis industry a privilege that the alcohol industry was not given and would have liked.”
      • Tax rates for alcohol vary, but are assessed with a per gallon excise tax, whereas cannabis has as 37% excise tax on the value of the product. Using data from the Tax Policy Center, a standard drink of beer in Washington (12 fluid ounces) is assessed a tax of $0.024375 and a standard drink of wine (5 fluid ounces) carries a $0.033984375 tax. A June 2020 comparison from the Tax Foundation showed Washington cannabis was the most taxed among legal states.
    • “We are further ahead than any other state in the nation on this front,” Postman continued, “and we often hear from WACA that we’re behind every state. We’re not.” He was aware of “one state that’s allowed one store to do this” and felt Washington was “out ahead on this” and that “no one else in the country is doing it...so of course there’s going to be some bumps.” With a goal of promoting vaccinations, Postman didn’t feel the state was “promoting alcohol, we’re not promoting cannabis, we’re trying to get more people to get vaccines.” As well, he believed there were other ways for socially conscious cannabis licensees to help their communities. He asked for “a little understanding” from licensees and the public, concluding that if Joints for Jabs was “not the right thing, then that’ll be too bad because I think we all need to get as many people vaccinated as possible.” Board Members Ollie Garrett and Russ Hauge agreed with Postman’s sentiments.
      • A Forbes article one month before Washington announced the Joints for Jabs program identified cannabis-based incentives in Washington D.C. and the states of Arizona, Michigan, and New York.

• A public hearing on expansion of tier 1 cannabis producer canopy generated general support, but most commenters found the proposal didn’t go far enough.
  • Policy and Rules Manager Kathy Hoffman presented a background on the rulemaking effort (audio - 3m, Rulemaking Project).
    • Approved by the board to begin in December 2019 but delayed during the state pandemic response, Hoffman remarked agency staff had led two listen and learn sessions in 2020 that had been “well attended” - but mostly by tier 2 and 3 licensees. Seeking to “hear specifically from” tier 1 license holders, Hoffman led development of an opinion survey of those licensees, releasing a report on the responses on April 2nd. The “most prevalent theme emerging” from those surveyed, she said, was “to allow some measure of tier 1 expansion” in order to support “businesses with the ability to be competitive in an already competitive market.”
    • Hoffman acknowledged the CR-102 containing proposed rules was approved by the board on April 28th. It allowed for tier 1 canopy to increase from up to 2,000 square feet (sq. ft) to up to 4,000 sq. ft and adjusted tier 2 licensees from the current 2,000 sq. ft to 10,000 sq. ft range to be 4,000 sq. ft. to up to 10,000 sq. ft to avoid overlap between tiers.
    • Hoffman said, “tier 1 production canopy represents 1.94% of total licensed canopy” and if “every active tier 1 licensed producer added an additional 2,000 square feet of production capacity” the total canopy for tier 1s would “represent only 3.6% of total active licensed plant canopy.” This was equivalent to “adding less than nine tier 3 license[s],” she said, “although the equivalency there would be spread out among 125 active businesses” if there was 100% participation by that tier “and we don’t expect that that will happen.”
  • Micah Sherman, Raven Co-Owner, established that he had a tier 2 production license with 4,500 square feet of operational canopy - “a similar size to this new proposed tier 1” canopy limit. While he was “not opposed to adding this canopy” for tier 1s, he “strongly encourage[d] the board to not look at this as the solution to the problems that exist with the tier 1 license” (audio - 4m).
    • He believed the proposed change wouldn’t “do a lot for very many people, I think it will do some small measure of good for a small group of tier 1 producers” but “overall, the problems” those licensees were experiencing were “the same problems that all small cannabis farmers are having, and that's related to market structure, and our opportunities to get our products to market.” Sherman observed the “direction that that’s brought the industry overall” was “a lot of conglomeration, a lot of consolidation, a lot of failed” cannabis producers of varying sizes.
    • Sherman found proposed rule changes would be a “very small gesture towards a solution that is, is much bigger and broader than is going to be able to be dealt with by canopy space alone.” He asked WSLCB leaders and staff to “continue to look at” the problem of how “the market is structured” and seek solutions.
  • Jim MacRae was appreciative of the “focused, and brief, and extremely understandable set of rule changes,” and complimented staff for “elegant” revisions that “addresses the expansion of the tier 1s, I think that’s a good thing” (audio - 5m).
    • However, MacRae said it was “unfortunate” that “any reference to” medical cannabis production which “was part of the original discussions about the need” for tier 1 expansion had been removed. He was sympathetic to why the issue may not have been pursued, feeling “if the department of health were more engaged in things we might” have had more progress regarding medical cannabis access. Overall, he found the rulemaking changes “a good thing.”
    • Speaking to the history in the CR-102 memorandum, MacRae was complimentary of the description while emphasizing some specific points:
      • “The emphasis on having tier 1s and keeping things fairly small” he suggested, was to foster an opportunity for those who had grown illicitly to transition to a legal market and “for small, mom-and-pop type businesses to do their thing.” These producers were “what I think most of us would consider to be craft” cannabis, MacRae said, and could be helped by the rulemaking proposal.
      • MacRae called for more work on RCW 314-55-075(7)(a) and (b) which “still make reference to the board’s...ability to decrease the canopy of licensees under a few conditions.” He wondered if these “optional” powers were “even needed anymore given that, by rule, the maximum canopy is defined as that amount that is licensed” finding the language “circular.”
      • He stated the rulemaking was focused on “16.5% of the licensees” according to the numbers in the memorandum and suggested the board could take action on “how many farms are underutilizing their, their canopy...the board could shift it so that there are a total of 702 licenses that are forced into tier 1 because they are currently, years after being licensed, not even doing 4,000 feet of canopy.”
  • Mark Ambler, Breeze Trees, Co-Owner and Tier 1 Producer Association (T1PA) Founder, believed the proposal would "get us closer to an industry where licensure is available to all people." He felt there would be opportunities for entrepreneurs regardless of background or ability to “break into the cannabis industry” to “build their brand” and generational wealth (audio - 4m).
    • “What I think we should do is focus on brand value and profit, versus revenue,” Ambler said, finding the revenue of a producer to be an overvalued factor and that a “non-speculative investment group or person, they’re going to want to know more than just revenue.”
    • The expansion would help “on new areas as they open up” to legal cannabis, he advised, including “non-psychoactive cannabis products,” textiles, “or rope, we’re going to need more canopy for stuff like that.” Ambler talked about communicating with representatives from Western Washington University (WWU) who were waiting for changes in federal law to conduct research in his production facility, a “huge little thing” that he believed would need alternative business models as compared to what the state allowed.

• Other topics raised during public comments included policy development around cannabinoids synthesized through conversion of cannabidiol (CBD) extracted from hemp biomass and craft cannabis.
  • The topic of hemp biomass being converted into an ingredient for the cannabis market had been discussed in several board meetings, most recently during the June 8th Board Caucus.
  • Jeremy Moberg, CannaSol Farms Owner and Washington SunGrowers Industry Association (WSIA) Board Member, said “the infusion of hemp biomass into this market” along with “overproduction” of cannabis by some businesses was “what is hurting us the most” (audio - 5m).
    • Moberg said for “mid-sized farms” like his to be successful, agency leaders and staff had to enforce canopy limits because “the word on the street is the LCB, since the revision with the compliance officers...that there is no enforcement.” He alleged that “just up the road” from his licensed facility there was “farm after farm” producing in excess of their allotted canopy.
    • Morberg suggested that the increasing prevalence of delta-8-tetrahydrocannabinol (delta-8-THC) was further proof that regulations for cannabis production were being flouted. “Just a statement by the LCB" could help the situation, he said, and “go a very long way.” He argued this would help create a “more equitable environment” for newly expanded tier 1 licensees as well.
    • Moberg voiced similar concerns during the January 6th WSLCB Cannabis Advisory Council (CAC) meeting and with other licensees opposed to imported distillate on April 14th.
  • Marcus Charles, clēēn:tech President and clēēn:hemp Co-Founder, told the board that his company licensed “hemp sourced THC technology solely and exclusively to regulated cannabis license holders.” He expected that as “the rulemaking process continues about clarifying hemp sourced THC in our state” he would have more chances to keep “engaging with” agency leaders (audio - 3m).
    • While “legislation will likely be required in 2022 to fully meet this goal,” Charles was grateful for the “fact finding effort” agency officials had already undertaken, pointing to the June 3rd deliberative dialogue on cannabis chemistry as an “effort to center science, and its relationship with public safety, at the core of the dialogue.”
    • Since his last testimony on May 26th, Charles had seen “a continuing public conversation amongst license holders and the media and the general public about the need to include all forms of THC in the regulated marketplace.” He was also encouraged by a Everett Herald editorial from June 6th which he quoted as saying “Washington voters made the determination that the best way to ensure safety, discourage the illicit market and keep cannabis products out of the hands of minors was to provide a well-regulated and transparent marketplace.”
    • However, Charles said according to an unspecified “internal data analysis of the different social media platforms, the largest segment of the online conversation regarding delta-8-THC specifically is occurring among people looking for these products in the illicit marketplace.” This reminded him of pre-legal cannabis when “the illicit marketplace thrived, unchecked, to the detriment of public safety.”
    • Charles called for “mandatory quality control testing for all legal cannabis products” to center public health and “ensure that the baseline for future regulation is safety first.” 
  • Monica Martinez, Owner of The Calyx Co. and a Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) appointee, wanted to talk about “synthetic D8 and [Delta-9-THC] in Washington and the importance of craft cannabis.” She believed if the “highly regulated” legal cannabis market faced “direct competition with the world’s hemp synthetically derived, psychotropic D8 and D9 THC, then Washington’s [initiative] 502 system will be null and void” (audio - 5m).
    • Comparing a pattern witnessed when cannabidiol (CBD) “was allowed to be imported in Washington from anywhere in the world,” Martinez said the result had been that the “I-502 CBD market crashed.” Should “cheaper” imported cannabinoids “continue to infiltrate I-502” from other sources, she expected the state’s “regulated and compliant farmers will go out of business.”
    • Allowing converted hemp biomass meant “the I-502 system will be riddled with sub-par products as they are much, much cheaper to produce,” she said. Martinez felt there were also issues of business transparency “as well as potential health effects” from “the heavy duty solvents used to create hemp-derived THC products” which she termed “very real and very scary” for the consumer and “deleterious to the environment.”
    • Continued use of the ingredients was sure to “push medical patients and recreational consumers to buy from their neighborhood, illicit, medical card growers unless craft cannabis legislation is passed,” Martinez argued. While medical cannabis patients were “a scarce percentage of customers at I-502 retail stores to this point,” she said they still “want to know their grower and visit the farm they are purchasing from” rather than the “closest retail shop, which in some instances, may be up to three hours away.” Creating a “farm-to-consumer or patient relationship” as well as increased “access of medically compliant and organic Washington-grown cannabis and CBD products” would help the public and “vulnerable patients,” Martinez stated.
      • The last craft cannabis legislation that was introduced was HB 1260, which was not given a public hearing during the 2021 legislative session.
      • At time of publication, the state had no organic-equivalent standard for cannabis. The Washington State Department of Agriculture (WSDA) Certified Cannabis program was created to set such a standard as mandated by 2017 legislation, but the program implementation was allegedly stalled due to budget limitations. WSLCB staff last talked about the hold up in February 2020. WSDA Organic Program Manager Brenda Book made similar comments during a webinar on March 24th.
    • Acknowledging all cannabis businesses had faced numerous challenges, Martinez said the greatest impact was “the enormous stress on many families.” To allow synthesized cannabinoids in the legal sector “opens the door for many to unfairly take advantage of this highly regulated closed system without having to comply” with the same rules as licensed producers, she told board members. The “closed” legal system had an “extremely limited amount of retail outlets and more than enough high-THC cannabis farmers,” Martinez added, leaving the state “overburdened with flower” and too few places to sell it. Adding THC from hemp biomass as a fixture of the market would “destroy small, independent farmers.” She remarked that there was “no place for these products in Washington.”
    • Marinez asked that the board take action to “ban all synthetic D8 and D9 THC products from Washington’s I-502 system and support legislation to outlaw the practice just like Colorado and 11 other states have done.” She also wanted the board to back craft cannabis legislation and closed with a fear that minors had “access to the D8 products” through the internet and were learning “how to create the psychotropic drugs on their own.”
    • Martinez offered other remarks on the practice along with other stakeholders during the April 14th board meeting.
  • Micah Sherman also talked about craft cannabis legislation, saying he’d spent years working on the subject. He wanted craft cannabis growers to be distinguished the way “craft brewing and craft spirits” were already (audio - 5m).
    • Sherman pointed out the WSLCB Licensing staff analysis of the bill claimed “Producer/processors would essentially be allowed to be vertically integrated” but the intention of the direct sales allowance for craft licensees was “not vertical integration.” The term had a “specific meaning, especially in the context of agriculture” that wasn’t applicable to the size of producers envisioned in HB 1260, he noted. “So, when a big wine maker buys a bottle factory, when a wine maker buys a chain of retail stores,” that was vertical integration, Sherman said. “What we’re asking for...is an exemption to the limit on direct sales” as a method of preventing “exactly that sort of conglomerization from occurring.” He asked WSLCB staff to acknowledge that distinction. Asserting “some others in the industry” had attempted “to confuse everybody about what it is we’re asking for here,” Sherman asked the board to help small producers have “a path to market” similar to craft alcohol companies.
    • He commented that the analysis from WSLCB staff also assumed “more access points is going to reduce the price of product” even though that pattern hadn’t been found in the craft alcohol sector. “This is about bringing a nuanced, high-level product directly to consumers,” Sherman stated, and “it’s about consumer education, it’s about transparency, and it’s about bringing understanding of the cannabis economy directly to our customers.” Seeking to avoid “alienating” consumers from knowing how their cannabis was grown could potentially lead to demand for more expensive items, he suggested. Craft producers didn’t want to participate in a “race to the bottom,” and instead sought “quality conversations with our consumers” that Sherman said could further public health and safety by raising awareness about pesticide use in addition to sharing “what it’s like on the ground floor for farmers.”