WSLCB - Board Caucus
(May 18, 2021)

Here are some observations from the Tuesday May 18th Washington State Liquor and Cannabis Board (WSLCB) board caucus.

My top 3 takeaways:

• Board Member Russ Hauge went over what he’d been learning about hemp biomass conversion into cannabinoids like delta-8-tetrahydrocannabinol (delta-8-THC) and “some very serious policy questions” that had arisen as a result.
  • In November 2020, WSLCB staff were developing a draft policy statement focused on delta-8-THC before receiving input from stakeholders that led staff to change the scope of the policy statement to more broadly include cannabinoids other than delta-9-THC.
    • On April 14th, board members heard from licensed producers and other stakeholders opposed to delta-8-THC derived from hemp in legal cannabis products.
    • On April 23rd, the Washington State Pharmacy Quality Assurance Commission (WA Pharmacy Commission) responded to an inquiry from WSLCB regarding interpretation of a THC statute, providing a general affirmation of a “plain language reading” of the law.
    • Board members and agency staff discussed the policy statement on April 27th before it was released April 28th. On May 3rd, WSLCB representatives issued a clarifying document which stated, “Until the LCB has reached a conclusion through the public rulemaking process whether to adopt rules to create enforceable requirements regarding products that contain delta-8, this policy statement is advisory.” 
    • On May 4th, Policy and Rules Manager Kathy Hoffman reviewed both statements and announced that she would request to initiate rulemaking around the “evaluation of THC compounds other than delta-9.” At the May 12th board meeting the Board voted to approve starting the project.
  • During the caucus, Board Member Russ Hauge brought up stakeholder meetings he was having “regarding the delta-8 issue” and said he’d found himself using the term “hemp-based biomass rather than cannabis-based biomass” (audio - 3m).
    • He talked about hemp biomass being “material that is collected during the farming” of the crop, and how it could “be turned into an intoxicant, delta-9 or a high concentration of delta-8,” whereas “cannabis biomass is the trim and leaves that our producers grow and sell to processors to turn into oil and other distillates.” Hauge relayed his belief that use of this process was “the opening gun in the commodification of cannabis.”
    • Hauge had gotten the impression that “if hemp-based biomass is allowed into our regulated market that we will be....we’re setting the table for even more pressure on our smaller producers” due to the fact that “their market for the trim...will be gone.” Though open to being “corrected on that,” he said his impression opened up “some very serious policy questions”:
      • “What kind of market do we want to have?”
      • “What are we going to say to those people who entered our market, got licenses for a small tier 1 or tier 2 production facilities, and then, now we have their business model disrupted by this commodification?”
        • In December 2020 the board approved a rulemaking project which led to proposed rules for expanding tier 1 producer canopy. That rulemaking project was scheduled to receive a public hearing on June 9th.
    • Hauge said agency leadership had “gotten the attention of the industry with our policy statement and I look forward to working this through and...guess I’m putting my fellow board members on notice that this is not going to be an easy discussion to have.”

• Board Chair David Postman brought up the agency policy statement on THC isomers, asking whether it had been “reinforced” by the discussions Hauge had been involved in (audio - 3m).
  • Postman asked Hauge if the agency statement comported “with your thinking” about the issue and if it had been “reinforced by what you’re hearing from people.” Hauge responded that he saw the statement as “serving a very good purpose right now” but “the heart of what I’m saying is that I don’t know, as a board member, enough about this issue yet to say what I think we should do.” Hauge viewed the policy statement as outlining the concerns of agency leaders while not authorizing personnel to take “any enforcement actions based on the policy statement.” Still, the statement served as “fair notice that we recognize that these issues are very complex and potentially very impactful on our regulated market,” he said.
    • The WSLCB webpage on policy statements described them as applying “to the entire organization and are primarily intended to set direction.” 
  • Postman had found the cannabis sector was “not of one voice on this issue,” and Hauge agreed that the situation reactivated “the tension that has always been in our marketplace between those license holders who are of a size and have business power that they can absorb the hit, or capitalize on the hit of changing the foundation” from one of “cannabis-based biomass to hemp-based biomass.” He expected some business owners would say converting hemp biomass into cannabinoids was “a cheaper way for me to make product and to sell product, why should I not be able to make more money?” And, “on the other hand, there are the smaller producers, primarily, who got into the business” as a way to “have a farm and grow cannabis,” Hauge commented. He’d observed that the small producer “business model, from what I’m learning, pretty much always” included selling “the trim to make the deal.” Postman concurred there were significant implications for any regulatory decision and “it’s changing fast. The industry’s not a monolith on this and, and it will be a challenge.”
    • Beyond business implications, on April 28th the board heard a comment on the “conversion of [cannabidiol] CBD distillate to delta-8 and delta-9” which warned that the conversion process resulted in “unknown impurities [that] could pose a risk to consumers.”

• Board Member Ollie Garrett wanted to know how other states with legal medical or adult-use cannabis were responding to the extraction of cannabidiol (CBD) from hemp biomass and subsequent conversion into other cannabinoids (audio - 3m).
  • Garrett brought up “articles that’s been sent to us of other states,” asking if other jurisdictions were “ahead of us, or are we all struggling at the same place right now?” Hauge found it “hard to say for sure” since the “action of the states is governed by the idiosyncrasies of their” legislative calendars “or the authority of their rulemaking bodies.” He was finding that states having “regulated markets...have the same concerns we do and are taking steps to ensure” product safety and were looking at “what effect is this going to have on the market.” However, Hauge said it was “early days” and “nobody really knows yet” what the impact would be in part because “it’s not like we have a mature, regulated market now.” 
  • Postman spoke up to say that Hoffman, Director Rick Garza, and Public Health Education Liaison Sara Cooley Broshcart were “talking with other states’” officials and the board could “ask for an update...at an upcoming caucus on what are they hearing from those other states.” His understanding was that many states were “struggling” with the topic, and highlighted Oregon legislation that was “still pending” which lawmakers might approve in 2021.
  • Hauge said that Hoffman would “have the best handle on what’s going on,” and believed Oregon had taken up legislation “because when the issue came to their attention they could still get before their state legislature.” He continued, saying WSLCB staff lacked “a clear picture of what really was going on until after the deadlines had passed for legislative action.” Postman responded that staff had “been clear” that the policy statement, agency rulemaking, and “very likely” agency request legislation prepared for the 2022 legislative session would bring “further action” through an “iterative process and, and will not be done in one fell swoop.”
  • At publication time, several states’ officials had either banned delta-8-THC specifically via legislation or were considering legislation restricting cannabinoids besides delta-9-THC.
    • Oregon - On March 20th, Oregon Liquor Control Commission (OLCC) leadership released a statement indicating an intention to regulate delta-8-THC through HB 3000, legislation which would further regulate cannabinoids.
      • The bill received a public hearing by the Oregon State House General Government Committee on March 25th and 30th. Committee members hosted work sessions on the legislation on April 1st and 13th. At the latter meeting, they voted unanimously to recommend passage with amended language.
      • HB 3000 was then referred to the Oregon House Rules Committee, which convened public hearings on the bill on April 19th and 20th. The committee had met for one work session on the proposal on May 14th, with a second work session scheduled for May 25th. 
    • Alabama - In February, a bill banning an addictive, opioid-like antidepressant was amended to prohibit delta-8 and delta-10-THC. The legislation was delivered to the governor on April 29th.
    • Colorado - On May 14th, the Department of Public Health and Environment released a statement declaring that “chemically modifying or converting any naturally occurring cannabinoids from industrial hemp is non-compliant with the statutory definition of ‘industrial hemp product” and explicitly referred to delta-8-THC. The state Marijuana Enforcement Division also released a bulletin on the policy.
    • Kentucky -  On March 25th, House Bill 307 was signed into law, declaring that cannabis “means all parts of the plant Cannabis, whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant,” banning all isomers of THC. 
      • On April 19th, the Kentucky Department of Agriculture sent a guidance letter to hemp licensees reiterating their position on delta-8-THC, suggesting the compound was a schedule I controlled substance under federal law.
    • Michigan - House Bill 4517 was introduced on March 16th and would add a statutory definition for ‘Industrial hemp-infused product,’ defining it as “a topical formulation, tincture, beverage, edible substance, or similar product containing industrial hemp and other ingredients and that is intended for human consumption. The delta-9 tetrahydrocannabinol concentration of an industrial hemp-infused product must be measured based on the volume or weight of the industrial hemp-infused product.” However, a substitute version of the measure recommended on May 18th offered an even more expansive reform of the definitions around the distinction between hemp and cannabis plants. At time of publication, the bill was awaiting a second reading in the Michigan State Legislature.
    • Mississippi - Officials made all isomers, synthetic substances, and derivatives of THC illegal under House Bill 1547 in 2019.
      • A Hemp Cultivation Task Force report provided an exception for synthetic cannabinoid medications dronabinol and nabilone; and provided an exception for extracts, oil, and resins with a 20:1 ratio of cannabidiol (CBD) to THC diluted to a concentration of 2.5mg per milliliter.
    • North Dakota - House Bill 1045 was signed into law in April, specifically banning delta-8, delta-7, and delta-10 THC. 
  • Additionally, the U.S. Drug Enforcement Administration (DEA) finalized rules for hemp production in 2020. The agency added “Delta-8-THC” to a list of alternative names for THC in a May 10th guidance document of drug names. In a statement released by media on May 24th, the agency claimed that “Delta 8 THC was added to the controlled substances list in August 2020 on an interim basis while pending final disposition. As DEA is currently undergoing the rulemaking process regarding the implementation of the Agriculture Improvement Act of 2018 - which includes the scope of regulatory controls over marijuana, tetrahydrocannabinols, and other marijuana-related constituents - we would be unable to comment on an any impact in legality of tetrahydrocannabinols, Delta 8 included, until the process is complete. We are in the process of reviewing thousands of comments and do not speculate on what could happen as a result.”