WSLCB - Board Meeting
(August 18, 2021)

Here are some observations from the Wednesday August 18th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• During rulemaking updates, staff established that the agency had contracted with an economist to look at business costs for quality control (QC) testing and planned to announce a listen and learn forum on draft tetrahydrocannabinol (THC) rules.
  • QC Testing and Product Requirements (audio - 1m, video, Rulemaking Project) 
    • Policy and Rules Coordinator Jeff Kildahl announced that the agency had “finalized the contract for the small business economic impact statement” (SBEIS) and planned to hold “a kickoff meeting with the vendor” the following day.
      • Policy and Rules Manager Kathy Hoffman first mentioned contracting with an economist to improve the rulemaking project SBEIS on March 17th.
  • THC (audio - 1m, video, Rulemaking Project) 
    • A day earlier at the August 17th Board Caucus, Hoffman informed board members that the project---refiled on July 7th---had a “draft conceptual set of rules ready for internal review that’s going to happen next Monday.” A listen and learn forum would be announced “probably towards the middle of next week” scheduled for late August or early September.
    • The WSLCB rule development agenda filed with the Washington State Office of the Code Reviser on July 30th indicated the CR-102 with proposed rules remained on track for presentation to the board on September 29th.

• Attorney Mitzi Vaughn commented on communications allegedly sent by a licensed processor to retailers accusing 20 businesses of distributing delta-8-tetrahydrocannabinol (delta-8-THC) and delta-9-THC synthesized from hemp-derived cannabidiol (CBD) via “illegal processes” (audio - 2m, video).
  • Vaughn, a Karr Tuttle Campbell Shareholder and General Counsel for The Cannabis Alliance, said that licensed processor MFUSED sent out “what it termed ‘an official statement’ to an unknown number of cannabis retailers regarding the manufacture of delta-8-THC and 9-THC” from CBD. That statement purportedly accused Evergreen Herbal as one “of 20 processors that use, this is their language, ‘illegal processes’ to” produce synthesized cannabinoids used “to manufacture vape cartridges.” Vaughn said the email accompanying the MFUSED statement read, “If you are carrying any carts from the listed brands, the LCB has asked that you immediately destroy that Inventory or return it if at all possible.”
    • The MFUSED official statement declared: "Despite confirming early on with our lawyers that these products were most likely non-compliant and would put processors and retailers at risk of breaching their insurance policies and placing their licenses at risk, we have observed increasingly larger amounts of hemp synthesized oil converted from isolate flood the Washington market, leading to a price war on oil products that is unsustainable for the industry. We are proud of the fact that we have always and will continue to support our 30+ Washington cannabis cultivators, who work hard to grow amazing cannabis flower for us to extract.
    • Without the necessary oversight to safely test and classify synthesized isolate-based Delta-9 and Delta-8 THC oil from the WSLCB or Federal Government, we decided early on to prioritize customer safety and retail security over higher profits. MFUSED will never offer products that could put our relationships with retailers in jeopardy. Selling adulterated hemp conversion oil is a serious risk for retailers due to the WSLCB’s high likelihood of a full product recall and the threat of substantial administrative violations, fines and criminal prosecution."
  • Vaughn claimed that Evergreen Herbal did not “manufacture its products with hemp-derived CBD converted into delta-8, or 9, or anything else” and asked the board “to confirm or deny” that they had approved any statement accusing the company of the practice, or requesting retailers to “destroy or return any Evergreen Herbal products.”
  • Board Chair David Postman commented that there was “no such order” from anyone at the agency, and that staff had been “made aware of this email, I believe it was late last week.” Having reached out to various divisions at the agency, he was confident that “nobody has done anything like this on behalf of the LCB.”
  • While the July 22nd Interpretive Statement on synthesized cannabinoids was silent on ramifications for retailers, the August 5th Enforcement Bulletin stated: “Retailers should not knowingly purchase products from processors which contain delta-9 THC converted from CBD. Nor should retailers sell such products to consumers.”

• A public hearing was held regarding changes to criminal history background checks required of cannabis license applicants and renewing licensees, though the only commenter was unable to connect (audio - 3m, video Rulemaking Project).
  • Kildahl explained that the proposed revisions to rules in WAC 314-55-040 pertained to background checks for “cannabis licensees” which agency officials had been authorized to conduct as part of Initiative-502 in 2012. The development of the rule was “initially established in late 2013,” he stated, with the last revision having “occurred in early 2016.”
  • The changes in the CR-102 advanced “socially equitable conditions for individuals who have been disproportionately impacted by marijuana criminalization by revising and more fully describing the background check and threshold review process for cannabis license applicants and renewing licensees,” Kildahl reported. The rulemaking changed the “criminal history point system that may have created barriers to entry,” he said, and “no comments have been received.”
  • Jim MacRae, Straight Line Analytics Owner, had difficulties connecting to the online meeting. Postman suggested MacRae submit written remarks or speak during general public comments at a future board meeting (audio - 2m, video).
    • MacRae last offered general public comment on July 21st.
  • The Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) had been looking at how discriminatory law enforcement had impacted potential applicants and their family members as one way to determine if someone could qualify as a social equity applicant. At the July 27th WA SECTF meeting, MacRae accused WSLCB staff of being unable to produce records on background checks for several individuals who had been approved for cannabis licensure. He claimed, “there are people out there that hold licenses today, or were given licenses and then were subsequently able to sell them...that should not have been given those licenses” and that this occurred “with the full awareness of the people in the LCB that gave them those licenses.”
    • A draft social equity cannabis retail application prioritization scoring rubric was shared during the WA SECTF Disproportionately Impacted Communities Work Group meeting on August 17th.