WSLCB - Executive Management Team
(September 8, 2021)

Here are some observations from the Wednesday September 8th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) Public Meeting.

My top 3 takeaways:

• WSLCB staff had been preparing two potential pieces of agency request legislation for review by the Governor’s Office and the Washington State Office of Financial Management (WA OFM).
  • WSLCB Director of Legislative Relations Chris Thompson briefed agency leaders on the 2022 agency request legislation process on June 9th. Proposals were due by Monday September 13th, but WSLCB staff intended to have their bill packages vetted and submitted by Friday September 10th.
    • Review the timeline and form WSLCB division staff were provided with to propose request legislation. Cannabis Observer requested but did not receive any completed forms.
  • On June 11th, the Washington State Department of Ecology (DOE) Cannabis Science Task Force Steering Committee learned about a proposed Interagency Coordination Team (ICT) intended to regulate lab accreditation between WSLCB, DOE, and the Washington State Department of Agriculture (WSDA). On August 5th, Kendra Hodgson, WSLCB Cannabis Examiner Manager and steering committee member, offered more details on the proposal which would be led by WSLCB staff.
    • WSLCB Director Rick Garza spoke at a June 23rd meeting of the Washington CannaBusiness Association (WACA) where he was provided with talking points focused in part on cannabis testing labs and developing request legislation covering:
      • “when accreditation authority is transferred, 
      • where that authority is vested
      • and how involved agencies can build capacity to provide substantive, expert guidance and oversight to the program.”
  • On Wednesday September 1st, Thompson sent selected stakeholders a draft bill “extending regulatory authority over cannabinoids of a psychotropic and impairing nature and providing for enhanced product safety and consumer information disclosure about marijuana products.” 
    • The act begins with a section establishing that, “Due to the evolving nature of new cannabinoids being identified in the plant cannabis which are impairing and psychotropic in nature, the legislature finds there is a need to provide consumers legal access to products that have been tested and which meet the same standards for quality and safety as delta-9 tetrahydrocannabinol (Delta-9-THC). The legislature further finds there is a need to require labeling, serving size, potency, and ingredient disclosure standards for any psychotropic impairing cannabinoid. The legislature further finds there is a need to distinguish cannabinoids derived from natural plants that are prepared for human consumption and the more unpredictable artificial cannabinoids created solely through chemical reactions. The legislature further recognizes the need to maintain clarity between plants defined as marijuana and plants defined as hemp. The purpose of this act is to authorize the board to regulate all psychotropic impairing cannabinoids, regardless of origin, and to direct the board to adopt rules related to cannabinoid products and cannabis isolates.”
    • Distinctions between naturally occurring, synthesized, and artificial cannabinoids were explored at length during two deliberative dialogues hosted by WSLCB staff on June 3rd and July 20th.
    • Thompson’s engagement with stakeholders occurred late as measured by the timeline presented in June which assumed outreach would occur by mid-August.
  • On Tuesday September 7th, Thompson sent another email, extending the feedback period, noting, “We clearly did not provide enough time for stakeholders to analyze the proposal, discuss its impact with internal audiences, and develop comments or proposed changes to the bill draft. As a result, the LCB Director Rick Garza requested additional time for the agency to finalize its proposal, and we have today been given permission from the governor’s office and OFM to take the additional time necessary to give the stakeholder community an adequate opportunity to review the proposal. We will also distribute a brief summary description of what the bill would do, which might help clarify the purpose and intent of the proposal and provide for more substantive feedback. We will be facilitating an upcoming webinar presentation where we can also receive feedback from stakeholders on the proposal.”

• Director of Legislative Relations Chris Thompson first briefed on a joint request to create an Interagency Coordination Team (ICT) to regulate cannabis testing lab standards (audio - 8m, video).
  • Thompson informed the group that the agency had partnered with WSDA to offer the ICT request bill to establish a “new and more rigorous and effective system for cannabis testing labs.” He said the ICT would “assist and work with the industry” and credited the idea for the unusual, semi-permanent multi-agency entity to the cannabis science task force.
  • The ICT would be a “three agency coordinated team" establishing “quality standards for the testing labs,” Thompson said, with the proposal coming from WSDA and WSLCB as both “have regulatory authority implicated by the bill.”  He previewed the effects of the bill as:
    • Creates the ICT with required participation by WSLCB, WSDA, and Washington State Department of Health (DOH) staff to set “substantive requirements for testing labs.”
    • Allows WSDA to “establish those standards/requirements in rule” and give “admin[istrative] support.”
    • The draft clarifies “the difference between product standards and lab standards.”
    • Includes an “affirmative directive statement" that labs have to “obtain and maintain accreditation from the state to operate” though there was “implicit suggestion of that but this bill...would make it explicit.”
  • Not in the draft request bill, but “part of the package overall” according to Thompson, were “budget requests or decision packages from all three of those agencies to add a little bit of particular staff to this effort.” Although the budgets were still being put together, he “generally” anticipated participating agencies would request funding for “a couple, three or so, [full time employees] FTE at each of the agencies, particularly in scientific disciplines.”
  • Under the envisioned system, DOE representatives “would also play a role” Thompson compared to “an audit.” Once standards were adopted by WSDA, “then Ecology would go out to the labs and determine whether they are meeting those standards.”
    • He remarked that accompanying legislation by DOE leaders was on hold “for a year” as staff would “know a lot more about what we’re dealing with, what the legislature’s approved...and would clarify” further changes needed by the spring of 2023.
    • Because of this, related language about lab fees that was removed in the WSLCB request bill needed to be put back in, Thompson said. An edit to the draft would “restore those provisions...even though they’re not effective until 2024,” he remarked, later mentioning that discussions on the bill with DOE and WSDA staff were ongoing, and the lab fee language was “one change to our draft that we’ve already recommended.” The draft would either be revised before submission, “or...we’ll need to do it once the bill arrives in the legislature,” Thompson explained. He called the differences “technical stuff” that the board didn’t need to be concerned with (audio - 1m, video).
  • Thompson described how Chief Financial Officer Jim Morgan was putting together the budget decision package and fiscal note, and “aligning” the funding needs with WSDA colleagues. He commented that there had been minimal “stakeholder feedback outside of the team.”

• A second request bill on “psychotropic compounds” had provoked a much larger stakeholder response as the potential legislation was intended to address a “regulatory loophole" on synthesized cannabinoids created through chemical conversion of cannabidiol (CBD, audio - 8m, video). 
  • Thompson said this effort to "close, essentially, a regulatory loophole in cannabis oversight" where of the “150 or so, and counting, compounds that have been identified from the cannabis plant,” regulators had authority "tied solely to one of those compounds, just delta-9-THC.” He said WSLCB leaders wanted “regulatory authority over any and all compounds from the cannabis plant that are psychotropic and intoxicating." This included delta-8[-THC] “which you’ve probably heard lots about,” and other compounds “we think are probably not far behind” in becoming a product “that’s out there, delta-10[-THC]...there are a number of others. And who knows how many more might be identified as having, you know, commercial value and...emerged in a marketplace? If we don’t extend our authority we could be looking at a lot of products that are intoxicating, unregulated, and essentially untaxed, at least in a manner that cannabis is.”
  • The bill was set to add or modify several definitions in the state Controlled Substances Act, Thompson stated.
    • “THC concentration would no longer be limited to delta-9”
    • “The definition of a processor is also revised” to deal with “processors operating not strictly within the...confines of the license privileges established. And what we’re trying to say in this legislation is that a processor could...conduct an expanded range of types of activities.” This could include “doing compounds, converting, preparing---directly or indirectly---by extraction, other components of the plant...The intent here is to establish a more realistic range of activities that processors would be allowed to conduct.” 
    • The language may have “a technical amendment to the current bill draft” aligning the license privileges statute for processors with the new activities.
    • At publication time, the proposal modified the definition of  “Tetrahydrocannabinol” to include Delta-8-THC, Delta-9-THC, “and the optical isomers of Delta-8 or Delta-9 cannabinol, and any artificially or synthetically derived cannabinoid that is reasonably determined to have an intoxicating or psychotropic impairing effect.”
    • As well, the definition of ‘Total THC’ was expanded beyond Delta-9-THC to “the sum of the percentage, by weight or volume measurement of tetrahydrocannabinolic acid multiplied by 0.877, plus, the percentage by weight or volume measurement of Tetrahydrocannabinol.”
      • The tetrahydrocannabinolic acid multiplier of 0.877 estimates the molecular weight lost during decarboxylation of THC-A and is also used in THC definitions and regulations in Vermont, Ohio, and Nevada. During 2021, the value was proposed in legislative changes for definitions of ‘Total THC’ and ‘Potency’ in New York and Florida, respectively.
  • The bill would be “allowing for use of ‘synthetic cannabinoids’ that are created from plant material” grown by licensed producers while prohibiting use of "artificial cannabinoids,” Thompson reported. “The bottom line is we’re working toward a regime where this agency has authority” to regulate “any of the compounds which are psychotropic and impairing,” he said, while clarifying this did not mean authority over hemp below “0.3% THC level.”
  • Thompson told the group that the initial distribution of the draft to stakeholders included less than one week for responses, and led to “a lot of feedback...that that didn’t provide enough time.” He said agency officials had asked the governor’s and OFM staff for additional “flexibility” and had been approved to make “revisions” to the request legislation after submitting it to those offices by September 13th. Stakeholders---including additional ones “that we heard from,” noted Thompson---had been told they were getting additional time to review the draft and provide input.
  • Staff would again review “fiscal issues here,” Thompson commented, but there wasn’t a plan for the agency to seek “new funding for this” as agency staff expected they could manage any new work under existing appropriations. A fiscal note would project “no impact” for WSLCB and seek no new funding, he said. The potential bill package, “including a memo explaining why we need additional time to do additional stakeholder work,” was on track to be submitted before the deadline the following week, said Thompson.
  • Board Chair David Postman wanted to review subsequent progress at a future caucus, observing that the board had been “kept up to date” as the interpretive statement on allowed practices for processors was developed. He summarized the intent of the bill would be “to allow for synthetic, but to prohibit artificial” cannabinoids, and that both terms would be defined under the request bill (audio - 4m, video):
    • “(c)(1) ‘Artificial cannabinoid’ means a chemical substance that is created or manufactured by a chemical reaction that is structurally the same or substantially similar to the molecular structure of any chemical substance derived from the plant cannabis that is a cannabinoid receptor agonist and includes, but is not limited to, any material, compound, mixture, or preparation that is not listed as a controlled substance in schedules I th[r]ough V of the Washington State Controlled Substances Act, RCW 69.50.204. Artificially derived cannabinoids do not include: 
      • (i) A naturally occurring chemical substance that is separated from the plant cannabis by a chemical or mechanical extraction process; 
      • (ii) Cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid without the use of a chemical catalyst; or
      • (iii) Any other chemical substance identified by the board in consultation with the department, by rule. 
    • Later in the definitions, “(bbb) ‘Synthetically derived cannabinoid’ means any cannabinoid that is created by a chemical reaction that changes the molecular structure of any natural cannabinoid derived from the plant cannabis to another cannabinoid found naturally in the plant cannabis.”
  • Postman also believed the bill spoke to the “bigger question” of setting “a more realistic range of what processors can process” which he called the “nub” of “what...we envision” for that license type. He wanted Thompson and the “policy team” to provide the board with additional perspective.
  • Thompson welcomed the opportunity, saying the top complaint about the proposed request bill was not having enough time to reply. “Technical difficulty and complexity of these definitions” took longer than expected to resolve, he admitted, which “ate into the time we had originally allotted” stakeholder engagement. Staff wanted to get this right, Thompson said, as “change is coming, and this is a very dynamic and innovative industry" but there needed to also be “stability” for the cannabis sector. He promised Postman he would return with a review of feedback at a meeting in a “two to three week timeframe.”