WSLCB - Board Meeting
(September 15, 2021)

Here are some observations from the Wednesday September 15th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Policy and Rules Manager Kathy Hoffman shared a plan for the board to rescind unnecessary interim policies and transition the rest into policy statements.
  • Hoffman described how the board interim policies (BIP) had been issued for many reasons including emergencies and legislative action (audio - 4m, video).
    • BIPs authorized particular activities “on a temporary basis until rules could be developed and finalized, but always under the premise that the BIP would be rescinded” once permanent rules were adopted “or the issue that the BIP addresses is resolved,” she said.
      • She recalled that during the Vaping Associated Lung Injury (VALI) health scare in 2019, “licensed cannabis retailers reached out to us to ask if there was a way to return flavored THC vapor products to processors for credit for future purchases...So, for a specific period of time we allowed those products to be returned, even though our rules didn’t expressly allow it.” That policy expired at the end of 2019, Hoffman noted, and “was no longer needed.”
      • Hoffman stated that another situation when interim policies were helpful occurred when “a piece of legislation becomes law and allows a certain activity and the agency isn’t able to get rules in place rapidly enough to establish a framework for that activity to occur.”
    • Hoffman said that staff had worked “to review existing BIP and determine which needed to be rescinded...or which might be converted to policy statements.” The group had identified “approximately 15” interim policies that could be rescinded. Hoffman requested the board rescind 5 of them “and I’ll bring the next five to the following board meeting, and so on.”
  • Hoffman then proposed the board rescind the first batch of five defunct BIPs.
    • BIP 02-2016 - UBI Labeling on Marijuana Products (audio - 2m, video) 
    • BIP 01-2017 - Sales of Immature Plants/Clones and Seeds (audio - 1m, video) 
    • BIP 01-2018 - Spirits Beer Wine Restaurant Food Service Requirements (audio - 1m, video) 
    • BIP 15-2019 - Return of Flavored Marijuana Vapor Products by Retailers to Processors in Exchange for Credit (audio - 1m, video) 
      • Adopted in October 2019
    • BIP 17-2019 - Implementation of WAC 314-55-105 regarding marijuana packaging and labeling rules, and WAC 314-55-077 (8) and (9) (audio - 2m, video) 
      • Adopted in December 2019 at the same time Hoffman asked the board to rescind six other cannabis BIPs
  • Board Chair David Postman commented that "interim should be interim" and rescinding unneeded BIPs increased transparency, adding “it’s good that we hold ourselves accountable to that” (audio - 1m, video).
  • The board voted to rescind the five BIPs (audio - <1m, video).
  • Later that same day, agency staff announced the publication of Policy Statement 21-04, concerning packaging and labeling (PAL) of infused cannabis products certified as medically compliant by the Washington State Department of Health (DOH).
    • The policy statement addressed the approval process for labels which contain “structure or function claims for marijuana [cannabis] infused products...This policy statement is intended to define medically compliant cannabis product structure or function claims to the extent possible, and to establish a framework to guide the evaluation of structure or function label claims.”
    • On review, the policy statement did not appear to directly relate to any of the rescinded or active BIPs. Instead, it’s Cannabis Observer’s understanding that the statement codified internal policy that had been under development since the passage of SB 5298 (“Regarding labeling of marijuana products”) which authorized the inclusion of structure or function claims on certified medical cannabis products.
      • In other sectors, structure and function claims are policed by the United States Food and Drug Administration (U.S. FDA).
    • Coincidentally or not, the implementation of another statute modified by SB 5298 had also been at issue as a result of the Washington State Citizen Commission for Performance Measurement of Tax Preferences (WA Commission for Measurement of Tax Preferences) review of tax exemptions for medical cannabis products, prompting requests for clarification from WSLCB staff at the Commission’s August 3rd and September 9th meetings.

• Policy and Rules Coordinator Jeff Kildahl provided updates on the quality control (QC) testing and tetrahydrocannabinol (THC) rulemaking projects.
  • Quality Control Testing and Product Requirements (audio - 2m, video, Rulemaking Project) 
    • Kildahl reported that agency officials “continue to work with the economists from Industrial Economics, Incorporated, or IEc” and had sent out a request “seeking interview participants to help us understand cannabis producer and processor perspectives.” Agency staff stopped accepting applications on September 10th, he remarked, after having identified 35 applicants. “As of Monday, IEc had held four interviews,” said Kildahl, “scheduled another seven interviews,” and were arranging more.
    • He explained that the following week, “we will be sending an invitation via GovDelivery seeking cannabis producers, processors, and producer/processors to take an online, multiple choice survey via SurveyMonkey to help us understand producer processor perspectives.” The survey would remain available for one week, and Kildahl encouraged all eligible licensees to weigh in once it was released.
    • Kildahl said a listen and learn forum regarding yet-to-be-released draft conceptual rules was scheduled “on or about October 15th” and that a revised CR-102 would be presented “approximately December 8th.”
    • Postman inquired as to the board’s access to “raw data” from interviews and surveys, or if the economists “boil that down into a report, how do we get that?” Kildahl responded that the information would be used by the economists to draft a small business economic impact statement (SBEIS), but he was “not sure at this time...I can double back with you about that...but, I’m sure we would have access to the information” (audio - 1m, video).
  • THC (audio - 1m, video, Rulemaking Project)
    • Kildahl indicated a listen and learn session was conducted on September 9th and “attended virtually by approximately 80 participants.” An internal review was underway and “we may push the CR-102 proposal to October 13th...rather than September 29th,” he explained. In this timeline, a public hearing would be hosted by WSLCB representatives on November 24th, with a CR-103 up for adoption “on or about December 8th. This achieves our originally stated goal of rule completion by the end of the year with an effective date before the” 2022 legislative session, said Kildahl.

• Licensed Producer/Processor Shawn DeNae Wagenseller shared her reservations about the planned transition to a Cannabis Central Reporting System (CCRS, audio - 4m, video).
  • Wagenseller, Washington Bud Company Co-Owner, told the board that the CCRS proposal “greatly concerns me.” She specifically mentioned the “audit capability of the LCB to ensure marijuana is neither diverted to, nor inverted from, unregulated sources.” Her impression was that WSLCB leadership was moving from "overly burdensome seed-to-sale tracking to an oversimplified reporting system that will be able to obscure the seed-to-sale transfers." Mentioning OpenTHC as a system she hadn’t heard brought up by staff, Wagenseller was curious about the auditing capabilities of CCRS: “who would be doing that auditing?” and “how would that auditing be paid for?”
    • First outlined publicly on August 11th, the CCRS was criticized during the September 1st board meeting ahead of a webinar on the proposal hosted by agency staff on September 8th. During that webinar, Cannabis Examiner Manager Kendra Hodgson said that “reports will be built to assist the agency in its work related to the regulation. The system will not be the same as the previous, but meets the requirements for reporting that have been identified” in law and rule, adding “audit-based work will likely be a tool that will be applied by the agency in new ways going forward.”
  • Wagenseller claimed the prohibited practice of synthesizing cannabinoids from cannabidiol (CBD) amounted to products being “inverted into the system from hemp biomass.” Losing “the seed-to-sale tracking system” left her “afraid that we wouldn’t be able to have that capability on a [comma-separated values] reporting system” for rigorous auditing. She again named OpenTHC as a “middle compromise” between the current and proposed systems.
    • BIP 12-2019, adopted in June 2019, rescinded reporting requirements for licensees who imported CBD “until the implementation of a Leaf Data System workflow that will allow marijuana licensees to enter test results of such CBD products.” At publication time, BIP 12-2019 remained in effect as MJ Freeway never implemented the required workflow.
  • In conclusion, Wagenseller recommended that since WSLCB had a contract “with Leaf [Data Systems] until the middle of next year, I would suggest that the LCB move our transition date from December 31st, 2021 to, say, the end of April in 2022.” She felt the concept of a major system change “over a holiday weekend is crazy making.”
  • Postman observed that the “CCRS expert" was not present---presumably the project executive sponsor, Chief Financial Officer Jim Morgan---but Wagenseller could anticipate written responses to her questions. He pointed out that the board had been updated on the planned transition at Executive Management Team (EMT) meetings and could add a specific briefing at a future EMT meeting “so we have a public conversation about it.” Postman reviewed her questions, including her misgivings about “how the existing system was used to help focus on some of the biomass.” He noted that Wagenseller could email any additional questions to Executive Assistant Dustin Dickson (audio - 1m, video).
    • WSLCB staff have also advised following the CCRS webpage for further updates and directing feedback to CCRS@lcb.wa.gov.