WA House APP - Committee Meeting
(February 4, 2022)

Here are some observations from the Friday February 4th Washington State House Appropriations Committee (WA House APP) Committee Meeting.

My top 3 takeaways:

• The committee heard an overview from staff on HB 1668, “Expanding regulatory authority over cannabinoids that may be impairing and providing for enhanced product safety and consumer information disclosure about marijuana products.”
  • The bill, which started as Washington State Liquor and Cannabis Board (WSLCB) request legislation, was first heard by the Washington State House Commerce and Gaming Committee (WA House COG) on January 13th. On January 25th, the committee made several amendments to the language before recommending passage.
    • Amendment H-2194.1
      • “(1) Specifies that artificial cannabinoids and synthetically derived cannabinoids are prohibited in the marijuana products that may be approved, labeled, or represented as complying with the additional product requirements adopted by the department of health for marijuana products sold or provided to qualifying patients and designated providers by retailers with a medical marijuana endorsement.
      • (2) Limits the retail sales and use tax exemption for qualifying patients and designated providers purchasing marijuana products so the tax exemption applies only when the marijuana products do not contain any artificial cannabinoids or synthetically derived cannabinoids.”
    • Amendment H-2265.1
      • “Eliminates a reference to ‘artificial cannabinoids’ being also defined in Schedules I through V of the state Uniform Controlled Substances Act, while retaining the new definition of ‘artificial cannabinoid’ included in the bill.”
    • Amendment H-2268.1
      • “Amends a 2015 law that makes it an unfair or deceptive act to manufacture, distribute, sell, or take certain other actions related to ‘synthetic cannabinoids’ in order to specify the 2015 law does not prohibit any activities of cannabis licensees that may be authorized pursuant to the bill and the liquor and cannabis board's rules with respect to separately defined ‘synthetically derived cannabinoids.’”
    • Amendment H-2335.1
      • “Changes the scope of a proposed grant of rule-making authority to the liquor and cannabis board over the production, processing, transportation, delivery, sale, and purchase of naturally derived cannabinoids or synthetically derived cannabinoids. Specifies that this grant of rule-making authority does not include authority to adopt rules on these activities related to:
        • (1) Hemp or products derived from hemp, except products intended for use by a cannabis licensee as authorized in law; or
        • (2) products authorized as a drug by the federal food and drug administration.”
  • WA House COG Counsel Peter Clodfelter gave a briefing on the resulting substitute bill language from the bill report (audio - 4m).
    • “Adds and amends definitions in the Uniform Controlled Substances Act, including expanding the definition of ‘Marijuana’ to include other tetrahydrocannabinols (THCs) in addition to delta-9 THC.”
      • The existing definition centered on “the percent of delta-9-THC, which is only one of the cannabinoids found within the cannabis plant.”
    • “Prohibits the sale of certain cannabinoid products except when sold by licensed cannabis producers, processors, and retailers, and adds new age restrictions to the purchase of certain cannabinoid products.
      • HB 1668 prohibited “people and businesses, other than cannabis licensees, from selling products for human consumption that exceed 0.3% THC and that contain more than a half a milligram per serving, or two milligrams total, in a package of a cannabinoid that may be impairing.”
    • Expands the Liquor and Cannabis Board's regulatory and rulemaking authority over cannabinoids that may be impairing or that are marketed as having impairing effects.
    • Includes provisions on:
      • (1) adding non-impairing cannabinoids to cannabis products;”
        • Existing law allowed hemp imports into 502 for “the single cannabinoid [cannabidiol] CBD,” and HB 1668 would expand the allowance for import of other non-impairing cannabinoids. Beyond THC and CBD, many other phytocannabinoids exist “in the plant but only in trace amounts. However, they have also been extracted and sold as isolates.”
        • Separation of minor cannabinoids had been forecast as “the next big thing” in the hemp market, with companies promising minor cannabinoid isolates in bulk.  
      • “(2) prohibiting artificial cannabinoids and requiring rules before the sale of any synthetically derived cannabinoids;”
        • Artificial cannabinoids were described as “a solely chemically created substance that does not originate from the plant cannabis, but is structurally the same, or substantially similar.” Synthetically-derived cannabinoids would be “a cannabinoid altered [through] chemical reaction that changes the structure of a natural cannabinoid derived from the cannabis plant” into a different cannabinoid.
        • WSLCB staff would be required to consult with the Washington State Department of Agriculture (WSDA) during rule development around synthetically-derived cannabinoids.
      • “(3) prohibiting synthetically derived cannabinoids in Department of Health–approved cannabis products; and”
        • Clodfelter stated that medically compliant cannabis items were “prohibited” from including artificial or synthetically-derived cannabinoids, and could not be included under a tax exemption available to medical patients.
      • “(4) requiring disclosures.”
  • WA House APP Committee Counsel Linda Merelle offered a fiscal review of the proposal based on an updated fiscal note (audio - 4m).
    • According to Merelle, WSLCB staff projected “$324,000 for fiscal year [FY] 2023” from the dedicated marijuana account with an “ongoing cost” of “$542,000 per biennium.” This would cover two full time equivalent (FTEs) at the agency to handle expected rulemaking, she told the committee. “The [Washington State Office of the Attorney General] costs as a result of its advisory role in the rulemaking” included an increase of “one to two anticipated…litigation cases per year.” Agency staff expected costs of  $46,000 in FY 2023, Merelle indicated, “and approximately $50,000 per biennium ongoing.” There would also be a “small” increase in enforcement costs “to test product samples,” she added.
    • Staff from the department of health expected “$23,000 in this biennium” from the health professions account, and “$7,000 in the next biennium,” stated Merelle. Additional staff would cover emergency rulemaking, she said, and subsequent permanent rulemaking “to distinguish between synthetic and artificial cannabinoids.”
    • Merelle relayed that the fiscal impact to the Washington State Patrol (WSP) was still being finalized, but the preliminary information showed costs of “$1.6 million” in FY 2023 from the state general fund, “and $254,000 per biennium ongoing.” She said the 2023 funding covered purchase of “three mass spectrometers at $450,000 apiece in order to analyze the expected increased samples that would be brought to [their] lab.” There would also be $200,000 for “overtime costs, for training for the new protocols, and also increased case processing time for those protocols” from the general fund, Merelle remarked.
      • Released after the hearing, the revised fiscal note projected WSP costs of $1,655,000 over the remainder of the biennium. It indicated existing staff would “develop and validate new testing protocols for the new instruments and then train staff on these protocols. We expect the development of these new protocols to require two scientists 22 weeks to complete,” adding “as they will not be performing normal testing during this time we expect it to result in an increased need for overtime by other staff of approximately 2,320 hours in the first year. We also expect the new testing protocols to result in an increase of approximately 30 percent to the current per case processing time. Based on this, we expect to have an ongoing need of approximately 386 hours of overtime for the increase in testing time.”
      • WSLCB purchased $755,000 in lab equipment for cannabis testing by WSDA staff under an interagency testing contract approved in 2016. A February 2020 briefing on the arrangement noted the agency continued to pay a $70,000 annual maintenance fee so that the department could conduct pesticide testing on cannabis. At publication time, it was unclear if the WSLCB/WSDA agreement would be impacted by WSP building capacity for testing cannabis.
    • The staff for the Washington State Office of Administrative Hearings reported a presumption of “no fiscal impact,” Merelle commented. This left the total impact from HB 1668 at “approximately $2 million in fiscal year 2023.”

• Four speakers opposed the bill, reiterating and honing in on an objection about the absence of a definition of “impairing” raised during the policy committee hearing.
  • Dylan Summers, Lazarus Naturals (audio - 1m) 
    • Summers alleged the bill was "too haphazardly drafted and poses a threat to the greater hemp industry and particularly the non-impairing, hemp-derived" product sector. He believed the definitions—and especially the absence of a definition for impairing—made the bill “unspecific and technically unsound.” Summers warned the bill would likely result in increased litigation against WSLCB along with “economic consequences.” He surmised that given an expected negative impact on the state hemp sector, HB 1668 was "too crude to be considered functional."
  • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director and Lobbyist (audio - 1m) 
    • Christophersen concurred with Summers that the text of the bill, specifically how "impairing is not defined," was reason enough not to accept the legislation in its current form.
      • Christophersen previously acknowledged the role of WACA leadership in drafting SB 5767, an alternative to HB 1668 and its senate companion, which included technical definitions intended to distinguish impairing cannabinoids. Both 1668 and 5767 were heard on January 20th, but neither bill was recommended for passage before the house of origin policy committee cutoff. The same definitions later appeared in SB 5951, but were stripped out during its policy committee executive session on February 3rd.
    • Christophersen said WACA members agreed with the need to regulate cannabinoids, but WSLCB staff “indicated it will take them at least 18 months for those rules, that’s two legislative sessions” (when rounding up), and she didn’t think the many things contingent on clear definitions could wait.
      • When WSLCB Director of Policy and External Affairs Justin Nordhorn was asked about the timeline for implementing the proposal so that products with synthesized cannabinoids could be legally sold, he speculated rulemaking would be “probably more towards the 18 month line,” and that some topics would “likely be done earlier.”
  • Jessica Tonani, Verda Bio CEO (audio - 1m) 
  • Jim MacRae, Straight Line Analytics (audio - 2m) 
    • MacRae testified that he favored "increased labeling and transparency" of cannabis products, but agreed with others that a missing definition of cannabinoids that “may be impairing” allowed for "a very broad expansion of the authority" of WSLCB. He thought WSLCB staff “should be asked about the estimates of a couple of lawsuits per year.” He noted that “two years ago they approved over 30 products that include delta-8-THC.”
  • Bonny Jo Peterson, Industrial Hemp Association of Washington Executive Director, signed up to testify but was unavailable when called upon.
  • John Hunt, 405 Lab LLC Co-Founder, signed in opposed to the legislation.
    • Hunt spoke in favor of SB 5951, "Concerning agricultural hemp products to ensure the safe implementation of Washington state's industrial hemp program," on February 1st.

• Two substance use prevention organizations had speakers support passage of the legislation in the name of public health and safety along with 18 stakeholders who signed in backing the bill.
  • Bob Cooper, Washington Association for Substance Abuse and Violence Prevention (WASAVP) Lobbyist (audio - 1m)
    • Cooper said citizens had been promised “a safe, regulated marijuana market, but the way things have evolved, we don’t have that.” He cast delta-8-THC as “less intoxicating than delta-9” but it remained unregulated, speculating, “I don’t think this is what DuPont meant when they championed better living through chemistry.” Cooper asked lawmakers to regulate “anything that comes from the cannabis plant, or looks like it.”
  • Linda Thompson, Greater Spokane Substance Abuse Council (GSSAC) Executive Director and WASAVP Board Member (audio - 1m) 
    • Thompson stated that she’d spoken to Initiative-502 author Alison Holcomb when the initiative was on the ballot about how her organization could “support the structure of a system that regulated marijuana products, and that is why I’m rising in support of this bill.” Observing there were already sales of delta-8-THC items without “safety regulations and taxes," she encouraged the committee to bring this under control by supporting the bill.
      • At publication time, Cannabis Observer was not able to identify a published source where either WASAVP or GSSAC was on record as supporting I-502. On their organization blog, WASAVP members were critical of the specific initiative and wider issue of cannabis legalization.
  • Signed in but not testifying (18):
    • Jacqueline Berganio 
    • Amy Brackenbury, Washington State Public Health Association (WSPHA) Lobbyist 
    • Adán Espino, Craft Cannabis Coalition (CCC) Executive Director
    • Mike Graham-Squire, Washington Association for Substance Abuse and Violence Prevention (WASAVP) Co-Vice President
    • Di Harper, Medical cannabis patient 
    • Melissa Johnson, American Physical Therapy Association - Washington (APTAWA) 
    • John Kingsbury, Medical cannabis patient 
    • Herb Krohn, SMART Transportation Division/United Transportation Union 
    • Ramona Leber, WASAVP Founding Member and Treasurer
    • Bryan McConaughy, Washington Sun and Craft Growers Association (WSCA) Lobbyist
    • James McMahan, Washington Association of Sheriffs and Police Chiefs (WASPC)
    • Megan Moore, Prevention Voices Community Liaison
    • Stacey Okland, Okanogan County Community Coalition Executive Director
    • Julie Peterson, Foundation for Healthy Generations 
    • Chris Thompson, WSLCB Director of Legislative Affairs
    • Danika Troupe, WASAVP and United General District 304 Program Manager for Community Health Outreach Programs
    • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner and Washington Sun and Craft Growers Association (WSCA) Board Member
    • Scott Waller