WSLCB - Board Caucus
(July 5, 2022)

Here are some observations from the Tuesday July 5th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• An update on cannabis canopy measurement and enforcement by Director Rick Garza showed interpretations were still being adjusted by agency staff.
  • After a new policy on the measurement of cannabis production canopy was publicly announced in January, the topic had been a recurring concern among stakeholders and staff.
    • On June 7th, Enforcement Education Program Manager Matthew McCallum talked about a “canopy measurement” document made by WSLCB “subject matter experts.” A pilot program had been organized to collect feedback on whether the policy was understandable and “how can we do a better job of explaining this.” He felt this showed enforcement staff “how to educate on the topic before we roll it out to the general public.”
      • “Version 1.0” of the “Measuring Plant Canopy” document was dated April 2022.
    • On June 15th, Board Chair David Postman identified canopy measurement among the agency’s top priorities when responding to a question at the Washington CannaBusiness Association (WACA) Spring Meeting. At that time, he said staff were still debating enforcement approaches for canopy “internally, a lot.” One attendee’s perspective when speaking to legislators at the event was that “no one knows what canopy limits are” so compliance was “nearly impossible.”
  • During the caucus, Garza laid out how communications had been sent out the previous week to board members “and our enforcement cannabis team, and the entire agency” about canopy. This was followed “hours later” with an announcement to “our cannabis licensees and stakeholders, and obviously this impacts our cannabis growers more than anyone” (audio - 6m, video).
    • He stated that on May 10th he’d received “correspondence from one specific licensee raising concerns about how we were measuring canopy” and that “a couple of weeks ago, several growers came to us and shared concerns again” over the measurement policy.
    • Garza indicated enforcement officials "put together a protocol" in November 2021 because they’d become aware “we may have been inconsistent in how we applied the canopy.” Mentioning this protocol was formally defined “for clarity’s sake,” he said the informal policy had included “pathways and walkways as part of the canopy” for some time, but he had reason to think it “may have been applied inconsistently in parts of the state.” For this reason, WSLCB leadership had determined staff would “pause for a moment" in counting pathways as part of the canopy to ensure their regulations for measurement were being applied evenhandedly.
    • Garza shared part of the announcement to licensees, “Related to canopy, for the duration of 2022, any seizure or directive to have a licensee cut down over canopy plants must be based on a canopy measurement that would be over canopy if the pathways (or areas between rows) were not included in the calculation.” He conveyed that “we've had a lot of concerns raised in the last year or year and a half that there are people growing well beyond the canopy that they’re approved for" and that Enforcement had been taking action to “bring them back” to compliant levels of cannabis production. The pause applied to counting pathways, “roadways” one could “drive a small tractor through,” or “walkways in between the plants,” commented Garza. Anyone “well over their tier measurement…we will continue to enforce that,” he warned. Garza argued the types of divides between plants merited consideration when measuring canopy, making it “a little more complicated” and necessitating more staff review of their protocols.
    • He expected it was possible that officials would “see a petition" for canopy standards as soon as "in the next few days." Postman “was involved” in drafting the announcement with Communications staff, Garza added.
  • Postman remarked that the pause was about ensuring a “uniform policy/protocol statewide” that was communicated “thoroughly.” It should not be seen “as a signal to anybody that you can grow as much as you want wherever you want,” he said, but rather an “essential” ability of the WSLCB “to regulate the total amount of production." Postman believed that with a decade passed since voters legalized cannabis, some were questioning whether canopy was still “the best tool we have for…regulating this.” He promised transparency and consistency in agency compliance expectations, adding that he wasn’t convinced “we're at total canopy limit statewide, and so it's time to check in on all of that, too" (audio - 2m, video).

• A swift rulemaking update from staff covered cannabis projects, anticipated petitions for rulemaking, and transformation of existing board interim policies.
  • HB 1210 Implementation (audio - <1m, video, Rulemaking Project)
    • Policy and Rules Manager Kathy Hoffman told the board that a CR-103 implementing a change in rule terminology from ‘marijuana,’ to ‘cannabis’ would be presented at the Wednesday July 6th board meeting.
    • Policy and Rules Coordinator Jeff Kildahl affirmed that the rulemaking package he would present the following day had been mandated by HB 1210, a 2022 law which changed references in statute and required WSLCB to make corresponding changes in WAC 314-55. He commented that the project had received no comments since two “early” ones were deemed “non-substantive” and there’d been no changes to proposed language in the CR-105. With board adoption, changes would take effect August 6th, Kildahl added (audio - 2m, video).
  • Cannabinoid Regulation (audio - <1m, video, Rulemaking Project)
    • Hoffman mentioned “on-going" outreach work of staff on the subject and said they “had anticipated a listen and learn session on July 14th, we’re going to push that out to the end of the month” in order to do more internal work “to kind of whittle down what we’re thinking about putting into rule.”
  • Social Equity (audio - <1m, video, Rulemaking Project)
    • According to Hoffman, staff were still reaching “out to other states” as they refined the project which had been withdrawn on May 11th. She said they’d also made overtures to “constitutional scholars” for feedback on their “approach,” though it would still be “weeks” before the board was presented with next steps.
  • Future Rulemaking (audio - <1m, video)
    • Having previously discussed upcoming projects on June 7th, Hoffman said her team was still evaluating possible packaging and labeling (PAL) and advertising projects “since those haven’t been adjusted in quite some time.”
  • Future Rulemaking Petitions (audio - 1m, video)
    • Hoffman indicated that staff would present their proposed response to a recently received petition for rulemaking pertaining to “curbside service,” formerly a coronavirus pandemic allowance, “on, or about, July 20th.” She anticipated receiving additional rulemaking petitions for “minors on farms” and cannabis canopy.
      • When temporary allowances were discussed on May 24th, further extending curbside service was shot down by staff due to “direct conflict with” state law.
    • Postman wondered about the potential for a canopy petition, and the pros and cons of starting a new rulemaking project due to a petition versus initiation by the board. Hoffman felt it made no difference, as the processes for assessing costs and impacts were the same. She added that if the Washington State Legislature (WA Legislature) mandated something, “we’re exempted at that point” from needing to study the impacts of a rule change (audio - 1m, video).
    • Later in the caucus, Kildahl spoke to the curbside service petition which he planned to present to the board on July 20th. Remarking that it had been submitted on May 24th, he told the board the petition sought rule changes to permit both curbside and walkup retail cannabis sales (audio - <1m, video).
    • Postman confirmed the petitioner wanted to codify some expired allowances as permanent, and Kildahl suggested that staff were reviewing the allowance and requirements around it like “video security" and requiring valid identification as proof of age (audio - 1m, video).
  • Contact Information (audio - 1m, WSLCB video, TVW video)
    • Hoffman mentioned a new rulemaking project “to address some obsolete addresses” that were in rule, indicating “a lot of references to” the agency’s former headquarters at 3000 Pacific Avenue Southeast in Olympia. She planned to request expedited rulemaking to update mentions of incorrect email addresses that needed changing as well.
  • Board Interim Policies (BIPs, audio - 1m, video)
    • The board started rescinding unnecessary BIPs in September 2021 while other interim policies were transitioned into policy statements.
    • Hoffman identified two active cannabis BIPs which would likely be “addressed in the next couple months”:
      • BIP-04-2016 - Wet Flower Transfers
      • BIP-12-2019 - Cannabinoid Additives - Requirements, Restrictions, and Quality Assurance Testing 
        • Hoffman explained the latter BIP addressed “the application of [WAC] 314-55-109, that has to do with the reporting of outsourced CBD” into Leaf Data Systems, which was no longer used.
    • Postman asked what “outsourced” cannabidiol (CBD) was. Hoffman replied that CBD from outside the licensed cannabis system in Washington was allowed under RCW 69.50.326, however the rule “was put in place before we had Leaf” Data Systems as the cannabis traceability platform. The parent company, MJ Freeway, never developed a way to “track a product that came from outside” 502, she explained. With the Cannabis Central Reporting System (CCRS), Enforcement staff assured Hoffman the BIP was “no longer needed” (audio - 1m, video).
  • Electronic Service (audio - 2m, video, Rulemaking Project)
    • Policy and Rules Coordinator Audrey Vasek relayed that she would present a CR-103 for final adoption of revisions to “electronic transmission of documents for service and filing” at the July 6th board meeting. This would complete one aspect of modernizing “business and adjudicative processes,” she stated. Public comments were considered but no changes were made to the proposed rule text. Vasek highlighted how no written or oral testimony was given at the project’s public hearing on May 25th. If adopted, the changes would make electronic transmission “an additional means for service and filing of documents,” setting up definitions and procedures to file materials by electronic means as well as describing “how the date and time of delivery, or receipt is determined.” With board approval of the CR-103, Vasek would file the documents and the rule changes would go into effect on August 6th. 

• Board Chair David Postman updated on the push by officials in the nation's capital for federal banking reforms for cannabis companies (audio - 3m, video).
  • Having seen "a round of stories, mostly in the cannabis press" that the SAFE Banking Act “had died in Washington D.C.,” Postman contacted the Washington State Governor’s (WA Governor) office in the nation’s capital. Though he “remain[ed] a skeptic” about the bill’s prospects, the situation wasn’t “as dire as it appears.” Postman felt the U.S. Congress was “at logjams over the [America] COMPETES Act” rather than the inclusion of SAFE Banking language within that bill. He felt that prospects for passage of the America COMPETES Act had diminished, and SAFE Banking language wasn’t included in the active version of that bill.
  • More positively, he had seen “some indication from the [U.S.] Senate…that they’re interested in trying to get something done,” referencing a June 23rd Politico article on the matter that “in recent weeks the tone has changed on Capitol Hill. Senators previously opposed to anything but a major marijuana decriminalization bill are slowly warming to another option: adding provisions to a broadly supported bill that would allow financial institutions to offer banking services to the cannabis industry” including SAFE Banking language. Postman noted a featured quote by Oregon Representative Earl Blumenauer that there was “a greater sense of urgency,” and he believed “there’s a broader base of support.”
  • Postman reiterated his sense that the odds for action were about the same as they were “a month ago,” but not as bad as some “may have been led to believe by reading” stories about stalled progress on the subject. He added that WSLCB leaders were unswayed in their conviction that such reforms were “essential to…safe operations of our systems.”