WA SECTF - Work Group - Production - Public Meeting
(July 26, 2022)

Here are some observations from the Tuesday July 26th Washington State Legislative Task Force on Social Equity in Cannabis Regulation of Cannabis Production Work Group (WA SECTF - Work Group - Production) Public Meeting.

My top 4 takeaways:

• The work group offered feedback on a specific WA SECTF recommendation regarding the impact on cannabis sector equity should production oversight be moved from the Washington State Liquor and Cannabis Board (WSLCB) to the ​​Washington State Department of Agriculture (WSDA).
  • Under RCW 69.50.336(9)(d), WA SECTF was mandated to provide recommendations on “The social equity impact of shifting primary regulation of cannabis production from the board to the department of agriculture, including potential impacts to the employment rights of workers.” 
  • The work group’s first meeting was on June 21st, where members talked about the expense and implications of either moving the existing program for cannabis production from WSLCB to WSDA, or establishing a new program to regulate cannabis growing.
  • The full task force would deliberate on the work group draft recommendations for inclusion in a final report due by December 9th, 2022 to the appropriate Washington State Legislature (WA Legislature) committees, the Washington State Office of the Governor (WA Governor), and WSLCB.

• Work group co-leads presented draft recommendations intended to inform lawmakers, which included some steps towards primary regulation for cannabis production being under the purview of WSDA.
  • Work group co-lead Jim Makoso, task force Co-Chair and Lucid Lab Group Director, recognized this was “a really broad question, with a lot of different implications" for both social equity applicants (SEAs) and the wider cannabis sector. He found their draft recommendations were developed “as holistic[ly] as possible” (audio - 3m, presentation).
  • Co-lead Micah Sherman, Raven Co-Owner, Washington Sun and Craft Growers Association (WSCA) Board Member, and a task force appointee, read the group’s draft recommendation (audio - 5m).
    • “The Task Force recommends that the legislature take steps to shift primary regulation of cannabis production from the Liquor and Cannabis Board (LCB) to the Washington State Department of Agriculture (WSDA)...A successful outcome for social equity applicants is dependent on an overall cannabis economy that fosters equitable opportunities for the entire industry. This includes making policies that not only enable social equity licensees to exist, but also reevaluating the existing cannabis industry policies to determine areas of improvement. We believe the incorporation of the WSDA into the primary regulator role of cannabis production will be a step in the direction of a more equitable cannabis industry.”
  • With the view that their input to the wider task force was “pretty limited,” Sherman said a “serious step” would be for WA Legislature “to evaluate” the general concept in order to move forward. He’d also found “the question wasn’t quite accurate to where we already existed” as lawmakers framed the request of the task force as if “everything existed within the LCB” and involved “moving things entirely to the WSDA, and that’s not really how we chose to answer it.” The drafted recommendation acknowledged the “mixed responsibility" for regulatory oversight was sure to continue, he stated, but officials could make the delineation of responsibilities more clear and intentional “of what goes where.” Sherman summed up their feedback as being about "a process of shifting an already split workload between these two agencies" and “revisiting” their regulatory roles.
  • Sharing some of the group's rationales, Sherman said they could discuss "legislative and regulatory considerations," and sort out lingering “potential pitfalls” to help lawmakers make more informed decisions.

• In reviewing the established rationales, comments and concerns were aired over how ready the recommendation was, whether new equity businesses or established licensees would benefit more, existing WSDA programs, and expected changes after “nationalization” of the cannabis market.
  • Sherman established that WSDA was “subject to” the Healthy Environment for All Act (HEAL Act) and were in a process of incorporating “public health and environmental justice into their policies” which could “inform the work of cannabis production in a more equitable manner.” He then noted the work of the Washington State Environmental Justice Task Force had informed the HEAL Act, which in turn was prompting changes in policies at WSDA and other agencies. Sherman felt their focus was “useful to the end goal” of a cannabis industry that produced “equitable results” for equity licensees (audio - 2m).
    • While some state agencies have prominent pages about their implementation of the HEAL Act, the sole WSDA mention at time of publication was on the department legislative affairs page. A draft document there attributes slow implementation of the act to a “delay in the initial convening of the [Environmental Justice Council] EJC, they support the adoption of a draft community engagement plan…a living document that will continue to evolve and change with time. WSDA will regularly update the community engagement plan with guidance and feedback from the Council, communities, and Tribes.”
  • WSLCB Director of Policy and External Affairs Justin Nordhorn admitted to being “pretty shocked" to have seen recommendations on the topic after the work group’s sole public meeting. Feeling the rationales raised “a number of issues,” chief among his concerns was uncertainty over “the results, or the intended results of social equity” as opposed to the recommendation’s reference to “cannabis industry equity” which he asserted was different. Agreeing with parts of the drafted rationales, Nordhorn asked if WSDA had existing social equity programs relevant to cannabis production, “and if not, then what is the assumption that shifting from one area to another is going to improve that?” He warned of the “heavy cost burden” to move regulations and reach goals “that may be anticipated here” - which could end up passed on to licensees. Nordhorn agreed “there is a role" for WSDA in cannabis production, but he was "not sure that’s a benefit” for social equity in cannabis (audio - 13m).
    • Paul Brice, Happy Trees Owner and WA SECTF “advisory community member,” checked whether WSDA would have authority over production and processing. Makoso stressed that specific components hadn’t been agreed upon, but that there weren’t plans for WSDA officials to have responsibility for regulating cannabis processors.
    • Makoso “kept coming back to” a general need for the cannabis industry “to have the highest probability of success” before encouraging SEAs to enter it. The “health and success of the industry as a whole” had a direct connection to stakeholder outcomes, he argued, including hypothetical equity licensees. As a “person of color myself" and a “small business owner” in the cannabis space, he saw “margins shrink” and believed “we need to think about the market from a macro standpoint, as well as a micro standpoint." A cannabis market with policies to ensure longevity gave SEAs the best chance for success, Makoso reasoned, commenting that “we see one affecting the other" in other economic markets. He added that several stakeholders indicated production of cannabis flower was “the biggest expense" in the cannabis market, meaning that lower expenses for producers like himself could impact the entire cannabis sector as well as newer “entrants” to the market, like SEAs.
    • “We haven't really heard much from the WSDA what any of their intentions, or how they plan to, again, improve" things for SEAs, Brice said. He wondered how a shift in regulation helped “the biggest guys” in cannabis production, as he believed they were already “dialed in" and would gain outsized benefits from any changes as a result - “unless the WSDA” planned for specific SEA accommodations.
  • Lara Kaminsky, the Cannabis Alliance Government Affairs Liaison, confirmed that the recommendation language could still be changed before seeking to understand the “intended outcome that we hope the legislature will take" from the WA SECTF recommendations. She speculated a “task group” dedicated to transferring authority between agencies was needed, akin to the Cannabis Science Task Force (CSTF) which helped “iron out” the transfer of authority for accreditation of cannabis testing laboratories (audio - 3m)
    • Sherman responded that the group didn’t want to be “overly prescriptive” about what steps officials should take. Kaminsky asked if their recommendation should convey that “ultimately, we think that there should be more shared responsibility” between WSDA and WSLCB on cannabis production. Sherman affirmed that approach, unless anyone offered a “perfect idea” before the end of the meeting.
  • WSDA Hemp Program Manager Trecia Ehrlich made clear that state agencies wouldn’t direct what should be the most equitable program for cannabis, “because it shouldn’t be our plan, it should be your plan.” Improving equity outcomes “becomes a dance” between what the task force proposes, what lawmakers approve, and how agency officials “facilitate that” (audio - 4m).
    • Ehrlich noted the WSDA had been required to form a hemp in food task force whose members had decided to produce draft legislation.
      • Despite inquiring with the WSDA Food Safety team and requesting the opportunity to observe the Washington State Hemp in Food Task Force beginning in late May, Cannabis Observer was not invited to the first meeting of the group in July. Subsequently, WSDA staff have promised to allow Cannabis Observer to observe the task force’s deliberations.
    • Ehrlich speculated on the intent behind the original recommendation, suggesting that it might be about movement from the WSLCB “enforcement culture” towards a WSDA culture of education and compliance. She argued that a shift in authority should be “because certain things were changing in statute” that would also “make things easier for people” joining the cannabis industry, and that even if legislators made the change, ideas should start with WA SECTF. Ehrlich agreed there should be more discussion by WSDA officials “about the HEAL Act and what that looks like” as regards cannabis production regulation. She thought they had a good idea what their intent was, but more was needed to articulate “what could be done, and what’s feasible.”
      • Enforcement policies and division structure at WSLCB began to be changed after an independent review in December 2019. Agency staff briefed a legislative committee about changes in their practices in October 2021, though some criticism of agency enforcement continued in 2022.
  • Makoso’s view was that they should aim for the "consensus of the appropriate amount of stakeholders” for task force members to consider for their final report. Not considering himself to be “a policymaker," Makoso was “just trying to fulfill our obligation to provide at least a well-informed recommendation” of stakeholders to officials, rather than draft a proposal for them. He further noted that Sherman and himself were open to input, as “the next four weeks is an opportunity for everyone to provide their feedback” (audio - 3m).
  • Jessica Tonani, Verda Bio CEO, proposed new wording that called on elected officials to “take steps to develop a plan” for shifting authority, rather than asking for them to take steps. This gave time to account for the continuing “ambiguity” in what a plan would entail, like a cost-benefit analysis, she remarked (audio - 5m) .
    • Sherman considered that change in phrasing helpful, claiming that because this recommendation had been added after the task force was established they should “respond in scale to what was asked” of WA SECTF.
    • Makoso thought that a “more in depth look” at the problem was needed, since WSLCB staff had "been doing this for a while" and estimated they had "about 95% of the purview" over the cannabis market. He reiterated his hope for a consensus opinion from the work group, even if it was a call for further study of the topic.
  • Kaminsky was curious how much their recommendation would call for a “shared role” over cannabis production, versus a “complete shift” from WSLCB to WSDA. She read the question in statute as calling for powers to “shift entirely over" to agriculture officials, but noted their comments advocated for splitting authority (audio - 10m).
    • Sherman noted the phrasing was “primary regulation.” Nordhorn called that a general term, drawing a comparison to situations where WSLCB staff worked with local police who acted as the “primary law enforcement to deal with illicit market activity.” WSLCB Enforcement were called if they needed “resources or expertise,” he said.
    • While supporting the work group’s purpose as a member, as a part of WSLCB leadership Nordhorn felt the agency was unlikely to support a shift in authority as they hadn’t seen “evidence” it would benefit licensees or SEAs. A study would be useful for this reason, he told the group, to look more deeply into topics like whether a shift in regulatory power would “impact…employment rights of workers.” He hoped a study by a “third-party” could investigate and make “an informed decision” on the broader question.
    • Bringing up SB 5052 in 2015, Nordhorn remarked that it had “certainly not worked out for the state.” Kaminsky and Makoso echoed that point. Makoso hoped the work group recommendation called for more information, but also incite “action” on the matter, as he was convinced that “an agricultural crop should be regulated by…an agricultural agency.”
  • Tonani argued that WSDA has “some agricultural assets that would be valuable for cannabis growers,” but asking for a plan to shift regulations “doesn't mean that’s gonna happen next week.” She was comfortable asking legislators “to develop a plan” without many restrictions on, or qualifications about, how they would choose to develop it (audio - 2m).
  • Ehrlich admitted when she had gotten into government, “I wanted to change everything," but over time became more used to explaining “why we couldn’t.” She argued that articulating how a shift between regulators would help equity was important, even if the goal was a “cultural change” (audio - 5m).
    • The mention of “employment rights” in the recommendation question was an area where she thought the HEAL Act could be relevant. She perceived WSLCB regulations as not “really engag[ing] with employee practices at, say, a grow operation,” the way WSDA often did for workers in other agricultural commodity sectors. Ehrlich wasn’t sure which aspects impacted “equitable access to licensing and the ability to make livelihoods,” but only some were “directly relevant to who’s regulating it.” She called for spelling out how useful these changes were in relation to other barriers faced by SEAs.
    • Makoso called this one of the considerations he hoped the task force laid out in a final report. He then brought up other WSDA programs for crops like “access to collaborative programs, education, mentorships, trainings for potential farmers” among them.
  • Brice asked about enforcement practices by WSDA compared with the processes of WSLCB (audio - 7m).
    • Ehrlich talked about how “hot” hemp crops were disposed of, but noted WSDA staff were “not armed, we are just folks who work at the Department of Agriculture." She had never encountered a situation where her staff were denied entry to a hemp farm, nor had she ever felt unsafe. But she conceded safety would “be a new consideration for us” should greater responsibility for cannabis production be shifted to the department. She also expected WSDA staff would evaluate policies on “canopy limits…and what they are" for a hypothetical social equity producer compared to other licensed producers.
    • Brice was of the opinion that “unless you guys think you can come in here and regulate” cannabis growing more “efficiently” without “making people feel as if they were just picking on certain farms,” then he expected WSLCB would have to “collaborate” at times “to put the stick down.” Sherman relayed that moving production regulation entirely to WSDA wasn’t what they were considering.
  • Nordhorn contributed that if the market for cannabis production changed due to federal law, “we’re going to be seeing other companies leveraging their way in.” He wondered if this would be considered a “barrier” if social equity licenses were approved for producers (audio - 5m).
    • Under a national cannabis market, Nordhorn anticipated “shifts, alterations, challenges" on legal issues like the dormant commerce clause and the state’s residency requirement as comparable restrictions for alcohol licensure had been struck down. He didn’t see how shifting production regulation helped the cannabis market to reach “a social equity goal” and felt a stronger response would be needed when lawmakers raised that question.
    • Another concern about the length of time state officials could study a policy change seemed overblown to Nordhorn, who pointed to a review of alcohol allowances approved by HB 1480 in 2021, indicating that review by WSLCB could “be done in a timely manner."
    • He then noted that WSLCB Enforcement acted on behalf of the Washington State Department of Health (DOH) and the Washington State Department of Revenue in relation to youth access to tobacco and taxation, respectively.
  • Brice mentioned friends who had been licensed to produce cannabis in Mississippi with “unlimited canopy.” He was interested in specific changes to help potential social equity growers such as larger canopy tiers, startup grants, or support for testing costs (audio - 1m).
  • Tonani referred to the “trial and error” around growing cannabis. If WSDA staff had resources “to help…jump start” businesses, they could use them for cannabis equity efforts so that SEAs could "succeed faster” and didn’t have to compete with the “scaled experience” of other licensees (audio - 2m).

• With abundant input but no clear consensus, work group members began to chart out what work they could do in the time remaining to help WA SECTF finalize an actionable recommendation (audio - 8m).
  • Sherman’s sense was that “we should take a step back,” but Makoso felt “great about it” as there’d been "a lot of feedback" even if there wasn’t consensus. He asked all work group members to “use the time we have in the next month” to map out “what it is that we actually want to recommend.” He thanked everyone that had spoken up, deeming success to be drafting a recommendation “to the task force that at least is something actionable” for law and policy makers.
  • Ehrlich explained one aspect which made their hemp regulations effective was WSDA leaders had “the federal government backing us” with serious consequences like loss of licensure as deterrents. Since “WSDA does not have the enforcement capacity” to cover all licensed producers, nor the funding to regulate them, she advised planning separate processes for the department to take over regulating cannabis producers which depended on whether federal legalization had been adopted.
  • Makoso wished they’d gotten further, but nonetheless appreciated the feedback they’d collected and remained optimistic that people could get “fired up” about moving regulatory authority to WSDA. He felt there was interest from representatives at the agencies in studying the topic further for legislators.
  • Tonani suggested that the work group advocate for a one year study “to really evaluate” the questions their group had raised. Makoso seconded the concept, feeling that stakeholders and agency officials could agree to it.
  • Nordhorn concluded that while WSLCB staff weren’t opposed to the change in regulatory powers, their exact stance was “inconclusive” based on the open questions on the matter.
  • The next scheduled meeting of the full task force was set for August 23rd where members would consider recommendations from both this work group and the Non-Violent Offense Policy and Home Grow Work Group. The latter group planned to consider a mandated recommendation on home cultivation of cannabis at their Tuesday August 9th meeting.