WSLCB - Board Meeting
(November 13, 2019)

Here are some observations from the Wednesday November 13th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• The Board advanced the Cannabis Penalties rulemaking project, proposing reforms to categorization, monetary fines, and the deferral of violations through the agency’s compromise process (audio - 5m).
  • The move marked the end of the rulemaking project’s CR-101 stage (WSR 18-22-099) during which WSLCB produced draft conceptual rules and solicited feedback during listen and learn forums on September 26th and October 31st. Policy and Rules Coordinator Kathy Hoffman brought forward proposed rules for the Cannabis Penalties CR-102, which she prepared the Board to adopt during caucus the day before.
  • Hoffman began by telling the Board that the rulemaking process started late in October 2018. Stakeholder meetings began in March and the project was modified in May to include changes mandated by SB 5318. Hoffman said there had been “quite a bit” of work with cannabis industry representatives, evidenced by two short listen and learn sessions on the conceptual drafts. She indicated the reforms shift the agency towards “a compliance and education-based regulatory approach.”
  • Hoffman told the Board the new rule set accomplished several objectives:
    • Established “a process for the issuance of a notice of correction” instead of a civil penalty “when appropriate”
    • Reduced “the cumulative effect of escalating penalties from three to two years”
    • Provided a “deferral option”
    • Restructured existing penalties through the establishment of penalty categories and “significantly” reduced the number of violations that could result in license violations
    • Reincorporated “statutory references with violation types and reduces all fines by 50%”
    • Incorporated “mandates, directives, and requirements” of SB 5318
  • Hoffman projected a timeline for the remainder of the rulemaking project:
    • If the Board approved the CR-102, she planned to file the proposed rules with the Office of the Code Reviser (OCR) that day.
    • OCR would issue a notice on December 4th.
    • WSLCB would host a public hearing on the proposed rules on January 8th, 2020 at which time the written comment period would end.
    • Hoffman’s intention was to file the final rules as a CR-103 on January 22nd, becoming effective February 22nd.
  • Board Member Russ Hauge commented that “not only did [WSLCB] change the way penalties are categorized” to be “more rational,” the agency also “cut the presumptive monetary penalty for all offenses in half.” He then emphasized the new deferral program would enable the agency’s preexisting adjudicative compromise process “to result in the violation no longer being on” a licensee’s record.
  • The Board voted to approve filing the CR-102.

• Policy and Rules Coordinator Kathy Hoffman provided a rulemaking update and forecast new rulemaking projects which could be opened in the not too distant future.
  • Hoffman’s last rulemaking update was during the October 30th board meeting, reiterating her update from the October 29th board caucus.
  • Voluntary Compliance Program (WSR 19-15-074, audio - 1m). Hoffman said the rulemaking project was underway after a successful first meeting of an external work group composed of agency staff and stakeholders the day prior. She believed staff had gotten “a really good frame penciled out” and thanked the Enforcement division for efforts underway to incorporate stakeholder views into the program.
  • True Party of Interest (TPI, WSR 18-22-054, audio - 1m). Hoffman announced that the next TPI external work group meeting was scheduled for December 9th. While she had “hoped to have that rule project moving forward with our penalty revision,” Hoffman reported “it’s just going to take more time.” She said staff was “incorporating all the suggested changes that we’ve made so far” in prior work group meetings and anticipated a CR-102 being ready “by the end of the year.”
  • Quality Assurance (QA) Testing and Product Requirements (WSR 18-17-041, audio - 1m). Hoffman planned an additional internal work group meeting to finalize the rule draft for OCR’s order typing service. She reported that the “significant analysis is written” and she planned to begin looking at the final Small Business Economic Impact Statement (SBEIS). At that point, she would define a schedule for phasing in new requirements.
    • Hoffman distinguished the preliminary and final SBEIS during the QA Testing listen and learn session on August 22nd: SBEIS and “Significant Analysis” work by WSLCB were done “in tandem” and not generally released until a CR-102 was filed. A preliminary SBEIS was intended to “paint the picture” of why emergency rulemaking wasn’t appropriate and “set the stage” for determining small business impacts in a final SBEIS. The preliminary SBEIS Hoffman contracted for the QA rulemaking project reaffirmed her suspicions that this topic was unprecedented for the state given the newness of the industry. Federal information common in other business sectors which reliably weighed small business impact was unavailable for the legal cannabis industry (audio – 5m).
  • Packaging and Labeling (PAL, WSR 19-12-029, audio - 1m). Hoffman said the PAL public hearing was still slated for December 11th and “I haven’t received any substantive comment on those rules at all.” She believed a minor tweak in the language around lot sizes was likely for “alignment.” 
  • Vapor Products (WSR 19-13-036, audio - <1m). The agency was on track for a public hearing on the CR-102’s proposed rules on November 26th. Hoffman said she hadn't received any feedback and expected to “move quickly” to the CR-103 stage.
  • Vapor Products Emergency Rules (audio - <1m). Following the agency’s emergency rulemakings on Vapor Product Signage and Disclosure which went into effect on October 16th, Hoffman reported monitoring the situation “to see if we need to make any sorts of changes so far. None of the activity that’s happening is suggesting that at this point.” She assured the Board that staff would continue to work with the State Board of Health (SBOH) and Department of Health (DOH) to track incidences of vaping associated lung injuries (VALI) in the state.
    • On Friday November 8th, the U.S. Centers for Disease Control and Prevention (CDC) published an announcement implicating Vitamin E acetate as a compound found in all 29 samples of fluid collected from the lungs of VALI patients. Later that same day, the WSLCB requested a “Cessation of Sales of Vapor Products with Vitamin E Acetate.” On Monday November 11th, Cannabis Observer predicted the WSLCB might undertake additional emergency rulemaking in relation to the new findings, but the agency did not indicate an intention to do so.
    • The latest development could impact a lawsuit by a Puyallup Tribal police officer alleging that cannabis vapor products acquired from the regulated market were at fault for his respiratory illness. Former Pierce County Prosecutor Mark Lindquist, who brought the suit on the officer’s behalf, told the Dori Monson Show his client “bought all of these products from stores - none of this is black market, it’s available to consumers all over the state.” As specific licensed processors are named in the suit, the relevant product ingredient disclosure forms submitted to WSLCB may or may not provide further validation of the claims.

• Future Rulemaking (audio - 1m). Surveying an already crowded rulemaking “horizon,” Hoffman said the agency planned a “tier 1 expansion rule project, opening up advertising rules, and we want to do some more exploration on transportation rules.”
  • Hoffman described a potential tier 1 expansion in October as the agency considered it a way to assist smaller producers.
  • In August, Enforcement Chief Justin Nordhorn mentioned a presentation for lawmakers concerned about advertising loopholes and Hoffman predicted a “revisit” of advertising rules last month.
  • Transportation requirements were recently debated following a petition to the Board.

• Patient advocate Don Skakie spoke about cannabis “juicing” during general public comment (audio - 2m).
  • Skakie, a medical cannabis and home grow activist from Renton, last addressed the Board on October 30th.
  • Skakie offered advisory comments ahead of next year’s legislative session to suggest there were “patients that benefit not from the full-termed flowered products but, in fact, from the in-growth vegetative juicing” of cannabis leaves. Skakie termed these items “nearly impossible” to find unless a patient grew cannabis themselves. Because of the “great medical benefit,” he suggested that when the Board was “looking at what could be resulting from this session” that they keep cannabis juicing in mind.