WSLCB - Executive Management Team
(April 3, 2019)

Here are some observations from the Wednesday April 3rd WSLCB Executive Management Team (EMT) public meeting. This week’s Board Caucus and EMT meeting were canceled.

My top 3 takeaways:

• Enforcement Chief Justin Nordhorn confirmed the agency’s position against advertising of cannabis products and trade names in and around public parks (audio – 3m).
  • Nordhorn said, “we were getting some inquiries from public events across the state” regarding advertising in public parks. He admitted Washington had permitted advertising of cannabis licensee trade names in parks “previous to 2017.”
  • Nordhorn said the inquirers included “one in particular which was [Seattle] Hempfest.”
  • In 2017, the omnibus cannabis bill SB 5131 included revisions to cannabis advertising law. You can read a summary of those changes in the final bill report or read the text of the session law.
  • Enforcement planned to send “a communication to licensees regarding what the law actually says in this area which is: you can’t have any sign.” Nordhorn said the Washington State Office of the Attorney General (OAG) was in agreement with WSLCB’s interpretation of the law, RCW 69.50.369.
  • Noting it was late in the legislative session, Nordhorn didn’t think it likely stakeholders could “work some magic” to “create an exemption.”
  • Nordhorn suggested the approach used in HB 1466, a bill seeking to ban retail billboards statewide while enabling local override, could be applied in this circumstance. See Cannabis Observer’s coverage of HB 1466’s House policy committee executive session, the last movement of that bill during the current session.
  • Nordhorn anticipated “we’ll probably be getting some pushback from folks across the state not liking that approach. But we can’t tell people they can violate the law.” He felt debate about ads was “percolating” and leadership should expect questions.
  • Nordhorn indicated he briefed stakeholders participating in a workgroup on the revision of cannabis penalty guidelines on Friday March 29th. Director Rick Garza said he expected increased inquiries to “the major trade organizations” and had asked Nordhorn to bring the subject up so the organizations would know how to respond.
  • Garza said he’d heard Seattle Hempfest was considering filing a lawsuit, adding “…I don’t understand quite why.” He concluded, “I don’t think there’s much the legislature is going to do about it right now.”
• Director Rick Garza celebrated “really good progress on the penalty rules” in relation to the Enforcement restructuring bill, SB 5318 (audio – 1m).
  • In early November 2018, WSLCB initiated a rulemaking on “cannabis penalty guidelines.” As the 2019 legislative session progressed, WSLCB used the open rulemaking to engage stakeholders and proactively demonstrate responsiveness to the demands being expressed through the legislature.
  • Garza congratulated Policy and Rules Coordinator Kathy Hoffman for her work with stakeholders: “I think you’ve done a really, with everyone, done a really nice job.”
  • Based on comments made throughout the meeting, it appeared that stakeholders had been meeting with WSLCB weekly to help define draft rules. Garza mentioned drafting could require “a couple more Fridays to come.”
  • The agency Director indicated there had been many comments, but he felt there was “little discord,” general “agreement with where we’re going,” and “alignment” with SB 5318.
  • After SB 5318 was passed by the Senate, the House Commerce and Gaming Committee hosted a public hearing and passed the bill during executive session with amendments. Subsequent to this EMT meeting, SB 5318 was heard by the House Appropriations Committee and passed out of the fiscal committee with additional amendments. At publication time, the bill had been referred to the House Rules Committee for potential scheduling on the House floor calendar.
• The EMT hosted a weekly collaboration on the Quality Assurance (QA) Testing and Product Requirements Rulemaking Project (audio – 24m, handout).
  • Cannabis Policy and Rules Coordinator Kathy Hoffman described “the scope of what is happening in a nutshell.”
    • WSLCB currently requires quality assurance testing for microbials (“potency, bacterial, and fungal organisms”), mycotoxins (“the byproducts of metabolism of certain species of molds and fungus”), and water activity.
    • WSLCB currently contracts with the Washington State Department of Agriculture (WSDA) to conduct complaint-driven “random pesticide testing” on a contract basis.
      • In November, WSLCB learned that WSDA intended to request a direct budget allocation for those tests. The latest House budget includes a shift of $1.27M from WSLCB to the “WSDA Cannabis Program.”
    • “Cannabis products for medical use are regulated through the Washington State Department of Health (DOH).”
      • To be considered “medically compliant” cannabis products must meet pesticide and heavy metal testing standards defined by DOH.
      • Hoffman described the conundrum created by the decision of Molecular Labs, the only testing lab certified to conduct heavy metals testing, to cease offering that service to I-502 licensees. WSLCB Marijuana Examiners Manager Kendra Hodgson described the situation and DOH’s response in greater detail in mid-February.
      • Hoffman said Trace Analytics and Medicine Creek Analytics remained “in line to be accredited” for heavy metals testing. In February, Hodgson expressed some skepticism that Medicine Creek Analytics projected readiness by the end of February while Trace Analytics expected to be online in March.
    • Hoffman characterized the provenance of the rulemaking: “In early 2018, several stakeholders—including medical marijuana patients and marijuana business owners—sort of urged the LCB to require cultivators to test recreational crops for pesticides and heavy metals. They thought that this move, because it was already adopted in other states, would inspire confidence among our consumers, increase access to medically compliant products, and bolster sales – at the same time.”
    • On August 8th 2018, former Policy and Rules Coordinator Joanna Eide filed the CR-101 (notice of rulemaking, issue paper).
    • WSLCB has since “met with stakeholders and industry partners including medical marijuana patients, Department of Health, and the Washington State Department of Agriculture to talk about the ways our rules can be better aligned to encourage marijuana testing standardization.”
  • Hoffman succinctly described the goals of the rulemaking project.
    • “Assure that all marijuana products in the Washington-grown marijuana market are safe for all consumers.”
    • “Establish Washington state lab testing standardization for consistency, integrity, and safety.”
    • “Encourage and engage strategic incremental rule implementation. So that means we’re planning well before adoption, to assure market integrity and product availability during transition.”
      • Hoffman indicated this could be accomplished by coordinating “with industry partners, DOH, WSDA, and others as necessary.”
      • She added, “We’ve learned from other states that, to not require pesticide testing on one day and then requiring it on the next day really is a problem.”
  • Hoffman described “our priorities, the activity detail with respect to this rulemaking.”
    • “Public health and safety”
    • “Increase product access, particularly for vulnerable and medically compromised consumers”
    • “Improve supply chain oversight at the same time”
  • Hoffman described her “strategies for this rulemaking.”
    • Facilitated Stakeholder Engagement
      • Hoffman expressed her intention “to develop sustainable rules that will stand the test of time” through meaningful engagement with stakeholders.
      • On Tuesday April 9th (subsequent to this EMT meeting), Hoffman led a “Quality Assurance Testing Draft Conceptual Rules Listen and Learn Forum” to gather stakeholder feedback on draft conceptual rules (agenda, webinar recording).
      • The “appreciative inquiry” format was intended to help WSLCB understand how stakeholders will be affected by the rules and solicit best practices from the labs.
    • Small Business Economic Impact Statement (SBEIS)
      • WSLCB has contracted with Industrial Economics to develop the SBEIS through the Governor’s Office for Regulatory Innovation and Assistance (ORIA).
      • Hoffman said, “this is consistent with what’s required in the Regulatory Fairness Act” (RCW 19.85).
      • WSLCB research had shown that “98% of our marijuana businesses are small businesses” where small business was defined in an uncited statute as “50 employees or under.”
      • Hoffman shared an example DOH CR-102 containing an SBEIS which she helped compose prior to leaving DOH. Cannabis Observer acquired the document via public records request. Hoffman later indicated ORIA presents the documents developed at DOH as model rulemaking templates.
      • The estimated completion date for the SBEIS was June 1, 2019.
      • The SBEIS will be included in the CR-102 packet. Hoffman estimated the CR-102 would be presented to the Board for approval in August.
    • Significant Legislative Rule Analysis
      • Hoffman indicated that WSLCB is not required to complete a significant analysis as part of every rulemaking, but felt it was appropriate for this rulemaking project “to compare what our rules did before, what our proposed rules will do, and do a brief cost-benefit analysis of each rule change.”
      • Hoffman said, “this is consistent with part of the Administrative Procedures Act found in RCW 34.05.328.”
      • The significant analysis will include a section, required by statute, that lays out “the types of activities we engaged in to reach the conclusions that we did in our rule proposal.”
      • Hoffman shared an example significant legislative rule analysis, also acquired by Cannabis Observer.
      • The estimated completion date for the significant analysis was June 15, 2019.
    • Phase-In Plan
      • “With industry partner input and collaboration, create a workable, sustainable, clear, and well communicated phase-in plan to allow producers, labs, retailers, and all interested parties the ability to timely comply with the potential new standards with the least amount of market disruption.”
  • Board Member Russ Hauge, the Board sponsor for this weekly collaboration, opened up discussion: “It looks like more work, but really what we’re doing is creating our history of our rulemaking up front rather than waiting till we get sued at the end and we’re scrambling around for documents.” He added Hoffman’s approach would be “an enormous change, and can be very very positive.”
  • Hoffman emphasized the long-term usefulness of her rulemaking approach: “We’re in a status of change right now. Five years from now, we might be as well. And so we can look back on these documents and sort of reconstruct what we did.” Director Garza admitted, “It’s hard for us to do that now.”
  • Hoffman suggested, “I suspect it’s going to really inform our decision-making” to which Garza replied: “And our stakeholders.”
  • Director of Legislative Relations Chris Thompson was present at this EMT meeting and said, “…quality assurance and pesticide testing…wasn’t required initially because of economic impact. And we don’t need to do, necessarily, that analysis for re-corking. But for something like this that really is profoundly economic in its impact—despite the push from consumers and public health—there are impacts that we are going to be much better off understanding well, even if we don’t do this for every rule.”
  • Director of Communications Brian Smith followed up to ask if there were criteria for employing this kind of rule analysis. Hoffman replied, “it’s agency discretion because it’s not required” and defined her threshold: “if it’s going to have any kind of impact on the regulated community other than just a small administrative impact…then yes, I think we should do a significant analysis.”
  • Hoffman went on to describe more of her personal practice of rulemaking, including development of an “implementation plan” and a separate “project management plan.” She took the opportunity to recommend development of a project management plan for “the communications piece.”
  • Overall, the Board and agency leadership seemed very pleased with Hoffman’s process and the results she had generated in her first 101 days at the agency.