WSLCB - Board Meeting
(January 25, 2023)

Here are some observations from the Wednesday January 25th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 4 takeaways:

• Director of Licensing Becky Smith went over developments in the agency social equity program, including license allotments and how webinars hosted by a third-party company featured agency staff and representatives of the firm that would be scoring applications.
  • Smith explained that the January 24th webinar was part of education on the WSLCB social equity program. Though set up by staff at vendor MakeGreenGo!, she said the event was co-hosted by WSLCB staff and “our third-party vendor, that's going to be reviewing applications as part of that.” Smith reported that “altogether we had 232 people that participated and over half the folks asked questions.” The most frequent questions were addressed during the webinar but, as many “questions were actually very personal to the person that was asking them,” staff responded in emails following the event (audio - 4m, WSLCB video, TVW video).
    • Many participants wanted to know more about the application scoring rubric for applicants with “convictions versus arrests,” Smith noted. She confirmed that equity companies had to be majority owned by a qualifying applicant to receive an equity license, couldn’t be vertically integrated, and also fielded several questions on how retail licenses could be financed.
    • Smith encouraged prospective applicants to sign up for the last webinars scheduled for “Saturday [January 28th] 10am and then again at 7pm.”
    • She told Board Member Jim Vollendroff that the webinars would last one hour (audio - <1m, WSLCB video, TVW video).
  • Smith spoke about license allotments, the DIA maps for applicants, and a checklist with “all the items” potential applicants need to know ahead of the application window (audio - 4m, WSLCB video, TVW video).
    • The allotment map showed licenses by county, Smith explained, rather than unincorporated county and municipal allotments since the board adopted rulemaking to allow portability of equity retail licenses within a county in October 2022. When people selected a county, she described how the map could “link you into those cities and those jurisdictions” where the licenses were allotted at that time. “We recently sent 200 letters to those 44 counties and we received 30 responses back,” which she stressed “might not seem like a lot, but it is.”
    • With the publishing of the DIA maps for applicants to gauge their ability to qualify and a 30-day licensing application window announced to begin March 1st, Smith swiftly went over DIA criteria.
      • Board Member Ollie Garrett asked about the background of the mapping vendor, Environmental Systems Research Institute (ESRI, audio - 1m, WSLCB video, TVW video).
      • Board Chair David Postman asked what criteria for DIAs were in statute (audio - <1m, WSLCB video, TVW video) and about qualifying based on past DIA residency (audio - 1m, WSLCB video, TVW video).
    • Smith and Postman discussed how accurate the maps were, as Postman had heard people complain they found their home wasn’t included. Smith described how the map was being updated to clearly show why a neighborhood hadn’t met all criteria for DIA designation; “it may be that those areas hit the top 20%...in participation in a federal program, and high rate of convictions, but didn't in the other two” areas of high poverty and unemployment. Postman felt “more granular” identification of why areas weren’t designated DIAs would be “helpful” (audio - 2m, WSLCB video, TVW video).
    • Talking about the application window in March, Smith mentioned that an individual can only appear on one application, regardless of their ownership level (audio - 1m, WSLCB video, TVW video).
      • Postman followed up to see what would happen if an individual was listed on more than one application. Smith said only the first application with a person could be considered, potentially rejecting any other application that person was involved with. She emphasized that applicants need to "know who you're getting into business with" as applications couldn’t be restarted (audio - 1m, WSLCB video, TVW video).
    • Postman was curious if applying sooner made a difference in consideration. Smith told him the agency would be holding all applications until March 31st, before transmitting them to the social equity contractor Ponder Diversity Group (audio - 1m, WSLCB video, TVW video).
    • When Garrett asked if agency officials would do any screening of applicants before transmitting them, she was told they wouldn’t. WSLCB staff were “just a portal" at that stage in the process (audio - 1m, WSLCB video, TVW video).

• A petition for rulemaking that would open a new window for processor licensure was deemed not necessary and denied by the board.
  • Policy and Rules Coordinator Cassidy West told the board that a December 2022 petition from Eugene DeMesa of Cloud 9 Good Budz sought the opening of a new processor licensing window for existing producer licensees.
  • “Although the application window is currently closed, a rule adoption is not necessary for the board to open that processor license application window,” West explained, as she provided a staff recommendation to deny the request (audio - 3m, WSLCB video, TVW video).
    • Vollendroff confirmed his understanding of the reasoning for denial (audio - 1m, WSLCB video, TVW video).
  • Board members voted to deny DeMesa’s petition (audio - 1m, WSLCB video, TVW video), and did not offer any indication of intent to follow up.

• Board members agreed to open rulemaking allowing cloud storage of licensee records following a presentation from Policy and Rules Coordinator Daniel Jacobs.
  • Jacobs stated the move would modify rules to “allow cloud storage for records that are currently required to be kept on premise.” Expanded from a petition specific to cannabis licensees the board received in August 2022 from the Washington CannaBusiness Association (WACA), staff had viewed it as a sensible option to allow for all regulated communities. Presuming no small business economic impact statement (SBEIS) was needed, he laid out a timeline for the project (audio - 2m, WSLCB video, TVW video):
    • A public comment period would go “until Monday, February 27th.”
    • A CR-102 with conceptual draft rules would be presented to the board “in early May...which would set a public hearing at the end of June.”
    • Without delays in board approval of a CR-103, “that would put rules in effect, in theory, by the end of August.”
  • Vollendroff asked when a SBEIS was mandated. Postman’s understanding was that the need for a SBEIS was determined during the CR-101 stage. Jacobs said in “some situations for rulemaking the agency comes into it” with clear “draft rules” so they can estimate if there are costs for licensees. However, “there wasn't any sort of draft idea submitted with this,” so staff were “starting from scratch” and would determine if a SBEIS was needed once rules had been drafted (audio - 2m, WSLCB video, TVW video).
  • “Industry’s asked for it and they all have to help us with that impact if there is one,” observed Postman, but “it makes sense, it just seems like a common sense evolution for us” (audio - <1m, WSLCB video, TVW video).
  • Board Members unanimously approved the CR-101 (audio - <1m, WSLCB video, TVW video).

• Among public commenters, two speakers called out the accuracy of WSLCB data (one regarding DIA maps, one on the validity of tax revenue data from the agency reporting system) while another speaker raised concerns around cannabis taxation and product regulation.
  • David Busby, OpenTHC CEO (audio - 3m, WSLCB video, TVW video)
  • Brian Stewart, (audio - 4m, WSLCB video, TVW video)
    • Stewart took issue with the DIA maps which he believed "in no way reflect" the drug war and a neighborhood he’d grown up in which he felt was an “epicenter for drugs and drug violence.” Having become a “habitat connectivity biologist and a landscape ecologist” with expertise in “research methodology,” Stewart argued “no one's done the steps to figure out causation.”
    • If a rural community experienced a condition like “resource extraction” leading to “systemic poverty,” that wasn’t the result of drug enforcement. He contrasted this with how “in the city, you have a two block radius of crack cocaine, police presence, and all surrounded by affluent neighborhoods, so when you lump them together and you try to get an average,” the resulting community could appear to have “good employment.” Stewart called for DIA maps to be “reevaluated with the proper mechanisms”
  • Christopher King (audio - 5m, WSLCB video, TVW video)
  • Jim MacRae, Straight Line Analytics Founder (audio - 5m, WSLCB video, TVW video)
    • MacRae was complimentary of WSLCB support for HB 1453 (“Providing a tax exemption for medical cannabis patients) but offered a “caveat though" around the fiscal note from agency staff. Noting the use of Cannabis Central Reporting System (CCRS) data, he alleged they "basically came up with a ridiculous[ly low] number" suggesting either the system was broken or "the query that was done internally to pull the data [was] broken…when you have 251 active stores and they're doing supposedly $2,164 pre-tax sales in a year. That's eight dollars and 62 cents per actively medically endorsed store. That's just wrong”
      • Whether medically endorsed retailers were actually active had begun to be evaluated by WSLCB personnel in the fall of 2022.
  • Ahmed King, Black Excellence in Cannabis (BEC) Member (audio - 1m, WSLCB video, TVW video)
  • Gregory Foster, Cannabis Observer Founder (audio - 6m, WSLCB video, TVW video)
    • Appreciative that agency staff were “having more substantive discussions publicly about policy considerations,” Foster remarked he was happy to help get “the word out about those discussions.” He was grateful to see WSLCB representatives “supporting medical cannabis legislation in general this session,” highlighting Director of Policy and External Affairs Justin Nordhorn’s work with patient communities “for years now.”
    • Noting the introduction of HB 1595, Foster said the bill would modify  cannabis excise taxation by “dividing it by product type, as well as then dividing it by different THC concentration levels.” Though the bill didn’t list an intent for the change, he presumed it related to the Washington State Health Care Authority (WA HCA) and University of Washington Addictions, Drug, and Alcohol Institute (UW ADAI) report on high THC policy “published this past Monday.”
    • With taxation based on product concentration levels among the reported recommendations, Foster mentioned his role on a 2019 Cannabis Potency Tax Work Group at the agency. Members had looked at this question and “at that time we found it was not feasible and I reviewed that report this morning just to see what we recommended.” He shared that the group’s final report found:
      • Unknown impacts to public health.
      • The potential for disproportionate impacts to small businesses who may have to alter their production and packaging processes.
      • General concern about the capacity of the traceability system to audit a complex tax framework.
      • A lack of evidence regarding how this proposal would impact consumer behavior and revenue.
      • Concern related to testing lab proficiency and reliability until Department of Ecology lab standardization has been implemented.
      • Impact of the proposal on medical patients who may use higher potency products to manage their medical conditions.
    • Asking agency officials to “please be engaged with this bill,” Foster reminded the board “we've been down this path before” as the findings identified in the report were “still legitimate concerns.”
      • Two days later on Friday January 27th, Representative Lauren Davis introduced HB 1641 ("Addressing public health challenges of high-potency cannabis products"), which would implement all of the recommendations in the WA HCA/UW ADAI report, and HB 1642 (“Regulating the sale of cannabis concentrates”) which  would prohibit the sale of cannabis products with a THC concentration greater than 35% to anyone except registered patients and their designated providers.
      • Both bills were scheduled for their initial public hearing in the Washington State House Regulated Substances and Gaming Committee (WA House RSG) on Thursday February 2nd.
  • Peter Manning, BEC Co-Founder (audio - 1m, WSLCB video, TVW video)
  • Mike Asai, BEC Vice President (audio - 3m, WSLCB video, TVW video)