WSLCB - Executive Management Team
(February 8, 2023)

Here are some observations from the Wednesday February 8th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

• Director of Legislative Relations Marc Webster talked about progress around cannabinoid regulation legislation drafted by the agency—including a costly fiscal note—and Director of Policy and External Affairs Justin Nordhorn gave his impression of several other cannabis-related bills before lawmakers.
  • Regarding their request bill HB 1612 (“Concerning the regulation of products containing THC”), Webster reported that Lacy Fehrenbach, Washington State Department of Health (DOH) Chief of Prevention, had been “really helpful in giving…some supportive testimony.” He shared that “both the cannabis and hemp industries remain very concerned about the THC threshold that's in the bill, but they remain split on what to do with it. Hemp would like that threshold raised, while the [legal cannabis] sector wants it dramatically reduced, or even brought to zero.” Webster added that he would be investigating the reason for a “very, very high fiscal note from the state patrol” (audio - 1m, video - WSLCB, video - TVW).
    • Board Chair David Postman and Nordhorn both expressed surprise at the fiscal note. Nordhorn found the Washington State Patrol (WSP) analysis “a bit confusing because last year [the cannabinoid regulation fiscal note] was quite high, and when we worked with them over the summer and…we seem to receive an indication that this would be easier to to work with.” He was uncertain of “what has changed in those assumptions”(audio - 1m, video - WSLCB, video - TVW).
      • The fiscal note attributed the cost to new Crime Laboratory Division (CLD) equipment, protocols, and additional staff time needed to “provide evidence testing that meets the new definitions of the proposed legislation to the extent scientifically possible.” But upon inquiry by Cannabis Observer, WSP Director of Communications Chris Loftis replied that CLD was already “capable of identifying virtually any chemical compound, thus all THC’s (delta-9, delta-8, [cannabidiol] CBD etc.), any hemp-derived synthesized cannabinoids, synthetic cannabinoids, and all ‘spice’ compounds.”
      • A proposed substitute version of the HB 1612 companion bill, SB 5367, was changed so that “nothing in the act shall be construed to require any agency to purchase a liquid chromatography-mass spectrometry instrument.” The revised language was recommended for passage by the Washington State Senate Labor and Commerce Committee on February 13th. At publication time, the bill was scheduled to be heard in the Washington State Senate Ways and Means Committee (WA Senate WM) on Saturday February 18th.
  • Nordhorn’s update touched on several bills the agency was involved in including HB 1612 and SB 5367 (audio - 8m, video - WSLCB, video - TVW).
    • He felt there was “not a full repeat of last year, but there are some folks sharing information that is just confusing what the bill does, and so I think that we're gonna have to strategize on how to make sure that we have proper information to the members…We're hearing things about the bill allowing synthetics into the market. That's just not the case.”
      • CBD can be imported as an ingredient in cannabis products, and testimony on HB 1612 from Micah Sherman, Washington Sun and Craft Growers Association (WSCA) Board Member and Raven Co-Owner, emphasized the bill required labeling “the amount of any synthetically derived CBD in the product sold or provided to the ultimate user.” Sherman objected to allowing CBD created from yeast or orange peels, stating “synthetic cannabinoids are not a part of the cannabis industry.”
      • Webster mentioned drafting a document to address "misstatements" about the cannabinoid bills at the February 14th Board Caucus.
    • Webster had also encountered “a number of folks from the hemp in food task force [who were] trying to work their recommendations from that task force into our bill as it doesn't look like they're going to be presenting a bill this year. So that's kind of clouding some of the issues.”
      • Bonny Jo Peterson, Industrial Hemp Association of Washington (IHEMPAWA) Executive Director, testified against the request bill, incorporating a call for “multiple amendments, as well as the hemp in food task force stakeholder bill.”
    • Additionally, Nordhorn referred to “some representation around lab compliance, and this is not a lab compliance bill.”
      • Amber Wise, Medicine Creek Analytics Science Director and Washington State Hemp in Food Task Force Member, shared her concerns around the ability of labs to test for not necessarily well defined compounds swept up in the expanded definition of THC—a potential reason WSP leadership would need additional CDL resources—as she noted her lab would need new processes with certified reference materials she thought weren’t yet “commercially available.”
    • Mentioning SB 5263, “Concerning access to psilocybin services by individuals 21 years of age and older,” Nordhorn mentioned legislator interest in using the Cannabis Central Reporting System (CCRS) as a traceability platform for psilocybin products, and “we had a really good conversation in our legislative meeting the other day that provided a good rounding of information on that.” He noted this included an upcoming meeting with Oregon Health Authority staff overseeing their Psilocybin Services program “so we can get an idea of what their anticipations and assumptions are on market structure.” The bill was advanced by a majority of WA Senate LC members on February 13th. 
  • Director Rick Garza called attention to SB 5377, “Concerning cannabis license ownership,” which was scheduled for a public hearing the following day on February 9th. He claimed the proposal empowered the board to cancel and reissue unused cannabis licenses, “producers specifically,” if the business wasn’t “using their license or they're not operating.” He specified how the “bill would say [any producer’s license] after July 1st, 2021, if there's no activity, you have to give up the license” (audio - 3m, video - WSLCB, video - TVW).
    • Garza seemed to conflate the impacts of SB 5377 and SB 5080, “Expanding and improving the social equity in cannabis program.”
      • The bill analysis of SB 5377 indicated WSLCB staff would be empowered to “suspend” producer licenses designated as “inactive” - but when federal changes in cannabis law were adopted, those licenses would be reactivated. No changes to license ownership were envisioned in the bill.
      • By contrast, the proposed substitute language adopted for SB 5080 allowed “up to 100 cannabis producer and 65 cannabis processor licenses that have been subject to forfeiture, revocation, or cancellation by the Liquor and Cannabis Board (LCB) as licenses authorized to be issued or reissued under the Social Equity in Cannabis Program.”
    • He asked Director of Licensing Becky Smith how such a program would “impact the current situation for us.” She guessed agency officials had “over 200 producer processors…that we've received their license back, either voluntarily, or they've been revoked, or they've never been open and operating.” However, as the bill didn’t define what would count as ‘activity,’ the agency would be expected to determine whether producer licensees who were “paying their fees and aren't…growing anything” counted as active. “I don't know that the pool is that big to make an impact on the industry,” remarked Smith.
    • Smith further conveyed some concern among her team “over…making people grow.” She didn’t know if telling licenses to cultivate cannabis “when they're really waiting for whatever” was an enforceable practice.
    • Postman felt “we don't have a shortage right now. So…it doesn't help the sort of supply issue because we got plenty of supply.”
      • Subsequent to this event, a proposed substitute to SB 5377 was unanimously adopted by WA Senate LC members on February 14th the proposal was referred to the WA Senate WM where a hearing was scheduled for Monday February 20th.
      • SB 5080 was heard by that committee on February 13th. On February 14th, Webster described the hearing as positive, and that WA Senate WM members “really got a sense for why it's important." An executive session on SB 5080 was included on the agenda for February 20th.

• A federal court ruling favorable to WSLCB in a lawsuit challenging the residency requirement for cannabis licensees was addressed by agency leaders.
  • A 2020 lawsuit against WSLCB brought by Idaho businessman Todd Brinkmeyer challenged the residency requirement for cannabis license ownership in RCW 69.50.331(1)(b) in state court.
    • Brinkmeyer’s attorneys also filed a federal lawsuit in 2020, after the Washington State Office of the Attorney General (WA OAG) filed a notice of removal to federal court seeking to shift the case to the United States District Court for the Western District of Washington. The federal court judge returned the suit to state courts where it was dismissed following a July 2021 hearing on the case in Thurston County Superior Court. 
    • After the state court’s ruling, the case was resumed in federal court in November 2021. Brinkmeyer’s motion for a favorable ruling was denied by Judge Benjamin H. Settle on February 7th.
  • Deputy Director Toni Hood mentioned how agency leaders had "prevailed" and the ruling was interpreted as good news that the constitutional Dormant Commerce Clause “cannot be read to protect illegal interstate commerce.” She noted Brinkmeyer’s attorneys put forward “other arguments regarding equal protection and the privileges and immunities clause, none of which prevailed.” Hood credited lead counsel Assistant Attorney General Penny Allen, asserting the State got “some good language in this case if there are other challenges related to equal protection” (audio - 2m, video - WSLCB, video - TVW).
  • Postman knew the decision may not “settle this issue nationwide” but felt it was “really good to see” (audio - <1m, video - WSLCB, video - TVW).

• An approaching social equity retail license application window meant staff were finalizing educational materials, the subject was receiving increased engagement in the agency’s online platforms and media outreach, and the board was deciding how to track licensee success long-term.
  • Smith last updated the group on the social equity program on January 25th.
  • In the EMT, Smith gave specific details about the social equity program which was set to open a 30-day application window starting March 1st (audio - 4m, video - WSLCB, video - TVW).
    • Washington State Department of Commerce (WA Commerce) staff were finishing a third-party contract “with their chosen facilitators,” along with “writing up contracts for 24 to 26 mentors for technical assistance for the mentoring program.” She described a partnership with WA Commerce officials to “ensure applicants will be able to easily sign up and access the mentor program when it becomes available.”
    • MakeGreenGo! webinar trainings for prospective applicants were available online, Smith commented, and staff had counted 365 attendees and 625 chat messages, which was “considered high engagement.” The recording would be “posted all the way through the end of March,” said Smith, and her team would be updating the question and answer page as well.
    • Disproportionately Impacted Area (DIA) maps had been revised to add more neighborhoods as outlined in her January 25th comments which “increased the number of census tracts that qualify as disproportionately impacted areas by increasing the threshold from 20% to 30%.” Internal training for enforcement and compliance staff had been conducted on January 23rd, Smith added. She promised additional information about map changes would be addressed during the February 15th Board Meeting.
      • At that meeting Smith discussed the changes to DIA criteria and called the maps “complete.” She encouraged people with questions to use an online submission form (video - WSLCB).
      • A 45th equity retail allotment was added in Skagit County on February 16th.
  • Smith went over discontinued businesses, with 219 alcohol licensees discontinued, and three cannabis businesses, telling the group “almost all of these were just lingering, expired licenses that now are off the books.” She was happy because getting them discontinued had “a lot of benefits” including “preparing ourselves for the systems modernization project as well” (audio - 3m, video - WSLCB, video - TVW).
    • Postman pointed out that regulators had encountered licensees who “never really seem to get up and running” and asked “how do we get alerted to that?” Smith responded that “there's not a red flag that goes to licensing” if a business wasn’t open or active, explaining that “sometimes we hear from customers or other licensees that they're not open and operating. But if they're paying their fee and…they're meeting all of the requirements, we wouldn't necessarily hear from them” (audio - 4m, video - WSLCB, video - TVW).
      • Board Member Ollie Garrett asked about “a process and at one time we knew everyone that wasn't open and we were keeping in communication to make sure that there were legit reasoning.” Smith said that was for retailers only, but her team “tracked by sales” reporting.
      • Board Member Jim Vollendroff thought that being able to track the active status of businesses would be useful for the board. 
      • Enforcement and Education Director Chandra Wax described the review of active retailers as a collaboration between her staff and Licensing “at the beginning of each month.” However, she cautioned that because of demands on Enforcement personnel, ”it's not something that can always be at the top of our priority list” or could always be done “in this detail.”
  • Director of Communications Brian Smith indicated that the communications plan around the equity program was underway; the responses he’d seen were “really positive about this stuff.” He offered an example that in “November, views on our social equity and cannabis section of our website was at the 31st out of about 400-500 sites, which I said” was positive since “this is a niche audience.” In January, their equity webpage was 11th, suggesting a “specific audience that's looking for something specific, and you've got enough people in the thousands that are going to that page for that information” (audio - 5m, video - WSLCB, video - TVW).
    • He’d surveyed webinar attendees and found:
      • 28% reported learning about the events via GovDelivery
      • 32% reported find out from the WSLCB website
      • 28% found out from “word of mouth”
      • 27% learned about the events “some other way”
    • Smith credited media outreach, mentioning a contact from the Seattle Medium whose staff had not previously “reached out to me on a news thing.” The newspaper publisher Chris Bennett also planned to schedule Becky Smith for a radio interview, he added, highlighting that Garrett had also been speaking to media outlets. She said her media appearances included programs “in the community, and all of these are coming from where we were hearing before no advertising was done to get word into the community and everything has been positive.” Smith agreed that for social equity coverage “all these things that we're hearing are really positive stuff.”