WA House APP - Committee Meeting
(March 31, 2023)

Friday March 31, 2023 1:30 PM - 5:00 PM Observed
Washington State House of Representatives Logo

The Washington State House Appropriations Committee (WA House APP) considers the operating budget bill and related legislation, budget processes, and fiscal issues such as pension policy and compensation. The committee also considers bills with operating budget fiscal impacts.

Public Hearing

  • SB 5367 - “Concerning the regulation of products containing THC.”
https://app.leg.wa.gov/committeeschedules/Home/Documents/31138

Observations

Hemp industry members opposed a bill on THC regulation, but an agency representative as well as several cannabis industry, public health, and substance prevention groups backed the move.

Here are some observations from the Friday March 31st Washington State House Appropriations Committee (WA House APP) Committee Meeting.

My top 3 takeaways:

  • The fourth public hearing on a proposal to limit hemp tetrahydrocannabinol (THC) products began with a briefing by staff inclusive of a revised fiscal analysis.
    • Initiated as Washington State Liquor and Cannabis Board (WSLCB) request legislation, SB 5367 was approved by the Washington State Senate (WA Senate) on March 2nd following amending into an engrossed second substitute bill.
    • WA House RSG committee counsel Peter Clodfelter detailed the effects of the proposed substitute legislation based on the bill report (audio - 2m, video):
      • Modifies definitions in, and adds definitions to, the Uniform Controlled Substances Act (UCSA) and hemp statutes, including amending the term "cannabis products" in the UCSA to include any product intended to be consumed or absorbed inside the body with any detectable amount of tetrahydrocannabinol.
      • Prohibits the manufacture, sale, or distribution of cannabis or cannabis products without a state-issued license.
      • Prohibits the production, processing, manufacturing, or sale of any cannabinoid that is synthetically derived or completely synthetic.
      • Modifies authorized activities of licensed cannabis producers and processors regarding enhancement of cannabidiol concentration in cannabis products. 
      • Clodfelter outlined some additional details, like exceptions to allow Cannabis Health And Beauty Aids (CHABA) and products approved by the U.S. Food and Drug Administration (FDA).
        • Washington law on CHABA exempts topicals with a “THC concentration of not more than 0.3 percent,” not able to cross “the blood-brain barrier,” nor “intended for ingestion by humans or animals” from the“regulations and penalties” related to cannabis processing.
      • He also pointed to a modification to a statute allowing cannabidiol (CBD) additives in cannabis products, that “subject to lab testing licensed cannabis producers and processors could use a CBD additive from an unlicensed source for the purpose of enhancing the CBD concentration of a cannabis product so long as that additive does not meet the new definitions of ‘cannabis,’ a ‘cannabis product,’ or is not…a synthetic cannabinoid.”
        • Though import of extracts and distillate for the purpose of enhancing CBD content of cannabis products would stay authorized, that statute would also be modified so that imported products couldn’t already meet the revised definition of “cannabis products,” effectively banning that pathway for hemp items already containing “detectable” amounts of THC.
      • Additionally, Clodfelter said SB 5367 would “prohibit the manufacture and sale of certain consumable products containing detectable amounts of THC that are currently not within the definition of cannabis or cannabis products, and that are not currently subject to regular regulation regarding their sale.”
        • The sole mention of prohibited activity in the bill language occurs in section 5 where, “producing, processing, manufacturing, or sale of any synthetically derived, or completely synthetic, cannabinoid is prohibited.” While not specifically noted in bill language, if production of hemp products containing THC initiated the schedule I penalties, those involved could be “guilty of a class C felony punishable according to chapter 9A.20 RCW.” As hemp products are able to be sold in other states, section 3(3) states the legislation does “not include the authority to enact rules regarding either the production or processing practices of the industrial hemp industry or any cannabidiol products that are sold or marketed outside of the regulatory framework.”
    • Committee Fiscal Analyst Matt Mazur-Hart took members through the updated fiscal note, highlighting costs related to WSLCB, WSDA, and the Washington State Patrol (WSP, audio - 3m, video):
      • WSLCB was expected to spend $400,528 between fiscal years (FY) 2023-25 and $265,468 for subsequent bienniums “all related to staffing.”
      • WSP calculated expenditures of $387,500 in FY 2023-25, and $136,000 in future bienniums “related to new testing that they would need to perform since the bill changes the definition of THC concentration.” 
      • The initial fiscal note by WSP staff had frustrated some leaders at WSLCB owing to their plan to purchase additional equipment for testing before the expenditure was explicitly excluded in substitute bill language. Additional details from the WSP analysis:
        • It is not clear how this may impact evidentiary standards, but if they only require determining the presence of THC to identify a substance as cannabis, there will be no impact to the current testing procedures of the WSP’s Crime Laboratory Division (CLD). If however, the evidentiary standards require the identification of THC concentrations consistent with new and current definitions, including the new definition of THC Concentration in Section 2(uu), we will need to expand our concentration testing protocols. 
        • We assume that our CLD will need to provide evidence testing that meets the new definitions of the proposed legislation to the extent scientifically possible. In order to accomplish this, each of our three Controlled Substance Laboratories would need to acquire a Liquid Chromatography-Mass Spectrometry (LC/MS) instrument capable of conducting the more detailed analysis required, at an estimated cost of $600K per instrument. We assume that the intent of New Section 6 of the proposed legislation is that we not do so, therefore these costs are not included in the expenditure table. This means that we will be unable to fully meet the new evidentiary standards created.
      • WSDA staff were “anticipating a reduction in revenue from fewer hemp producers” due to the restriction on hemp consumables, “$130,000 in each biennium ongoing, but they also estimate a cost savings of $130,000 per biennium from staff no longer needing to collect and then process those license fees.” Mazur-Hart calculated this amounted to a “net zero fiscal impact for” the department.
        • Analysis details he didn’t highlight include that:
          • Products sold in [Initiative 502] licensed retail stores must be grown and processed by I-502 producers and processors – so by saying that cannabis products with any amount of detectable THC (including products previously defined as hemp) must be sold through the I-502 regulatory channel.
          • About 75% of hemp licensees are selling into markets to make ingestible hemp products…and so if they lose their ability to sell into those marketplaces, they are unlikely to relicense. WSDA assumes up to a 75% reduction in our current 72 hemp licensees at $1,200 per license. Estimated reduction of 54 hemp licensees and $64,800 loss in revenue.
      • Mazur-Hart also gave the February 22nd fiscal committee briefing on HB 1614, “Concerning the home cultivation of cannabis," where his addition of an “illustrative” revenue outcome resulted in confusion from members and consternation by some testifying in favor of the measure, which didn’t advance after that hearing. He also provided the fiscal overview for social equity bill SB 5080, which was later removed from consideration ahead of an April 1st executive session.
    • RepresentativeJoe Schmick was curious about the rationale behind excluding “products that are already approved by the [FDA] and not be inclusive of those in” statute. Clodfeltered answered that drugs approved by that agency, such as Epidiolex, were excluded “to clarify that” Washington State officials weren’t “trying to prevent something that the federal government was allowing to sell” (audio - 1m, video).
      • In 2018, FDA officials acknowledged that hemp seed-derived food ingredients were generally recognized as safe (GRAS), and mentioned the items “contain[ed] only trace amounts of THC and CBD” and the “Consumption of these hemp seed-derived ingredients [was] not capable of making consumers ‘high.’”
  • Testimony backing the legislation came from the Washington State Liquor and Cannabis Board (WSLCB), some new cannabis trade group voices; and public health and substance prevention organization leaders.
    • 13 individuals registered a position in support of the bill (testifying, not testifying).
    • WSLCB Director of Legislative Affair Marc Webster spoke about the “long road" for SB 5367 and how it had “been really well worked on both sides and that it really targets the main policy purpose before you" by removing “synthetic cannabinoids from sale including the delta-8[-THC] gummies that started popping up in convenience stores.” He recognized there were “concerns…with the word ‘detectable’” and “what that means for testing labs,” but told legislators "WSLCB can write rule around that" in collaboration with WSDA officials “whose cannabis testing lab standards work is ongoing” (audio - 1m, video)
      • “The legislature has made a very clear statement of intent and state agencies can iron out the details,” Webster summed up in his call for passage, deeming that the bill represented “very important public policy, and it doesn't cost much.”
        • At time of publication, SB 5367 doesn’t feature a direct statement of legislative intent, which is sometimes explicitly spelled out at the beginning of a bill, but other times is ascertained through the “journal and recordings of floor and committee sessions.”
      • It’s Cannabis Observer’s understanding that WSLCB Chemist Nicholas Poolman left the agency to join the WSDA Cannabis Lab Accreditation Standard Program (CLASP) team.
    • Two cannabis sector representatives gave their support of the bill, praising how it "strikes the right balance between the regulated cannabis marketplace and the largely unregulated hemp marketplace" in regulating and taxing hemp consumables more like cannabis products. The legislation would “ensure that intoxicating products containing THC are not allowed to be sold in places like convenience stores where it is accessible to children and young adults under the age of 21,” and stop hemp consumables from “negatively impact[ing] the revenue that is collected by the state from the cannabis industry.”
    • People lobbying on behalf of public health and substance prevention argued the bill would “keep THC products age restricted and away from youth,” since the products could "look like candy" and “there have been several poisonings of youth by these products, including three at a Snohomish Middle School just a few weeks ago, purchased legally at a local gas station.” Furthermore, both noted limiting THC items to the I-502 market would provide more state revenue by taxing any THC item under the 37% cannabis excise tax.
  • Opposition testimony emphasized how damaging the legislation would be for hemp licensees, expecting their businesses would cease operating in the state.
    • 25 individuals registered a position in opposition to the bill; one person registered a position of ‘other’ (testifying, not testifying).
    • Representatives of existing and prospective hemp licensees said the bill would threaten their “hemp derived wellness” businesses and that the measure would make it “impossible to put healthy, good product out.”Believing SB 5367 was akin to “assessing an alcohol tax on grape juice," some called for more types of hemp products to be exempted from the restrictions. One speaker even accused legislators of harboring an “intent to destroy the hemp industry" and that such "government overreach is very wrong."
    • Bonny Jo Peterson, Industrial Hemp Association of Washington (IHEMPAWA) Executive Director, stressed her opposition to banning "any detectable amount of THC" while emphasizing that restrictions on synthetic compounds in the legislation “might not be perfect but it does get the products that are the public policy issues” which she asserted were products “the hemp industry doesn’t want to see in the market getting people high.” Urging implementation of a pilot “program under the WSDA and Department of Health that would…take the any detectable amount out,” she requested funding for rulemaking so those agencies could set a THC threshold where “over this amount is a cannabis product, under this amount is a something that doesn't get too high that would be a general market product, an all natural product” (audio - 2m, video).
    • Prior to the hearing WA House APP staff announced committee members planned to host an executive session on the legislation on Monday April 3rd.

Engagement Options

In-Person

O'Brien Building, 15th Avenue Southwest, Olympia, WA, USA

Hearing Room A

Livestream

https://www.tvw.org/watch/?eventID=2023031562

Information Set