WSLCB - Board Meeting
(June 21, 2023)

Here are some observations from the Wednesday June 21st Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 4 takeaways:

• Policy and Rules Coordinator Daniel Jacobs explained that a CR-101 on cloud storage of licensee records would be withdrawn in favor of guidance establishing that the practice could be allowed alongside physical record copies.
  • Jacobs reported how a petition for rules to permit digital cloud storage “for retaining records that are required to be kept on site” was accepted in August 2022, and had been expanded to cover all licensees in a CR-101 from January 25th. In looking at amending WAC 314-55-083 and WAC 314-55-087, he had decided to request withdrawal of the program, stating that agency staff “concluded that formal rulemaking on this topic is not necessary at this time and rather informal guidance will suffice to accomplish these intended goals” (audio - 3m, Video - TVW, Video - WSLCB, Rulemaking Project).
    • On April 14th, a survey was emailed to “over 3,000” licensees, or “approximately 100 of each license type, or where they are less than a hundred licensees of a particular type statewide, the survey was sent to all licensees.” Closed on May 8th, the survey received “over 200 responses.” Cannabis licensees were asked how they “currently maintained their records, and of those who use some kind of electronic storage, the vast majority also keep hard copies on file.” 
    • “A majority of those who did respond would like some sort of clarifying statement about the permitted use of cloud storage,” but nothing existed “in rule or statute that prohibits the use of cloud storage by licenses.” Therefore, rulemaking wasn’t required, and officials would instead give “general guidance along with some sort of general principles and advice will accomplish these goals while also ensuring that the use of cloud storage by licenses won't become a roadblock, or a justification for failure to produce required records.”
    • If approved for withdrawal, notice would be posted on the intent of staff to issue guidance on the topic.
    • Board Chair David Postman asked about the format for the guidance. Jacobs expected guidance would be finalized “later this summer.” The document was unlikely to be “a formal policy statement, just because we don't have…any law or regulation currently on the books on cloud storage,” he said. Jacobs broadly described their plans to be “if you use cloud storage for keeping records, and something happens to the server that's gonna be treated the same way as any other issue.” His hypothetical was that if WSLCB Enforcement and Education officials “need to look at these records and you can't produce them, whether it's because your storage locker, you lost the key, or your server’s down, it's gonna be treated the same way.” Postman checked if “showing the record” on a computer on site would suffice, but Jacobs cautioned that “if LCB officers need to be able to take the records back, that's sort of where we're getting the details on” (audio - 2m, Video - TVW, Video - WSLCB).
  • Board members unanimously approved withdrawal of the CR-101 (audio - 1m, Video - TVW, Video - WSLCB).

• Jacobs then turned to a rulemaking petition on vapor products which shed some light on enforcement around hemp products containing synthesized THC and why staff were advising denial.
  • Postman brought up the “request to amend WAC 314-35-075 which would add ‘vapor’ in front of ‘product’ to clarify that it refers to a ‘vapor product.’” Jacobs established that the petition came from ​​”Chris Girard on April 26th” to add ‘vapor’ in “a particular instance of the word ‘product’” in rule. A subsection made it a violation to “sell, give, or permit to sell or give, a product that contains any amount of any cannabinoid, synthetic cannabinoid, cathinone or methcathinone, unless otherwise provided by law” (audio - 3m, Video - TVW, Video - WSLCB).
    • Girard “previously submitted a petition for rulemaking but that had been denied because he was technically asking to amend a statute, which we can't do,” Jacobs noted. He pointed out this “companion statute,” RCW 70.345.030(4), had the same violation language “almost word-for-word.” As WSLCB had “no authority to change the wording in that statute,” Jacobs believed there was a chance agency leaders could be “crossing the line and narrowing the scope of the regulation beyond that which is limited in statute, and that could be problematic for legal and enforcement reasons.” This had led staff to favor denying the petition.
    • Postman was unclear what issue Girard intended to address. Jacobs told him Girard had argued, “this regulation is being used to take non-vapor products that are being sold in vape shops,” including “cannabis health and beauty aids commonly known as ‘CHABA,’ but there are other products that are sold there and his goal” was for that violation to be definitively “talking about vapor products…Mr. Girard's concern that this seems impermissibly broad is actually, arguably exactly what was intended, that it is meant to be broader than just vapor products.” Jacobs would advise Girard to speak to legislators about “amend[ing] the companion statute,” and then “we would most likely need to amend our companion rule” (audio - 2m, Video - TVW, Video - WSLCB)
  • The board members were united in voting to deny the petition (audio - 1m, Video - TVW, Video - WSLCB).

• Another petition about the social equity program scoring rubric was denied, however the requested change could be considered during implementation of related legislation (audio - 5m, Video - TVW, Video - WSLCB).
  • Research Manager Kathy Hoffman discussed the petition from Black Excellence in Cannabis (BEC) Vice President Mike Asai on June 5th.
    • Asai’s last public comments to WSLCB were at the June 1st Special Board Meeting. 
    • The first scoring rubric had been drafted by the Washington State Legislative Task Force on Social Equity in Cannabis Disproportionately Impacted Communities Work Group as part of recommendations adopted by the full task force in September 2021. WSLCB stated in a January 2022 letter that there’d been “some concerns about the current scoring rubric,” and subsequently asserted the rubric adopted in rule took “into account as much of the Task Force’s recommendations as possible that now includes provisions to target licenses for those…with a demonstrated history in operating a medical dispensary” among other eligibility factors.
  • Hoffman stated Asai’s petition sought to “amend the social equity application scoring rubric number eight,” which related to WAC 314-55-570. Asai had argued “there's no clear transparency regarding qualifications for formal medical cannabis dispensary owners,” one area applicants can be given points towards equity license prioritization.
  • Hoffman provided the rubric language for that requirement: “Did you own or operate a medical cannabis dispensary or collective garden, licensed as a business, prior to July 1, 2016 (10 points)? or Did you own and operate a medical cannabis dispensary or collective garden licensed as a business in a DIA (30 points)?”
    • While not quoted by Hoffman, the rubric explained “Own and/or operate means someone who physically owned the business (which may include a sole proprietor, partnership, LLC member, etc.) or oversaw all business operations and had independent control. This does not include management or employees. A cannabis dispensary or collective garden must have operated as a business.”
  • Asai’s suggested language from the petition was: “did you own or was a governing member of a corporation known as a medical cannabis dispensary known as a collective garden in a brick and mortar prior to July 1st, 2016.”
  • She pointed out that the rule at issue was less than a year old, and applications were actively being scored using the rubric by Ponder Diversity Group. “We don't see that there would be any impacts on the divisions with respect to this…rule change,” she noted, but staff were preparing a rulemaking project implementing SB 5080 which modified “various provisions” of the equity program. Hoffman relayed staff were “reviewing that bill and strategically planning the significant work that will be related to it, including rule development… At the same time, we're also observing the social equity application process as currently described in rule.” She felt Asai’s rubric change could be considered in a “robust, comprehensive, and complete…collection of rule revisions,” but only “once the current round of the social equity application review is complete.”
  • “We really will be looking at rules in upcoming rulemaking that we anticipate commencing probably towards the end of July, [or] early August,” Hoffman told board members, stating that she was requesting denial of the petition.
    • Board Member Ollie Garrett clarified that Asai’s rubric change would be considered in the implementation of SB 5080 (audio - 1m, Video - TVW, Video - WSLCB).
  • Postman anticipated “robust discussions around the entire rubric,” but “we don't know the timing exactly, when that's completed, versus when rulemaking” around SB 5080 would begin. “Accepting the petition wouldn't have added anything to our ability here,” he commented (audio - 1m, Video - TVW, Video - WSLCB).
  • Board members voted to deny the rubric petition (audio - <1m, Video - TVW, Video - WSLCB)

• Tetrahydrocannabinol (THC) legislation SB 5367 had a rulemaking project opened which was not expected to be completed before 2024 (audio - 3m, Video - TVW,  Video - WSLCB, Rulemaking Project).
  • Policy and Rules Coordinator Cassidy West reviewed the history of the bill, part of an effort to control “a market for intoxicating products containing synthetic THC derived from hemp like delta-8[-THC].” After an earlier agency request bill wasn’t approved by lawmakers in 2022, West described SB 5367 as a successful sophomore effort, signed into law on May 9th and “effective on July 23rd.”
  • With board approval, the timeline for the project would be filed and:
    • “There will be a public comment period until August 7th”
    • “We would tentatively have rules, and the CR 102 filed, on or after October 25th”
    • “A public hearing at the beginning of December”
    • “Assuming things proceed as planned,” rules would be presented for adoption “in January 2024, with the rules becoming effective on February 3rd, 2024.”
    • Postman rhetorically wondered if they had any choice not to move forward with the legislative mandate. West laughed and responded, “no, not really”  (audio - 1m, Video - TVW,  Video - WSLCB).
      • Postman’s question might be reflective of frustration over how WSLCB would implement the law voiced by Director of Policy and External Affairs Justin Nordhorn to the WSLCB Cannabinoid Science Work Group on June 1st.
    • The board approved initiating the rulemaking project (audio - <1m, Video - TVW,  Video - WSLCB).