WSLCB - Board Meeting
(July 19, 2023)

Wednesday July 19, 2023 10:00 AM - 11:00 AM Observed

The Washington State Liquor and Cannabis Board (WSLCB) convenes a meeting of the three-member Board every two weeks to consider formal rulemaking actions and hear public testimony.

https://lcb.wa.gov/boardmeetings/2023july_schedule

Observations

A longtime employee was recognized, staff were working with the equity scoring vendor on acceptable documentation, and stakeholders wanted the agency to learn from past traceability efforts.

Here are some observations from the Wednesday July 19th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

Deputy Director Toni Hood recognized Director of Policy and External Affairs Justin Nordhorn for a quarter century of work with WSLCB (audio - 2m, Video - WSLCB, Video - TVW).
- Hood stated that Nordhorn had joined the agency as an Enforcement officer in training in July 1998 and “quickly moved” through the next rank to become a Lieutenant in 2002. “He was quickly promoted to Captain, and then shortly thereafter to Deputy Chief” of the division in 2010, she remarked. Hood explained how Nordhorn was promoted to Chief of Enforcement for WSLCB in 2011, and served in that capacity until September 2020, when he took on the newly created post of Director of Policy and External Affairs. “He is extremely valuable for all of us here at LCB,” she added, mentioning how Nordhorn brought knowledge, history, and “experience” to their work. Additionally, Hood called attention to his work with other stakeholders on the Cannabis Regulators Association (CANNRA), commenting that he’d helped agency staff and the broader public before concluding “we really appreciate your 25 years of service.”
  - Nordhorn had also represented the agency in meetings with state lawmakers. Besides the implementation of Initiative 502 during his tenure as chief, Nordhorn served as Board President of the National Liquor Law Enforcement Association (NLLEA) from 2017-2018.
  - The position of Chief of Enforcement was retitled as the Director of Education and Enforcement during a reform of the division following an enforcement report from consulting firm Hillard Heintze in December 2019. At time of publication, Chandra Wax had served as Director of Education and Enforcement since February 2021.
- Board Chair David Postman lauded Nordhorn’s contribution to WSLCB: “you’re really a star here.” Postman declared he couldn’t “have made it as far as I have without you,” since he started with the agency in 2021. “You’re the brains, often,” and Postman had found Nordhorn’s name was somewhat “magical” among lawmakers and stakeholders. He also thanked Nordhorn for his work to help the institution “evolve” during the transition to legal cannabis (audio - 1m, Video - WSLCB, Video - TVW).

Director of Licensing Becky Smith talked about the status of the social equity program (SEP) and introduced program manager Aaron Washington (audio - 3m, Video - WSLCB, Video - TVW)
- Smith’s most recent public comments on the program were on July 12th.
- Ponder Diversity Group (PDG), a third-party vendor, was “currently reviewing all applications” completed before an extended submission deadline of April 27th, she told the board. Smith gave some background on the SEP, the Washington State Social Equity in Cannabis Task Force, and the role PDG staff played in scoring and prioritizing applications after soliciting documentation relevant to a scoring rubric adopted by the board in 2022. A vendor external to WSLCB was used “to avoid any appearance that the agency employees were influencing the process,” Smith stated.
- Smith spoke to “handling concerns that…had been shared at previous board meetings, and emails that we've received relating to the process of our third-party contractor.” Questions about specific applications were being forwarded to PDG personnel as “we do not have access to the application, and are not able to know what has or has not been submitted by the applicant,” she said. Additionally, she understood that “applicants [were] anxious given the short time left for those to submit documentation, [but] Ponder has informed us that their response time is 24 hours, if not sooner.” Smith next indicated concerns “from applicants that the verifying documents requested by Ponder may be difficult to provide, specifically as it relates to affidavits for individuals that may have trouble supplying documentation.” Agency staff had communicated to PDG that “affidavits would be considered related to residency, household income, and people that have been denied jobs, or housing opportunities,” and she said they would “recognize and support a process that is equitable, consistent in line with the information posted on our website.”
  - Members of Black Excellence in Cannabis (BEC) voiced criticisms of PDG document management and communication with applicants in comments on June 7th and July 5th.
- “Keep in mind we understand that this process is complicated. The community, applicants, and others will have an opportunity to provide feedback” as WSLCB carried out rulemaking implementing SB 5080, a 2023 law that expanded and modified the program, Smith told the group. She said staff had started “planning for the return of applications, and how individuals will be notified. We’ll be sharing more of that as time gets closer,” including via website updates.
  - On July 3rd, staff suggested that rulemaking around SB 5080 would start once “background” work was finished in “late July/early August.”
- Smith also welcomed Aaron Washington to WSLCB as the Social Equity Manager, who would be available to answer questions on the topic (audio - <1m, Video - WSLCB, Video - TVW).
- Board Member Jim Vollendroff asked about a “super helpful" visual aid on the process he’d seen previously. Smith promised that materials like “a visual showing what the process is going to be” would be published, or “some timelines, but we want to wait till that time gets closer to when we'll be receiving those applications back” (audio - 1m, Video - WSLCB, Video - TVW).

Two members of the public raised the long history of varied cannabis traceability systems deployed by WSLCB when asking staff to be open about the process of soliciting information for a potential fifth platform change since the commencement of legal manufacturing and sales in 2014.
- David Busby, OpenTHC CEO (audio - 1m, Video - WSLCB, Video - TVW)
  - Busby called attention to a traceability-focused request for information (RFI) published on July 10th, finding it “implie[d] that there's going to be a bunch of other changes that are coming on” related to traceability integration. “I have complained before that the [traceability software] integrators don't get information soon enough and so I would like to encourage you to put information out earlier rather than later,” Busby said. He knew there would be a “margin of error” for the RFI, but if it reflected an “estimate, plus-or-minus 50[%],” that could help his team who would “have a lot of planning to do” for any traceability changes.
    - The Cannabis Central Reporting System (CCRS) was first announced in August 2021 when officials claimed the in-house solution was about “simplifying” traceability to “reflect the growth and maturation of the cannabis industry” while preparing for the future. That month, staff talked about the transition and communications plan for CCRS, which commenced in December 2021. A second phase of the CCRS project was initially reported in February 2022. By September of that year, the platform was said to be "already much more usable.” On January 4th, Chief Information Officer George Williams stated an update to the system would go live over some “concerns expressed by the integrator community as well as some of the licensee community.”
    - Busby was an early critic of how CCRS was implemented by agency staff in 2021. Throughout 2023, he raised concerns about CCRS performance on January 4th and 25th; April 26th; and May 24th. Busby’s last public remarks before board members were on July 5th.
  - Postman asked whether Busby was requesting the chance to “provide input” on the RFI. Busby replied he was focused on getting a “timeline” since the RFI would be closed on August 3rd. He felt that after that point there was “an opportunity to tell integrators some things about what you've learned, and what your plans are” around a request for proposals (RFP) or any new contract. With CCRS, Busby remarked integrators "only had a few weeks" to prepare their systems to work with the reporting system, and “many, many months" would be preferable. Postman stressed “it will be different, it's a priority for the board” and staff. He believed the RFI had been released early, but “we will make sure that those sorts of things don't happen as the process goes on. We really want to be able to be sharing information as it comes out, as you say, even if it's not 100%.” Postman added that “we want people to be part of the conversation…of the next iteration of this” (audio - 2m, Video - WSLCB, Video - TVW).
- Gregory Foster, Cannabis Observer Founder (audio - 4m, Video - WSLCB, Video - TVW, written comments)
  - Foster delved into the pre-CCRS history of cannabis traceability, noting he had a long history advising WSLCB representatives as part of a traceability advisory committee (TAC), and a successor, the Traceability 2.0 Work Group (T2.0). He presented the longer history of traceability and stakeholder engagement because “a lot of us are new here.”
    - The original initiative language as approved by voters in 2012 empowered WSLCB to establish rules on “books and records to be created and maintained by licensees, the reports to be made thereon to [WSLCB], and inspection of the books and records,” plus times and “periods when, and the manner, methods, and means by which, licensees shall transport and deliver” cannabis.
    - The first traceability system contract—sometimes referred to as “seed to sale” tracking—was awarded to BioTrackTHC and announced by WSLCB officials in 2013, when the selection of “a vendor for our traceability system [was] one more piece of the puzzle in creating a tightly controlled and regulated cannabis system,” according to then-Project Manager Randy Simmons.
    - Four years later, WSLCB set up the TAC in 2017 and announced a transition to Leaf Data Systems from vendor MJ Freeway. However, the change over didn’t go smoothly. Agency leaders tried to negotiate an extension with BioTrackTHC and briefly operated a Contingency Reporting System (CRS) for traceability. BioTrackTHC offered to submit reports to CRS on behalf of licensees until Leaf Data Systems was functional in early 2018. Delayed updates and dissatisfaction with Leaf performance led agency leaders to look for traceability alternatives from stakeholders, developing a minimal Cannabis Traceability Requirement Repository.
      - MJ Freeway subsequently became a subsidiary of Akerna.
  - Suggesting MJ Freeway staff were “a bunch of grifters for the most part, and terrible software developers,” Foster noted that parent company Akerna sold off their cannabis businesses in favor of moving “into the cryptocurrency mining space” in April 2023.
    - The TAC continued to be convened between April 2018 and August 2019. Then the T2.0 work group met until March 2021. Additionally, there were Integrator Work Sessions between business representatives and WSLCB staff from March 2018 until February 2021 when the events were officially cancelled that June just before the transition to CCRS was announced. The CRS served as the basis on which the CCRS was built.
  - He said “at the end of that Traceability 2.0 work group…we were talking quite a bit about…what is next? What does the agency need? What has been the problem with traceability over time?” Foster encouraged staff and board members to review the prior input and considerations before they sought any new traceability contract.
  - Foster agreed with Busby that integrators and licensees needed more time to transition to a new process, saying he’d been involved with the Washington Cannabis integrators Association who “helped define the…standard for transfers between licenses after the agency…got out of the middle of that process of the business doing its operations.”
  - Regarding the RFI, Foster was “happy to talk in person about any of these things…the centralization issue was a big one where these platforms become a single point of failure that brings down the entire industry if they go down.”
    - On July 5th, WSLCB staff announced an outage of CCRS which was repaired the same day.
  - He had seen this cause issues with as “simple of a thing as getting a unique identifier,” so “decentralization” had been something T2.0 members had advocated for.
    - T2.0 members released a recommendation on decentralized generation of unique identifiers in March 2021.
  - Foster understood the RFI to mean WSLCB leaders again wanted to “be in the middle of business transactions between vendors” to “be able to quarantine products” or take actions related to product recalls.
    - The RFI specified a mandatory requirement that vendor solutions be able to:
      - “quarantine products per LCB business rules”
      - “prevent the sale of products per LCB business rules”
      - “block transfers for specific products related to recalls”
  - “The RFID [radio frequency identification] tags issue is going to be an issue though. I do see it's not required,” but he noted the vendor’s “system has to allow the use.”
    - Before contracting with MJ Freeway, agency leaders attempted to hire Metrc for the traceability system, who utilized mandatory “traceability tags” to be purchased by licensees. As one editorial article from February 2018 elaborated: “tags cost approximately 50 cents and [were] required on all plants at all stages. Immediately following this, the WSLCB released an announcement that any vendor would be obligated to utilize all legal methods of cannabis traceability – including pen and paper records. Nearly immediately, [Metrc parent company] Franwell withdrew their bid from the running.”
    - At publication time, a representative from Franwell Metrc had downloaded the RFI documentation from Washington's Electronic Business Solution (WEBS) website.
  - Foster urged the board and staff to avail themselves of the documents and meeting materials related to traceability that were logged on Cannabis Observer.