WSLCB - Board Meeting
(July 22, 2020)

Here are some observations from the Wednesday July 22nd Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 4 takeaways:

• The Board rescinded an interim policy on traceability workarounds and heard additional pushback on the change during public comments.
  • Staff first announced their plan to ask for an end to board interim policy (BIP) 13-2019 on July 2nd. The BIP permitted unapproved workarounds to certain parts of MJ Freeway’s Leaf Data Systems owing to problems with the software’s July 2019 release. Policy and Rules Manager Kathy Hoffman restated the plan to ask for an end to the BIP on July 16th.
  • When formally asking to rescind the BIP on Wednesday, Hoffman described the “flexibility to develop workarounds” for “lab test data and manifest information” as “very narrow in scope and limited to records that were already in the traceability system.” She said that new records had “not experienced the same challenges” and the issues the BIP sought to address had “either aged out, or been corrected.” The Board moved to rescind the interim policy without further inquiries or comments (audio - 3m).
  • Later, during general public comments, Jim MacRae offered to “caution you about the decision you just made" and asked board members to “reconsider that action in the immediate future." He alluded to earlier testimony critical of the change and argued that WSLCB’s information technology (IT) staff should have told agency leadership about “issues that have been plaguing" those attempting to obtain “an accurate view/representation of what’s going on in the marketplace which is supposedly afforded by the Leaf traceability system.” MacRae told the Board that when the troubled release had first come out “all of the IT planning project documents” projected “subsequent rollouts within months” to fix “flaws.” Unfortunately, he said, “those rollouts never occurred” and traceability errors had “not only continued, they have accelerated.” MacRae implied there was a disconnect between what agency IT staff had told the Board, and what “the people who deal with the database every day” (i.e., third-party software integrators) had reported to those IT staff. In closing, MacRae claimed that "today, there is less product on the shelves that can be reliably tracked" to lab result codes than when 1.37.5 was released, creating a “faith-based quality assurance system" which he felt was a “disservice” to Washington’s cannabis market (audio - 3m).
    • The last three bi-weekly Integrator Work Sessions were cancelled. The most recent session was hosted on June 4th, one month prior to Hoffman’s initial “heads up” on July 2nd signaling the prospective policy change. More recently, the meeting schedule was summarily switched to a monthly cadence. At publication time, participants were scheduled to convene the following week on Thursday July 30th.
• Policy and Rules staff provided updates on agency rulemaking projects before the Board voted to refresh one of several coronavirus-related emergency rules.
  • The last rulemaking update was presented during the July 16th Board Caucus.
  • Quality Control (QC) Testing and Product Requirements (WSR 20-03-176, audio - 1m). Policy and Rules Coordinator Casey Schaufler explained that although the CR-103 to finalize the rulemaking project had been forecast for August 5th when the rulemaking project was re-filed in May, it “might be pushed back” as staff were still “assessing comments” following the rule set’s CR-102 public hearing on July 8th.
    • The day after the public hearing, Hoffman told members of The Cannabis Alliance that comments on the rule were still being compiled for the agency to weigh “whether we need to incorporate those comments, those changes, into the rule which would more than likely result in a supplemental CR-102” and another public hearing. She added that it was possible the agency would instead address some comments in a concise explanatory statement which would be part of the CR-103.
    • Schaufler stated on July 16th that WSLCB was still organizing and assessing public comments and didn’t speak to whether the agency would propose a supplemental CR-102.
  • Cannabis Retail Title Certificates (audio - <1m). Schaufler confirmed that the Washington State Office of the Code Reviser (OCR) had withdrawn the rulemaking project following a vote by the Board on July 8th.
  • HB 2826 Implementation (WSR 20-15-041, audio - <1m). Schaufler said the agency had “started to receive some public comment” regarding the new law around “marijuana vapor products” and a listen and learn session was probable “sometime, possibly in late August.”
  • Voluntary Compliance Program (VCP, WSR 19-15-074, audio - <1m). Schaufler described the rulemaking project as “on track with the tentative CR-102 filing recommendation date of August 5th.”
    • The agency hosted a listen and learn forum for the VCP rulemaking project on May 28th.
  • Authority to Suspend Licenses to Enforce Governor's Proclamations (audio - 4m).
    • Hoffman began her request to re-file the agency’s emergency rules establishing authority to suspend alcohol, tobacco, and vapor licenses by contrasting the fate of another emergency rule allowing deferment of payment of cannabis retail excise taxes passed by the Board on March 27th. At that time, she called it “a waiver retroactive to February 29th, 2020 of penalties for failure to pay or late payment of excise taxes that become due while governor’s Proclamation 20-13 is in effect.” Hoffman said that the proclamation was “not being renewed" and therefore WSLCB’s corresponding emergency rule wouldn’t be renewed either.
    • Hoffman then outlined her request to refresh the emergency rule establishing the agency’s authority to suspend licenses not in compliance with proclamations of the Governor. Originally adopted on April 6th, the existing emergency rules would otherwise expire on August 4th. Hoffman stated that the measure supported gubernatorial actions pertaining to the coronavirus such as Proclamation 20-25 which was recently extended.  “The board has statutory authority to enforce governor's proclamations” she said, and the emergency rule would permit WSLCB “to serve and order a summary license suspension after a preliminary staff investigation” into a "liquor, vapor, or tobacco product licensee." The Board voted to refresh the emergency rule.
      • The WSLCB already has summary license suspension authority over cannabis licenses under WAC 314-55-540.
• The agency announced a new delay in the true parties of interest rulemaking project which may be related to a legal challenge to the residency requirements in Washington cannabis law and rule.
  • True Party of Interest (TPI, WSR 20-14-032). During his rulemaking update, Schaufler reported that the agency had received “some additional comments and we are evaluating our next steps forward.” He’d previously projected August 5th as the date of the public hearing on proposed rule revisions (audio - <1m).
  • On June 8th, Idaho businessman Todd Brinkmeyer sued the WSLCB challenging the State’s residency requirements for cannabis license applicants and true parties of interest encoded in RCW 69.50.331(1)(b)(ii), WAC 314-55-020(10), and WAC 314-55-035. The petition to Thurston County Superior Court identified Brinkmeyer as a “highly valued advisor and financier of a retailer” in Washington who cannot “become an owner of the business he works for and invests in” and requested “an order invalidating the Residency Requirements.” Brinkmeyer was represented by Miller Nash Graham & Dunn attorneys Andy Murphy and Daniel Oates.
  • Assistant Attorneys General Haylee Mills and Joshua Orf Rodriguez were assigned to represent WSLCB in the case. Rodriguez filed an Answer to Petition for Declaratory Judgement on June 29th.
  • On July 7th, Attorney General Bob Ferguson filed a Notice of Removal to Federal Court asking that the case be moved from Thurston County Superior Court to the U.S. District Court for the Western District of Washington in Tacoma. The case was assigned to Judge Benjamin H. Settle who most recently sent an Order Regarding Initial Disclosures, Joint Status Report, Discovery, Depositions, and Early Settlement to the parties on July 21st outlining the pre-hearing schedule with initial dates in October.
• Trecia Ehrlich, a policy researcher at WSLCB, will be leaving the agency for a role in the Washington State Department of Agriculture’s hemp program.
  • Board Chair Jane Rushford announced Ehrlich’s departure, stating she had “taken a position with the [Washington State] Department of Agriculture (WSDA) in their hemp program.” She said that Ehrlich’s research had provided “immeasurable contributions to our work” (audio - 1m).
    • Ehrlich provided the agency with academically grounded research and measured perspectives on topics such as public health and prevention, WSDA's certified cannabis standards, cannabis potency taxation, and equity policies.
    • In comments shared with Cannabis Observer, Ehrlich added that she would “be the Hemp Program Manager for WSDA and my first day is August 3.”