WA House APP - Committee Meeting
(February 1, 2024)

Here are some observations from the Thursday February 1st Washington State House Appropriations Committee (WA House APP) Committee Meeting.

My top 4 takeaways:

• Staff reviewed the history behind HB 2151 (“Reassigning the accreditation of private cannabis testing laboratories from the department of ecology to the department of agriculture”) along with the legal and fiscal implications of the bill.
  • A 2019 law set up a deadline for accreditation of cannabis testing laboratories to be moved from the Washington State Liquor and Cannabis Board (WSLCB) to the Washington State Department of Ecology (DOE) by July of 2024.
    • Subsequent legislation in 2022 added modifications and established the Cannabis Lab Analysis Standards Program (CLASP). Led by the Washington State Department of Agriculture (WSDA), the group included representatives from WSLCB and the Washington State Department of Health (DOH). Once established, WSDA staff in CLASP started to feel they may be better positioned to accredit labs testing cannabis as a commodity as they already did for other crops, whereas DOE accredited environmental-focused labs. By the end of 2023, WSDA staff drafted an agency request bill to take over cannabis lab accreditation.
    • The department previously announced a rulemaking effort for lab standards in January 2023.
      • After interested parties raised concerns and questions around costs and implementation during a June 2023 webinar on the topic, WSDA officials issued written responses and a revised set of draft rules. In November, they shared proposed rules in the CR-102 as well as separate standard method documents.
      • At a public hearing in December 2023, lab staff and others identified discrepancies between the rules and the standard methods documents as well as expenses related to proposed lab quality standards leading WSDA staff to promise further changes. At publication time, a revised CR-102 had not been filed.
    • Between late June and July 2023, DOE officials undertook a rulemaking project and provided draft conceptual rules. Proposed changes were expected to be part of a CR-102 completed by March of 2024. The department convened webinars on lab accreditation in the second half of 2023.
    • HB 2151 was first heard by the Washington State House Regulated Substances and Gaming Committee (WA House RSG) on January 15th. On January 22nd, members amended and recommended the bill for passage.
  • At the WA House APP hearing, WA House RSG Counsel Peter Clodfelter briefed on the background and legislative effects from the bill report (audio - 2m, video).
    • Reassigns agency authority and responsibility for accreditation of cannabis testing laboratories to the Department of Agriculture (WSDA), effective July 1, 2024, and authorizes expedited rulemaking.
    • Modifies authorization related to the fee that may be imposed for the administration of the cannabis product testing laboratory accreditation program, and removes a provision requiring destruction of cannabis in the context of a sample failing a quality assurance test.
    • “Revenue could also be used by [WSDA] to support the laboratory quality standards program, which is another part of the cannabis program,” Clodfelter noted.
  • WA House APP Fiscal Analyst Dan Jones addressed the revised fiscal note and his Estimated Fiscal Impact detailing accreditation and enforcement costs since “the main impact of this bill is the difference between what WSDA expects to spend on managing cannabis lab accreditation compared to what Ecology would have expected to spend under current law” (audio - 3m, video).
    • Reviewing the Estimated Fiscal Impact, Jones relayed, “under current law Ecology would expect to spend around $800,000 this biennium, and $1.2 million next biennium to take on the accreditation responsibilities.” If WSDA added this accreditation to their existing “program on cannabis lab standards…they assume they would need one additional FTE at about $400,000 per biennium,” he said. So while WSDA staff got “new funding for the bill it's less than what Ecology assumes under current law resulting in overall savings,” Jones commented.
    • A WSLCB cost “not related to the lab accreditation changes in the bill,” that Jones emphasized was the amendment striking RCW 69.50.348(4), which required WSLCB to destroy cannabis samples which failed quality assurance testing. He said agency staff determined “this change [meant] that LCB would no longer have the authority to destroy cannabis that has failed certain tests. And so as a result, they would want to add an additional Enforcement officer to help prevent cannabis that has failed to test from being sold illegally.”
      • In the fiscal note, WSLCB staff argued “not destroying failed lots will provide a major loophole for diversion.”
    • Jones indicated there would be “lower revenue compared to current law” which required lab fees “to cover agency costs” whereas with HB 2151, “fees are described as ‘supporting agency costs’ rather than being ‘sufficient to cover agency costs.’” WSDA staff anticipated their fees would “bring in up to $80,000 per biennium…with a lower fee charged to labs compared to Ecology's estimate under current law of about $1 million.”
    • Jones summarized that, “compared to current law, this bill would have cost savings of around $600,000 per biennium and then a revenue loss of about $900,000 per biennium.”

• Representative Lauren Davis delved into the change in the legislation which she interpreted as preventing regulators from destroying failed cannabis samples, wondering about the provenance and implications of the limitation (audio - 1m, video).
  • “Can you share—if you know—where that request came from to not destroy [failed samples] and what would happen to undestroyed cannabis,” Davis asked.
  • Clodfelter deferred to the “amendment sponsor,” Representative Kristine Reeves, and pointed to the bill report regarding where the idea originated, before reviewing details of the existing rule on failed cannabis samples.
    • “There is a process in the current cannabis board rules,” he said, “currently during the quality assurance testing for cannabis products if a first test fails, there's some options where that cannabis could be remediated, or retested, or it could be put into extracts” which were retested before they could be sold.
  • The bill removed the requirement for WSLCB to destroy samples, “it does not say what would have to happen or what couldn't happen,” but WSLCB staff had interpreted it as “taking away their authority to destroy cannabis. There are some additional provisions in current rules that reference destruction of cannabis that doesn't…comply with law and rules, but defer to the Liquor and Cannabis Board about how they would apply this.”
    • RCW 69.50.348(4), which reads if “a representative sample inspected and tested under this section does not meet the applicable quality assurance and product standards established by the board, the entire lot from which the sample was taken must be destroyed,” was added in statute in 2019 under HB 2052. That law set up the transition of testing accreditation to DOE.
    • Prior to HB 2052, quality assurance testing rules in WAC 314-55-102(6) outlined procedures for failed test samples, including exceptions for when cannabis could be retested following extraction “unless failed for tests that require immediate destruction.”
    • While several withdrawn rule changes were proposed since the bill became law, only the Quality Control Testing and Product Requirements rulemaking project approved in March 2022 significantly reorganized this section, while still maintaining rules for retesting and remediation as alternatives to destruction of cannabis lots. Additionally, WAC 314-55-220 detailed the process by which the agency can order cannabis destroyed, and WAC 314-55-097 outlined cannabis waste disposal requirements for how material was to be destroyed.
  • An amendment by Representative Larry Springer published the day after the hearing proposed to restore the mandate for WSLCB Enforcement to destroy failed samples while granting them power to make exceptions in rule.

• Kelly McLain, Washington State Department of Agriculture (WSDA) Legislative Liaison and Policy Advisor, was the only person to testify on the bill (audio - 2m, video).
  • McLain supported the department request bill, remarking how WSDA already had “an exceptional team of scientists working to create [CLASP], that was created by this body, and those staff would be easily usable in the space of lab accreditation.” She called cannabis accreditation a “natural extension of the standards work that we're already doing,” and the bill would aid the “efficient use of State resources.” McLain noted there were “eight labs that do this work” in Washington, meaning a “million dollar in fee revenue for the Department of Ecology's work would be difficult for eight labs to absorb.” As accreditation authority was already in transition, she suggested, “this is supported by work that's already happening in the budget.”
  • Wrapping things up, McLain added, “because you all missed Dairy Day, I brought over treats…I will leave them over here with staff, but…there's milk products, there's cheese, and there's ice cream.” Ranking Minority Member Chris Corry  jokingly wondered if this included “cannabis ice cream,” however WAC 314-55-077(11) requires cannabis infused edibles to be shelf stable foods.
  • Along with McLain, seven individuals signed in as supporting HB 2151 (Testifying, Not Testifying).

• In an executive session on Saturday February 3rd, the committee was briefed on two amendments to the legislation, adding one to restore WSLCB authority to destroy failed cannabis lots, prior to recommending the bill for passage.
  • As covered in the February 5th legislative update, members heard about two amendments to HB 2151:
    • Amendment CLOD 278 by Springer which reversed the removal of WSLCB authority to destroy lots of cannabis products failing quality assurance testing and permitted the agency to create exceptions to allow for remediation of those products in rule.
    • Amendment JOND 347 by Representative Tana Senn was presented as returning the fee structure to existing law so WSDA would have to charge labs the entire cost of the accreditation program on top of covering costs of the CLASP staffing. Committee staff predicted biennial expenses under Senn’s amendment would total $1.7 million. However, Senn withdrew the amendment.
  • The committee unanimously approved the incorporation of Springer’s amendment before also voting unanimously to recommend the revised bill for passage.
  • Following the executive session, the bill was sent to the Washington State House Rules Committee, where it could be scheduled for a second and third reading on the chamber floor.