WSLCB - Board Caucus
(September 10, 2024)

Here are some observations from the Tuesday September 10th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• Board members learned how SB 5367 (“Concerning the regulation of products containing THC [tetrahydrocannabinol]”) had been enforced by the agency, and had several questions about cannabinoid testing equipment, seizures, and proving intent.
  • SB 5367 was passed in May 2023, and involved regulating sale of hemp-derived consumable cannabis products outside of regulated cannabis businesses, with attention focused on the risks such items posed for those under 21 following federal legalization of hemp in 2018.
  • Board Chair David Postman welcomed Enforcement and Education Captain Jennifer Dzubay to discuss “what we've done since we got that THC bill passed, which was trying to get that unregulated stuff out of the stores” (audio - 1m, video - TVW).
  • Dzubay went over the response to the law in her division, starting with the “training that we've given the officers.” She highlighted an established cannabis health an beauty aids (CHABA) statute, “but [WSLCB] was never assigned to do anything with that, so it was just kind of sitting out there” (audio - 7m, video - TVW).
    • In 2021, her officers had received training involving delta-8-THC products following a memo from Chandra Wax, the Director of Enforcement and Education, which “told what enforcement activities we're going to do, communicate, take product, and if it's intentional, then we would take some enforcement action.” Speaking as the lead of the tobacco and vapor unit, Dzubay indicated Enforcement staff around the state had been trained. Additionally, “we have participated in the [SB 5367 rulemaking process], we asked to be part of that” in order to “help our team.”
    • Educating non-cannabis licensees during “premises checks” was another aspect of their work, and Dzubay said licensees were shown “discontinuing sale products…which talks about all the illegal things that you can't have” and given guidance again if staff found THC products on their shelves. This amounted to 98 hours of education, though she acknowledged most wasn’t SB 5367-specific.
    • She noted labeling of hemp cannabidiol (CBD) products was also changing to include claims like: “Do not drive heavy machinery while taking CBD,” as well as “we cannot guarantee the use of this product will result in passing a drug test.” Dzubay explained that even labeling THC content below the 0.3%---a limit under which plants were classified as hemp—was “now immediate seizure, because you can't have it. It's now detectable.” Some hemp processors removed any mention of THC content from packaging, but testing certificates of analysis (COAs) showing THC was also grounds for products to be seized, she stated.
    • Finally, she told board members Enforcement officers had “narcotics identification kits” (NIK) for testing on site, however, “it will only test over 1% of THC,” and so “doesn’t always work.” Postman remarked testing over 1% meant there was “lots of THC in there.” Products were then purchased, and tested again with a LightLab3 Cannabis Analyzer, of which Dzubay suggested there were five in the state because they were “expensive machines.” Following retesting of a product, if it had detectable THC, “we would go back and seize the rest of the product,” she remarked.
      • Board Member Jim Vollendroff wanted to know “who owns those machines?” Dzubay said the enforcement division owned all the LightLabs, jokingly referring to them as gifts from the board (audio - <1m, video - TVW).
      • In November 2022, WSLCB purchased additional cannabis testing equipment, which included two mobile LightLab kits.
  • Seized product was tested a final time by the Washington State Patrol (WSP) lab, Dzubay reported, which could be used by the State in any legal disputes. Since SB 5367 had become law in July 2023, “we had 11 locations, we've seen about 880 items” seized that year. She said of enforcement since then, “most of it's warnings until we find intentional” sale of products, and “about seven months into [2024]…we've checked about 381 locations for this” involving seizing of “almost 1500” cannabinoid items (audio - 1m, video - TVW).
    • Postman reflected on the amount of products Enforcement staff had taken action on (audio - <1m, video - TVW).
    • Board Member Ollie Garrett asked how the officers were defining “intentional” action by businesses (audio - <1m, video - TVW). Dzubay made reference to a February 2023 complaint about Trichome, a Seattle tobacco licensee selling delta-9-THC products, where officers provided education only to field another complaint about the business in July. “We did an undercover buy where…they went in to…ask, and [an employee] had to go in the back to get it, so it's not where we would normally see it unless we're looking at [the] product in the back. So that's intentional.” A warrant was issued in October and officials seized the product in question, though there were also “freezers and refrigerators in the back” which necessitated a secondary warrant. The following month they found “cannabis stuff was still in the freezer or the fridge” and seized. This had been the only criminal citation related to SB 5367 issued by WSLCB to date (audio - 1m, video - TVW).
    • Garrett again asked for clarification on proving intent on the part of the business, and Dzubay reviewed steps Enforcement officers could take (audio - 2m, video - TVW).
    • Postman wondered about the ability of business owners to check on the legality of a product they carried. Dzubay indicated they could check with Enforcement and Education staff assigned to their business or refer to materials or communication channels provided by WSLCB (audio - 1m, video - TVW).
  • Postman reached out to a researcher from the University of North Texas who’d identified Washington and Alaska as the only states where hemp cannabinoids were banned in vapor shops, and felt “that’s something.” He acknowledged the agency still needed a “lever” for dealing with hemp items ordered online and sent through the mail, viewing this as the “biggest threat to the legal system.” She noted that Trichome had lost their tobacco license, but was still advertising the sale of CBD products, and so staff “might have to go take a look at that” (audio - 1m, video - TVW).
    • The researcher had mentioned Washington during a presentation on semi-synthetic cannabis products on May 23rd.
  • Director of Policy and External Affairs Justin Nordhorn was curious whether these products had been more prevalent in tobacco or liquor stores. Dzubay answered that it was predominantly tobacco businesses, but following training by staff, she’d seen a “spike in the liquor stores…and then it slows down a little bit.” Nordhorn planned to cover this in a presentation to lawmakers “in a couple of weeks” (audio - 1m, video - TVW)
    • Following the caucus, a Washington State House Regulated Substances and Gaming Committee (WA House RSG) work session was announced for Tuesday September 17th, slated to cover "Cannabis, Tobacco, and Vapor Product Policy and Regulatory Update" and a "Washington State Patrol Cannabis Enforcement Update."

• Staff updated upon all active rulemaking projects, which elicited questions from board members on changes to rule drafts and public feedback.
  • SB 5376 Implementation (audio - 1m, video - TVW, Rulemaking Project )
    • Policy and Rules Manager Cassidy West talked about a “really productive” focus group on the cannabis waste rulemaking from September 4th that led staff to delay a CR-102 with proposed changes from September 11th until October 23rd. She promised the added time would include new opportunities for public input.
    • After West briefly mentioned the project later (audio - <1m, video - TVW) Postman wanted to know about waste reprocessing to extract further cannabinoids. Staff suggested that was unlikely to be feasible if a licensee had already classified it as waste (audio - 1m, video - TVW).
  • Minors on Wholesale Licensed Premises (audio - 1m, video - TVW, Rulemaking Project)
    • West indicated that focus groups on the matter were set for Monday September 16th, and another on the 19th. “The first half will cover children and grandchildren of licensees,” she said, “and then the second half will cover minors who are employees of a contractor working at the licensed premises.”
    • She later added the CR-102 was set for presentation to board members on October 9th (audio - <1m, video - TVW).
    • The project has been postponed since the adoption of the CR-101 on February 28th, with West predicting on May 21st public engagements would be organized in June.
  • Lab Authority Transfer (audio - 1m, video - TVW, Rulemaking Project)
    • The transfer of cannabis laboratory accreditation powers to the Washington State Department of Agriculture (WSDA) was also going to be slowed, as West said staff were aiming to get “everything right.” Aside from WSDA, she said they were working with a chemist at WSLCB, and that opportunities for interested parties to give input were being arranged for October. Under the revised timeline rule changes would take effect “early 2025 which is not too far off our original timeline” of December 21st, as forecast by staff on July 16th.
      • The transition of accreditation for labs has proven complicated, the CR-101 referencing three laws passed in three legislative sessions which necessitate alignment between WSDA, WSLCB, and DOH requirements. On April 25th, Agriculture officials confirmed the extension of a contract with third party accreditor RJ Lee to support the WSDA transition until the end of 2024. WSLCB maintains authority around product standards used by labs, and the board has an advisory role on an interagency coordination team led by WSDA but may have less authority to generate rules going forward.
  • Employee Stock Ownership Plans (audio - <1m, video - TVW, Rulemaking Petition)
    • Formal initiation of the rulemaking project on the petition received March 26th was set for October 9th, West noted.
  • Product Samples (audio - <1m, video - TVW, Rulemaking Project)
    • According to West, adoption of the product sample rule used by licensees for promotion had been scheduled for October 9th.
  • HB 1453 Implementation (audio - 3m, video - TVW, Rulemaking Project)
    • Policy and Rules Coordinator Daniel Jacobs gave a preview of his presentation for the following day’s board meeting to put in place new rules for the cannabis patient excise tax law passed earlier in 2024. He noted that changes had been made based on the August 28th public hearing comment about patient confidentiality, reaffirming statutory limitations in rule. If adopted, he indicated changes would take effect October 12th.
    • Postman asked if the mention of confidentiality was considered a substantive change. Jacobs replied that it wasn’t as it was repeating an established statute (audio - 1m, video - TVW)
  • Payment Flexibility (audio - 3m, video - TVW, Rulemaking Project)
    • The proposed rules on issuing checks as a payment option between licensees would also have a public hearing during the board meeting, Jacobs explained. He mentioned there hadn’t been any written remarks on the project, leaving it on track for completion on September 25th.
  • SB 5367 Implementation (audio - 1m, video - TVW, Rulemaking Project)
    • Another public hearing on September 11th, West noted the proposed language dealt with serving size and overall transaction limits; plus packaging and labeling; and testing changes. Assuming no major changes, she expected to have a CR-103 ready by September 25th.
    • Postman asked what feedback staff had received so far. West told him they heard “more questions than comments and about CHABA products, and really a lot from hemp folks” (audio - <1m, video - TVW).
  • SB 5080 Implementation (audio - 1m, video - TVW, Rulemaking Project)
    • The last public hearing for rulemaking on September 11th, West shared that the CR-103 was also set to be presented on September 25th. Postman wondered whether there continued to be “a lot of people still unhappy.” West answered that the majority of comments had to do with license mobility for title certificate holders (audio - 1m, video - TVW).
  • Social Equity Program Title Certificate Holders (audio - <1m, video - TVW, Rulemaking Petition)
    • West noted that on September 25th she would address “three or four, I believe, petitions on social equity license mobility for title certificate holders.” She acknowledged receiving comments on the petitions, and was “going through those this morning.”
      • Board members responded to petitions for equity license mobility from three separate petitions put forward in June.
  • Transporter Fulfillment Hub (audio - 1m, video - TVW, Rulemaking Petition)
    • West mentioned that staff would recommend accepting the petition, which would allow licensed transporters “cross-docking at their own fulfillment hubs.” With laws on cannabis transportation mandating delivery to a licensee within 48 hours after pickup, “and temporary storage at any facility is not allowed,” she said the petitioner hoped to address inefficiencies and safety issues related to cannabis transport, “particularly due to the long driving hours [or] adverse weather conditions that drivers could sometimes face.” Having determined this was within their rulemaking authority, West promised to “provide a detailed summary of our analysis” during the board meeting.
    • Garrett inquired whether the idea had previously been considered by the board: “did we do something in this area?” Nordhorn agreed there were “discussions in the past,” but never “responding to a formal petition.” He suggested this was "the next step that they would like the board to consider.” Nordhorn also alluded to past “changes a number of years ago on trying to make a reasonable application of law versus changing the rules…but this would be more formalized” (audio - 1m, video - TVW).
      • A 2019 petition from Kevin Lynch, CEO of Go Green Enterprises, did request “amendment to WAC 314-55-310. He requests this amendment to subsection (6)” to permit “transportation licensees the ability to park vans with cannabis products inside a warehouse-type facility or penned space.” Garrett and the board voted to deny the petition and “explore alternative means to address the concerns raised.”

• During an unannounced addition to the published caucus agenda, Director of Legislative Affairs Marc Webster sought board member approval for two agency request bills for 2025, but found he would have to wait for the following day’s meeting to move forward.
  • Webster provided that board approval would allow the proposals to be advanced to the next stage of review by the Governor’s Office and the Washington State Office of Financial Management (WA OFM, audio - 1m, video - TVW).
    • Postman noted the board couldn’t take formal actions on unscheduled agenda items during the caucus but would act on the ideas during the board meeting (audio - <1m, video - TVW).
  • Webster described the absence of “sweeping or contentious policy changes” as evidence their ideas weren’t controversial (audio - <1m, video - TVW).
    • DOH Data Sharing (audio - 2m, video - TVW)
      • Pointing out that RCW 69.51a.230 allowed some information to be communicated from the Washington State Department of Health (DOH) patient registry to the Washington State Department of Revenue for a sales and use tax exemption, Webster stated agency leaders wanted to propose a similar statute allowing DOH to share patient information with WSLCB to verify excise tax information related to HB 1453. Understanding that legislators passed the exemption as a way to motivate “patients to get on the DOH registry, and that processors have an incentive to make more DOH approved medical cannabis,” Webster believed that intent could be undermined if agency staff were limited in their ability to verify how the tax was being applied. Webster also expected opposition during the legislative process, guessing officials would hear from “some folks who probably will misinterpret the intent of the bill.”
    • Cannabis Retail Signage (audio - 1m, video - TVW)
      • Webster said, “last year we talked a lot about cannabis retail signage and almost had an agency request bill, and then, and then worked with an existing bill, which wasn’t passed. Although, “we might revisit that down the road, but my sense right now is that that is not the highest priority of the board. And of course, that bill generated a lot of opposition from the public health community.”
      • Checking whether a cannabis trade association might propose similar legislation in 2025, Postman heard Webster wasn’t certain (audio - <1m, video - TVW).
    • An alcohol request bill around server training and removing redundant license types was petitioned by Webster (audio - 2m, video - TVW). He also brought up another request bill proposal related to alcohol product placement (audio - 1m, video - TVW).
  • Taxpayer Confidentiality (audio - 1m, video - TVW).
    • Finally, Webster conveyed a “request from Finance to shield certain tax audits and related documents…from disclosure.” Internal conversations suggested to him the concept wasn’t refined enough, “but it's something that we can continue to work on and bring to you for your deliberation over the coming months. Probably not a ‘this session’ thing.”