WSLCB - Board Caucus
(May 25, 2021)

Here are some observations from the Tuesday May 25th Washington State Liquor and Cannabis Board (WSLCB) caucus.

My top 3 takeaways:

• Licensing Management Analyst Kaitlin Bamba provided background on available retail allotments and obstacles like local zoning or bans and moratoriums (audio - 6m).
  • Bamba went over the fundamentals of how WSLCB had been granted authority to set “maximum” retail allotments in law. She described how agency representatives were expected to distribute retail locations by county “taking into consideration population and the needs of medical patients” and that agency rules “further define that the most populated cities within each county are allotted a maximum number of stores with the remainder at-large within the county.” At-large locations could be placed in unincorporated areas of a county, Bamba stated, “or they can actually be within a small city...that does not have a designated allotment.”
    • Officials from Public Health Seattle and King County sent WSLCB Director Rick Garza a letter on March 17th asking agency staff to assist their county-level counterparts to “right-size the retail store licenses allocated to urban unincorporated King County.” The letter reports that as “many cities within the district banned the use or did not end up with potential retail sites available to such a use, presumably due to state or local buffers,” one outcome had been cannabis retail density in North Highline and West Hill. Officials wanted WSLCB representatives to “consider an appropriate balance on community impacts” in places “like the urban unincorporated areas of King County, where marijuana retailers have clustered” in large part because of local ordinances and concerns about an “association between marijuana retail density and marijuana use.”
      • See the King County Summary of Zoning Requirements - Licensed Marijuana Uses from 2019 and the public health division Health and Human Services priorities regarding marijuana legalization and Youth Health and Marijuana webpages.
  • Bamba reported there were “486 retail licenses” issued and “45 [retail] title certificates” which had been “issued in the same jurisdiction in which the license was issued, and title certificate holders have the ability to convert their certificates back into a license if the local ban or moratorium is lifted.” Governments in two jurisdictions had already done so, she added, “we have had four title certificate holders in Clark County reinstate into a license and also two title certificate holders were able to reinstate into a license the City of Everett.”
    • Read about Everett officials’ October 2020 decision to expand allowed retail locations in their city.
  • There were “38 open allotments” that were either “allotments unfilled, which we have 21” mostly in areas with bans or moratoriums, as well as “licenses discontinued, cancelled, or revoked, and we have 17 allotments in that category,” Bamba said. Furthermore, “you will see that this number will change over time,” she mentioned, “as a retail license is discontinued or cancelled it is added back into this bucket...that’s something that we do expect will change over time.”
    • At publication time, there were 569 total issued retail licenses, title certificates, and open allotments across Washington state.
    • Check out a September 2020 spreadsheet of retail store allotments available by jurisdiction.
  • Considering areas with bans and moratoriums, Bamba showed “82 cities in Washington with bans,” as well as “seven counties.” Besides bans and moratoriums there could be “further zoning restrictions that can make it difficult for a retailer to find a location,” she added. Bamba mentioned that the City of Seattle required additional buffer distance between stores and that in the City of Tukwila “we have two licenses allotted there and both businesses are not able to operate because they’re not able to find a location that complies” with zoning rules. She noted the 2015 expansion of allotments in a supposed effort to better serve medical cannabis patients also enabled cities “to modify certain state requirements so they can actually reduce the buffer from restricted entities...to as little as a hundred feet in some situations.”
  • Looking at retail allotments available for the social equity retail license application program to be administered by WSLCB, Bamba said agency staff had been authorized “to issue...retail licenses to social equity applicants” including those not “previously issued by the board,” or those which “have been forfeited, revoked, or cancelled.” She indicated that there were “a total of 38 open allotments” but that only 15 were in "potentially viable locations" without a local moratorium or ban. Bamba stressed the “viable” part “because it doesn’t necessarily mean that they can find a location there just because there isn’t a ban.”
    • WSLCB staff have stated the agency will not initiate a social equity application window until receipt of guidance from the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) and formal rulemaking to create a social equity program.

• Cannabis Licensing Manager Kevin Milovac described outreach to officials from jurisdictions with cannabis retail bans and moratoriums to find out if any were amenable to revising or ending their policies (audio - 4m).
  • Milovac established that 23 retail allotments were restricted by 17 jurisdictional bans or moratoriums and that agency licensing division staff had contacted “jurisdictions who have open allotments to identify whether they would like additional information about the social equity program and retail cannabis licensing overall and to identify if they have any interest in rescinding those bans.” He said that representatives in seven jurisdictions expressed an interest in “additional information and were provided that information,” four were not interested as they were “maintaining their current regulations and restrictions,” and six had not responded to WSLCB staff. Officials who didn’t respond were sent information “based on the email address we had on file,” Milovac noted, and he would be following up with them.
  • Representatives from Lewis County had responded to Milovac in April as they were “considering lifting their ban,” and he met with them to address “a lot of questions about social equity, about the current state of all licensing for cannabis, and if they do lift their ban it’ll effect seven title certificate holders.” Lewis County officials had more questions following the meeting, which he inferred “was encouraging.”
    • WSLCB leadership talked about the potential change in position by Lewis County officials on May 12th. County Commissioners changed a moratorium on cannabis businesses to a ban in 2017, and Board Member Ollie Garrett described their “strong” opposition to changing that policy in 2019.
  • Licensing staff had also met with representatives of the Association of Washington Cities (AWC), Milovac commented, saying agency staff had previously conducted a survey of AWC members about retail allotments “to build connections and find out information.” He said that of 44 survey responses from officials saying they were or “maybe” interested in social equity retail locations, nine responses were from regions with bans or moratoriums. Milovac indicated that staff had made contact with representatives of all jurisdictions reporting receptiveness to cannabis licensing.

• Board members posed several questions about local outreach by WSLCB staff, specifically asking about survey responses from larger jurisdictions as well as concerns over water and power usage.
  • Board Member Russ Hauge asked about larger jurisdictions and the response from places like “Seattle, Tacoma, and Spokane.” Milovac replied that those governments had not been contacted because staff had focused on places with bans or moratoriums or that had “licenses available.” Hauge confirmed that the survey data reflected places with cannabis restrictions only and wondered if there was “any plan to reach out to jurisdictions, particularly the larger jurisdictions where there are no bans or moratoria, and ask if they would be interested in more” cannabis retail allotments “given population growth, or change in circumstances, or social equity.” Milovac stated that outreach hadn’t been “a top priority but it definitely is something that we can reach out and inquire” about, which Hauge asked that he do as a “next step” as it would be useful for board members to understand for social equity “and just the general issues of health in the market.” Garrett seconded Hauge’s input on staff outreach (audio - 2m).
    • The City Council for the City of Tacoma requested that the State grant the city additional retail locations for social equity purposes in July 2020.
  • Board Chair David Postman mentioned the AWC survey which pointed out that “92 of the respondents said they were not even aware of the social equity bill and only 26 were,” feeling it was “incumbent” on WSLCB staff and leaders to “be communicating with local governments...starting at the very basics” (audio - 4m).
    • Postman asked Milovac for “any sense of how open” jurisdictions expressing an interest were, and whether any were “approaching a point where they’re going to reconsider some of these things.” Milovac responded that many officials “were very interested, a lot of them didn’t realize...they had a ban or moratorium” due to turnover in their governments. Some had told Milovac “it’s a whole new regime” in their jurisdiction and officials were prepared “to dive into it” whether through public meetings or dedicated reviews by government staff. He expected the speed of their actions concerning the bans and moratoriums would vary, and that some “may move quickly.” Postman encouraged Milovac to remind interested officials what their region had “done with local bans” and the impact on equity in the cannabis sector. 
    • Milovac said Lewis County officials’ main concern “was wastewater runoff” but that in his time visiting licensed cannabis facilities “they are pretty efficient at their water use and don’t try to waste so much water.” He’d given Lewis County representatives clarification around agency staff’s experience with licensee water usage.
  • Hauge wanted to know if staff had been hearing about cannabis businesses’ “drain on electricity and the increased carbon footprint of indoor grows." Milovac hadn’t encountered that specific concern but noted since Lewis County was “on the westside [of Washington] they would probably need to be an indoor grow, just for efficiency purposes” (audio - 1m).
    • Several government agencies and nonprofits have evaluated energy use and efficiency in the cannabis sector:
      • Massachusetts Department of Energy Resources presentation on Cannabis Energy Overview and Recommendations.
      • The Indoor Cannabis Cultivator Energy Use Estimator from the Oregon Department of Energy.
      • Electricity Use in Marijuana Production created by staff of the National Conference of State Legislatures (NCSL).
    • Research on energy usage by the cannabis industry includes:
      • 2017 - Trends and Observations of Energy Use in the Cannabis Industry
      • 2020 - Study of Cannabis Energy Use Shows Indoor Cultivation Operations Using LED Lighting Demonstrate Better Efficiency and Energy Use by the Indoor Cannabis Industry: Inconvenient Truths for Producers, Consumers, and Policymakers.
      • 2021 - Nuances in Parsing Cannabis Cultivation Energy Use and The greenhouse gas emissions of indoor cannabis production in the United States
  • Garrett asked what Lewis County officials’ concerns were for retail stores, and Milovac said they’d voiced broad concerns about “infusing controlled substances into, you know, community” remarking “that’s the way it’s always been.” He described this as a “general stance” of all local governments with cannabis retail restrictions but added that in some places local officials “were looking into all the pluses on it” such as local jobs and tax revenue (audio - 1m).

Here are some observations from the Tuesday May 25th Washington State Liquor and Cannabis Board (WSLCB) board caucus.

My top 2 takeaways:

• Board Member Russ Hauge shared more information about hemp biomass conversion into “intoxicating substances" including delta-9-tetrahydrocannabinol (delta-9-THC). 
  • The issue of conversion of hemp crops into cannabinoids was last discussed by board members on May 18th. The subject was discussed publicly by agency staff in November 2020 around the time officials began developing a draft policy statement focused on delta-8-tetrahydrocannabinol (delta-8-THC). Staff emails indicate the issue was discussed within the agency for several months prior.
  • Connection difficulties resulted in incomplete audio for approximately 30 seconds near the beginning of Hauge’s remarks. He noted that the “hemp-based biomass issue” involved “excess” material sourced “from legal hemp farming.” Familiarity with the process of converting the biomass into “delta-8-THC to become slightly intoxicating, or, I don’t know how intoxicating” was “being spread around the country and it is in our market, perhaps in our stores,” Hauge stated. He felt as regulators “of intoxicating substances we should be very concerned about that” (audio - 3m).
    • In addition, Hauge suggested the “other issue” was that “it is much cheaper to produce delta-9 from hemp-based biomass than it is from cannabis.” He considered this possibility a “trickier question because reasonable minds can differ on what we should do.”
    • Hauge said some stakeholders had voiced the opinion that “it’s just progress, and this is the way the market’s gonna go and everybody’s got to stand by,” whereas a counterargument he’d heard was “we’ve got a market here, limited to the state of Washington, and it is based upon farmers of different size and processors of different size and the introduction of a much, much cheaper source of THC delta-9, isolate, or distillate, is going to really disrupt that market.”
    • While not rendering a judgement on those arguments, he commented that he was seeing “two separate issues that we need to address in different ways:”
      • “Delta-8 coming into the market in intoxicating quantities”
      • “Hemp-based biomass being turned into delta-9 at a price that is much cheaper than...utilizing regulated cannabis biomass.”
    • A March 2019 fact sheet on hemp from the U.S. Congressional Research Service noted “More than 480 natural components are found within the Cannabis sativa plant, of which 66 are classified as cannabinoids” and identified major cannabinoid subgroups and their known variants.
    • In 2010, Dutch researchers released a report, Chemistry of Cannabis, that found delta-8-THC possessed “a similar pharmacological profile and slightly lower psychoactive potency” than delta-9-THC.
  • Board Chair David Postman was curious to hear stakeholder views on the issue, asking Hauge, “are you hearing from current licensees who are sort of pro-delta-8? Who are saying ‘yep, let it go, we need this’...or is it mostly people who are outside the current licensed scheme?” (audio - 2m)
    • Hauge replied that he wasn’t hearing from license holders as much as “people who have a financial stake in turning hemp-based biomass into delta-9 to be utilized in our regulated market.” He added that these people were “making a lot of money, apparently, and want to keep doing that. However, they’re not license holders, as I understand, right now.”
    • Hauge was still uncertain about “how hemp-based, derived, delta-9 is coming into our system, but it is” and the logistics of its prevalence in the legal market was “the first question to answer.”
    • He felt there were licensees positioned to “take advantage of the scale of the market,” which he anticipated would “change when hemp-based isolate or distillate for delta-9 replaces cannabis-based biomass.” Larger businesses were “going to make a lot of money,” Hauge expected, but licensees “not able to take advantage of that,” or who had been “counting on raising cannabis and making ends meet by selling cannabis-based biomass after you sell the bud, then you’re in trouble" .
    • A group of stakeholders critical of cannabinoids converted from hemp biomass addressed the board on April 14th whereas a hemp processor spoke to the perceived merits of the practice on May 26th.

• Policy and Rules Manager Kathy Hoffman briefed on the status of the open agency rulemaking around THC and an approaching deliberative dialogue session with experts and stakeholders (audio - 1m).
  • The rulemaking project, part of the agency response to converted cannabinoids, was opened by the board on May 12th.
  • Hoffman relayed that no comments had been received on “THC isomers beyond delta-9” and that a deliberative dialogue remained scheduled for Thursday June 3rd at 9:30am. She said the dialogue would address “cannabis plant chemistry” and feature a “well qualified and diverse group of experts to keep the focus on” plant science including key topics such as “isomerization, the differences between heat and solvent processes, and by-products of conversion.” Hoffman commented that staff were “committed to grounding this work in fact and data.”