WSLCB - Board Caucus
(May 28, 2019)

Here are some observations from the Tuesday May 28th WSLCB Board Caucus. We’re catching up on the summaries we were unable to release the previous week due to travel.

My top 3 takeaways:

• WSLCB Policy and Rules Coordinator Kathy Hoffman walked the Board through a new rulemaking project on cannabis packaging and labeling (audio – 7m).
  • In preparation for the subsequent board meeting, members learned about three proposals to open rulemaking: two regarding alcohol and a third on cannabis packaging and labeling (PAL). Hoffman discussed the new CR-101 and issue paper which show the agency “is considering changes to WAC 314-55-077(8) and (9), and WAC 314-55-105 related to marijuana packaging and labeling requirements.”
    • WAC 314-55-077 subsections (8) and (9) currently focus on PAL for infused food products while WAC 314-55-105 covers PAL for all cannabis products.
  • Hoffman said the rulemaking responds to two petitions on product waste received from The Cannabis Alliance first addressed during the April 30th Board Caucus. One petition would limit thickness of plastic packaging and the other would no longer require external measuring cups for infused beverages. Based on the Board’s positive reactions to the petitions, Hoffman anticipated “changing the rules to reflect the language” proposed.
  • The rulemaking would also incorporate changes required by SB 5298, which was signed into law on May 13th. Hoffman explained the new law enabled “additional language around curative and therapeutic” claims on products. She anticipated working with the Department of Health on that part of rulemaking.
  • Hoffman cited the five board interim policies on PAL adopted at the January 9th Board Meeting, some of which will go into the “conceptual draft rules” before opening the rulemaking project to public comment. She anticipated “streamlining” these sections of rule for “readability” and to “increase compliance opportunities.”
  • Hoffman intended to finish the rulemaking project by year’s end contingent on feedback received, potentially extracting uncontroversial sections for faster action.
  • Board Chair Jane Rushford raised a concern about costs to licensees. Hoffman promised to do a cost/benefit analysis but was unsure if a Small Business Economic Impact Statement (SBEIS) would be needed.
    • Hoffman explained her criteria for engaging an SBEIS during the April 3rd Executive Management Team (EMT) meeting.
  • Hoffman added that her team was “formulating mitigation strategies” to phase in rule changes as part of the current Quality Assurance and Product Requirements rulemaking project as another means of minimizing financial impacts on licensees.
• The Board reflected on news that MerryEcho Productions (Vashon Velvet) was closing its doors, bringing new urgency to discussion on ways to help smaller cannabis businesses.
  • Susie Gress, co-owner of Tier 1 producer/processor Vashon Velvet and Secretary of the Washington CannaBusiness Association (WACA), told Board Member Russ Hauge that she’s leaving the industry. According to Hauge, Gress said she was closing up shop because “Tier 1 [producer canopy] is just not big enough to provide a viable economic foundation” (audio – 1m).
    • Gress also represented WACA on the WSLCB Cannabis Advisory Council (CAC) and has stepped down from that role. See her comments at the last CAC meeting.
    • The week prior, Gress publicly announced she was in discussions about selling the Vashon Velvet brand and cultivars.
  • Responding to Rushford’s query about what could be done to help, Hauge said the “emerging position that I hear is that first step would be to give some relief to the Tier 1s.”
    • He noted increasing lot size may not help smaller operations which sometimes harvest less than five pounds per cultivar.
    • Hauge echoed MerryEcho’s position that “some kind of relief” for Tier 1 canopy size was crucial – and a near-term change that the Board could make within their existing authorities.
    • On-site direct sales for small producers was another suggestion, but Hauge conceded they’d need to reach agreement with industry and make a “joint presentation” to the legislature next year.
    • Towards that end, Hauge again mentioned developing a definition of craft producers based on criteria such as “how much they produce, how many strains, where they’re at.”
    • Hauge hinted at agency exploration of a distribution tier or agricultural cooperatives: “Providing some mechanism for them to combine their efforts at sales because a lot of them are often in the hinterlands and no one is going to go visit them.”
    • Hauge felt these potential actions could keep some smaller businesses from being “swept away” when outside corporate investment was opened up, federal legalization occurred, or (interestingly) “regional legalization” were to be established.
  • Rushford, wistful that WSLCB didn’t act sooner, concurred they needed talks between the agency and the “critical few” stakeholders on this topic to “move forward at a faster pace” and help “the smallest of their licensees.”
  • Hauge mentioned a past proposal by Gress for producers to “grow their way into more production.” At the time, he had felt it was “too complex, didn’t seem like it would really solve the problem” but admitted he “felt responsible” it hadn’t become a top priority and was more motivated to act now. “The most direct route would be for [WSLCB] to simply start a rulemaking” and have the agency clearly lay out their vision to support small producers and processors.
  • Rushford said a next step was to talk with Licensing Director Becky Smith and other staff about Gress’s original proposal. She later mentioned her intention to focus on the topic throughout June. Hauge wanted to hear from agency staff to see if there was any reason to oppose taking action and planned to continue a dialogue with other licensees facilitated by Gress.
  • Hauge anticipated the Vashon Velvet brand would continue and said Gress was pivoting to become an industry consultant. He added, “She’s going through the kind of consolidation that maybe we don’t want to make necessary. And her opinion is that really, her business decisions have been mandated by our rules and the limits that we’ve placed upon her” (audio – 13m).
• WSLCB Executive Assistant Dustin Dickson shared an update on the upcoming board meeting in Bothell and announced a delay of the agency headquarters move (audio – 2m).
  • Dickson reported progress on logistics for the Board’s proposed meeting in Bothell this August. The location was confirmed during the previous week’s caucus and details about the venue, lodging, and stakeholder events were being arranged.
  • Dickson also said the agency’s move to its new headquarters would be delayed by a week. Members were unsurprised and felt the new moving date for the Board, June 28th, may still be ambitious. WSLCB is moving to downtown Olympia’s Capitol Plaza Building. You can track updates on the agency move on the WSLCB website.