WSLCB - Webinar - Agency Request Legislation Proposals
(August 17, 2023)

Here are some observations from the Thursday August 17th Washington State Liquor and Cannabis Board (WSLCB) webinar on three potential agency request legislation proposals.

My top 3 takeaways:

• WSLCB staff arranged three webinars to collect feedback on draft concepts for cannabis request bills for 2024.
  • During the first webinar on the topic on August 11th, Director of Policy and External Affairs Justin Nordhorn explained the process and intention behind the concepts, and declared the measures might be modified based on public response before being proposed to the Washington State Office of Financial Management and Governor’s office. Nordhorn conveyed that the “purpose of this meeting is to be able to answer your questions…to help you inform comments that you would like to make towards the proposals. And so we're not going to probably be able to vet out all…potential possibilities and, and possible adjustments, but really, to give you an opportunity to formulate thoughts to provide some constructive feedback to the agency on whether or not we should move forward.”
    • Nordhorn also brought up the draft legislation ideas during the August 9th Executive Management Team meeting.
    • Besides Nordhorn, the only other member of WSLCB policy and rulemaking staff in attendance was Research Manager Kathy Hoffman. Five officials with the Washington State Department of Health (DOH) were on the call, but didn’t provide comments.

• Like the first webinar, the potential for registered cannabis patients to engage in Contract Growing with licensed cannabis producers elicited the greatest number of responses, mostly from existing retail licensees.
  • Nordhorn provided similar remarks on the draft concept during the first webinar, but also addressed some questions officials had received since (audio - 9m):
    • With regards to the “risks associated with overproduction…what can the producer do if you're over,” Nordhorn said agency officials “still have to discuss” that aspect.
    • Questions about “going to multiple grows, entering multiple contracts” had been raised, but since “possession limits for individuals does not change” and patients “could only leave the grower with the amount that you could have in your personal possession, and you would not be able to increase the legal amount in your home as a patient” by contracting with producers, Nordhorn believed the risk of that behavior was low. “You couldn't just enter into a contract with an authorization from a doctor,” he added; patients would need to register through DOH for the right to enter into such contracts.
  • Cannabis Observer Founder Gregory Foster verified only registered patients could enter into contract growing. Nordhorn agreed although “edits can be made if it goes forward for potential legislation, amendments can be made to any bill, but at this point in time the concept is to allow for this opportunity for those who are qualified patients in the registry” (audio - 1m).
  • Matthew Friedlander, Skagit Organics Founder and Chief Operating Officer, questioned what level of trimming or processing would be permitted when growing for patients. “Does this proposal put patients in the position of having to drive off with the full plant,” he wondered, or would there be “contracting of a certain amount of weight to be growing, trimmed, and processed for a specific patient?” Friedlander followed up to ask whether they could process concentrates under the potential bill (audio - 2m).
    • Nordhorn stated the language wasn’t drafted to include processing specifically, “but I think conceptually what we were thinking is a limited amount of processing. So you could trim the buds and not have to go away with the whole plant.” However, he stressed it had been “intentional to omit processed end product…making edibles and liquids, and concentrates, and those types of things” from the proposal.
    • “There was a similar question” Nordhorn said he’d gotten “that had to do with would the patients have access to the trim of the product, and I would say yes…if that's, the plants are being grown for them, they would have access to whatever part of the plant” they wanted.
  • Since the idea involved registered medical cannabis patients, Friedlander inquired if cannabis material would “have any testing requirements at all before it's transferred to the patient” (audio - 2m).
    • Nordhorn responded that testing wouldn’t be mandated, bringing up “unlicensed farmers market type of activity…where patients have gone to get product that they desire” and were presumably comfortable without assurances from testing. “We were trying to build in flexibility on this,” Nordhorn remarked. By leaving testing requirements as part of contracts, he figured “maybe, what the patient would be okay with having” on their plants included “types of pesticides or whatever…maybe they don't want something on there and that would be part of the contract.”
    • Flexibility for testing intended in the draft request bill would be considered along with the comments they’d received on the subject, Nordhorn told the group.
  • Shannon Vetto, Evergreen Market CEO and Washington CannaBusiness Association (WACA) Trustee, wondered how the proposal could aid patient access to cannabis as medicine in the absence of data about how patient demand was already assessed. She asserted the patient registry had been “exponentially larger prior to the availability of legal marijuana,” and “as a result, the only thing you can deduce is that if you don't need a card to get access anymore,” many patients wouldn’t register after getting an authorization from their doctor. Vetto felt the contract growing proposal “not only remove[d] the excise tax, but also remove[d] and disintermediate[d] the role of retailer who is currently providing quite a bit of patient access.” She further wondered if anything stopped contracts from becoming “the retail contract between all of our patients, and directly to the grows” (audio - 11m).
    • Nordhorn replied that there wasn’t “hard data” since the patient registry was set up after passage of SB 5052 in 2015, but “I've looked at similar states, and most have pretty active participation” in medical databases but Washington was an outlier with a “significant gap.” He attributed this to a variety of issues like “illicit outlets,” how only a few licensed processors pursued testing for medically compliant products, and how the lack of appropriate products was motivating patients to buy from unlicensed sources. Nordhorn believed a registry “with only 11,000 patients” wasn’t going to have a significant market impact for stores, but even if a patient wanted a specific cannabis cultivar “that may not be the only thing that I want…I may end up going to the store” for concentrates or edibles.
    • Vetto asked how WSLCB determined the size of the patient population “actually being serviced by the market, because…I find it to be a very rare occasion that a customer is coming in as a patient with a very particular strain that they are unable to get access to.” With a feeling that most authorized patients were using retailers without registering, Vetto perceived the bill as reducing cannabis excise tax anyway, so she thought officials should “test to make sure” by changing the excise tax for patients and studying “how many medical patients stopped going to the illicit markets, and go into the stores.” She doubted patient choices were based on “strain” availability, and expected more participation given a “47% with sales tax reduction.” Vetto was concerned WSLCB’s concept would be “kinda disrupting the entire business model" with contracts that may require their own vetting and enforcement processes.
    • Nordhorn recognized there had been legislation in 2023 to remove the excise tax for patients, but since it was only passed by one chamber, staff were looking at other approaches to address patient concerns about access. He assured the group the draft concept wasn’t guaranteed to become request legislation in 2024, but “this was a concept to say, ‘okay, what what would this look like if we were trying to improve access?’” Vetto encouraged WSLCB leaders to “define or size the lack of patient access in a way today that is understandable” as she continued to view this as legislation with the potential for “completely changing your system” in a manner “more like direct vertical integration with no role for the State both in regulatory enforcement or assuring that the protections are there that we need.” She argued “the majority of my patients would definitely like to get it direct with no tax, then come here,” and with half of her sales being cannabis flower, she guessed “they would qualify, all of them, under the registry.”
      • Vetto acknowledged her store didn’t hold a retail endorsement.
  • Scott Atkison, Zips Cannabis Co-Owner, appreciated the attempt to offer more affordable product to patients. “I don't know if you do an economic analysis of this,” he commented, but figured if exempting registered patients from the excise tax, “we would see the registry expand up past 100,000 registered patients, like within a few months” which he expected would motivate companies to serve the patient market more directly. Stating the biggest potential impact of the legislation was removing costs, he encouraged lower taxes be enacted for patients (audio - 2m).
  • Daniela Bernhard, Uncle Ike’s Co-Owner, was grateful to see regulators “wanting to take care of patients" as she’d “had two safe access points pre-legalization, and within the collective grow program." Nonetheless, “my mind's a little bit blown by this legislation,” she remarked, remembering the “turmoil” of SB 5052 combining medical and adult use markets for cannabis, and “having all these safe access points closed down and this completely new model…seems just like going back to what we had before except as a side program.” Bernhard considered patients to be “taken care of quite well" by the retail market, and she promised to share her “grave concerns" about upending the existing system (audio - 2m).
  • Lukas Hunter, Harmony Farms Director of Compliance, joined other licensee representatives in praising the concern of agency staff over patient access, and echoed calls for an end to patients paying an excise tax for cannabis. He mentioned that for their company, “with our cultivation methods, the total processing cost for the 15 plants would be of, just south of around $3,000 for patients to be able to get all the cannabis. And that's with…very minimal processing of it.” He saw this cost as a barrier for many patients and communicated how it “wouldn't entice, our model at least, to engage in this sort of contract because frankly we would make more money if we were to just sell the product to retail and go the extra step to do extra packaging and whatnot.” He further added that their unused canopy space couldn’t be immediately utilized because they would “have to build out those rooms, and it's not necessarily something that we could just add more plants to” (audio - 2m).
  • Nordhorn recognized that Eric Gaston, Evergreen Market Co-Founder, had sent in a comment, but as there was no question, he promised to “capture” it for later consideration by staff (audio - <1m).

• Attendees briefly heard about a conceptual draft of Advertising changes centered on retail store signage, with only one question put forward (audio - 9m).
  • Nordhorn outlined a conceptual draft bill to modify retail advertising signage laws to be more like limitations for other restricted substances, particularly alcohol. His overview was similar to his first webinar background on the proposal. As advertising was one of the top issues investigated by Enforcement Officers, Nordhorn explained the interest to “try to create some reasonable advertising regulation.” This could include more “marketing” or larger sized signs, no longer including a “trade name” or “monument” signage in a shop’s number of permitted signs; at regular and medically endorsed stores; and billboard distance requirements.
  • Shea Hynes, Lux Pot Shop Co-Owner, shared that “there's a couple of parts of this bill that create a more restrictive environment, and I'm just naturally sensitive to any legislation that creates more restrictions” (audio - 4m).
    • He pointed to a proposed section with wording that a “licensed cannabis retailer may not display any advertising outside of the license premise. I think that's poorly worded and can be…interpreted that we couldn't advertise at all.” Hynes also wondered about previous allowances for “two businesses on the same parcel” to have complementary signs mentioning one another, such as a “glass and goods” shop adjoining a licensed retailer, “you wouldn't be able to arguably advertise for your cannabis location as well, which is odd to me. It's more restrictive.”
      • The proposed text language in section (2) said: “Except for the use of trade name signs and billboards as authorized under this section, licensed cannabis retailers may not display any signage advertising outside of the licensed premises, other than two three signs, except cannabis retailers holding a medical cannabis endorsement in good standing with rules adopted by the board may display two additional advertisements on the licensed building specifically advertising the availability of products designated for medical cannabis use for qualifying patients as defined in RCW 69.51A. identifying the retail outlet by the licensee's business or trade name, stating the location of the business, and identifying the nature of the business.”
    • Hynes felt the billboard changes “within 1,000 feet of a store” would also be “more restricting, many retailers are currently utilizing billboards that are within a 1,000 feet of their store.” He didn’t want ad regulations “going backwards” and becoming less permissive.
    • Speaking to the billboard concern, Nordhorn knew “there have been concerns around how billboards have been utilized, and that's why we felt a separation would be appropriate.” But he noted it wasn’t “just moving a sign like a billboard away from the business. We’re opening it up for additional signage around the business.”
    • Nordhorn addressed that licensed premises hadn’t been defined by the draft request bill, but “we do have that defined in other areas.” He then stated “what we're trying to do is provide the allowance of those signs to be away from the building…hopefully opening that flexibility and latitude to move things away from the building and have them on the edge of the property” if a licensee wanted that placement. Nordhorn didn’t read the bill language as stopping shops on the same parcel from having separate signage.
  • A third webinar was scheduled for Monday August 21st, and Nordhorn indicated staff would be taking written comments through Rules@lcb.wa.gov until August 25th.