WSLCB - Board Meeting
(July 7, 2021) - Synthesized Cannabinoids

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[ Event Details ]

Board members voted to restart rulemaking on synthesized cannabinoids and heard directly from two advocates for the practice amongst many more otherwise opposed.

Here are some observations from the Wednesday July 7th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

  • Board members voted to refile a CR-101 on synthesized cannabinoids to ensure the rulemaking project encompassed the practice of licensed processors converting hemp-derived cannabidiol (CBD) into other cannabinoids for legal cannabis products.
    • Cannabis licensees and stakeholders raised concerns about synthesized cannabinoids in products as both a threat to their businesses and consumer health during the months preceding the meeting. On April 28th, agency officials announced a policy statement centered on delta-8-tetrahydrocannabinol (delta-8-THC) and other cannabinoids, sending a clarifying bulletin about the policy statement on May 3rd.
    • A rulemaking project on “THC Compounds other than Delta-9” was approved by board members on May 12th, a day after a presentation by Hoffman during the May 11th board caucus. On June 3rd, WSLCB staff hosted a deliberative dialogue on cannabis plant chemistry to learn more about synthesis of cannabinoid compounds.
    • On June 16th, less than two weeks later, a special board meeting was convened by Board Member Russ Hauge after he "became convinced" from “talking to people and reading” allegations that "delta-9 created from hemp-based biomass" was already being sold in the legal market. He said he didn't “know how many or who" among licensees in the cannabis sector were doing so, and asked, "why are we not pursuing enforcement action” to stop the practice. However, Board Chair David Postman and some WSLCB staff expressed hesitancy as to whether state law allowed them to act, and sought a legal opinion from the Washington State Office of the Attorney General (WA OAG), which Hauge reported receiving on July 1st.
    • During the board meeting, Policy and Rules Manager Kathy Hoffman reviewed the history behind the already filed CR-101 and the decision to refile it to expand the scope to “all THC compounds.” She asked the board to allow her to withdraw the CR-101 and refile in order to more fully effectuate “the provisions of RCW 69.50.342(1)(m) concerning the board’s ability to prohibit the use of any type of additive, solvent, ingredient, or compound used in the production and processing of cannabis” products (audio - 4m). 
      • The existing CR-101 “only contemplates products other than delta-9,” Hoffman noted, because “it appeared that this is where we needed to concentrate our efforts” when the board approved the rulemaking project in May. Since “mid June,” however, she said staff had become convinced efforts “should be extended” to include synthesized delta-9-THC. The “scope of development” in the new version covered “all THC compounds, rather than just compounds other than delta-9.”
      • Hoffman assured the board agency officials hadn’t lost “momentum” in the project, arguing that the new wording helped “maintain focus in a constructive, data driven, and effective way. And rulemaking is just one of those efforts.” She explained that staff would host a second deliberative dialogue on July 20th and would publish details “by the end of the week.”
        • The change to the CR-101 impacts the timeline offered by Hoffman when she initially presented the rulemaking project on May 12th. At that time she anticipated a CR-102 with proposed changes “by August 18th,” but stated on June 22nd that a pre-proposal comment period of at least 30 days begins once a CR-101 was filed with the Washington State Office of the Code Reviser (WA OCR).
      • To date, comments received on the rulemaking project offered “many of the same sentiments and positions we’ve heard in board meetings recently,” Hoffman stated. She said the feedback officials had collected would be included and considered and that commenters were welcome to expand or amend their remarks based on the refiled CR-101 if they wished.
    • Hauge spoke up to agree with Hoffman’s comment that WSLCB leadership was “not losing momentum here” but rather “focusing our efforts where they need to be focused” (audio - 1m).
    • Board Chair David Postman also appreciated the work of the Policy and Rules team, feeling “it does better reflect the breadth of the effort we have going on.” The board then voted twice, first to withdraw the original CR-101, and then to have Hoffman refile a statement of inquiry titled “Evaluating THC Compounds” (audio - 1m).
  • During general public comment, two individuals defended synthesis of cannabinoids as an “innovation” in the cannabis sector, including a representative of a licensee engaged in the practice.
    • Kent Haehl, Atlas Group and Atlas Global Technologies LLC President (audio - 3m)
      • Haehl said Atlas Global Technologies was “a supply chain partner, we produce vape cart[ridges] and terpenes for legal cannabis processors nationwide,” and he asked the board to allow “all forms of THC derived from the cannabis plant in our state’s regulated marketplace.” He claimed synthesized cannabinoids were one of many “waves of innovation" in the cannabis sector which provided “adult users and patients a greater choice.”
      • Trying to offer “greater context” to the board, Haehl addressed the claim that the state “is experiencing record low prices in the THC oil market.” He admitted an “analysis of market trends as well as the state’s own traceability system shows that this issue is real,” but argued the downturn was “driven by an oversupply of cannabis biomass grown inside [Initiative-502] for extraction.” Haehl thought that the federal economic stimulus in 2020 and early 2021 had buoyed demand for cannabis, but licensed producers had “maxed out canopy" with processes like autoflowering cannabis, “an innovation of outdoor cannabis production enabling a second, or even a third harvest” each year. As economic stimulus tapered off, he saw that “retail demand pulled back, but it was too late for outdoor farmers to adjust” their harvest cycles. “The result?” Haehl stated, was “a substantial oversupply of cannabis in relation to actual demand.”
      • Haehl predicted that “2021 is going to be even worse,” producers planning “additional outdoor harvests know it,” and some anticipate there will be “more than the current market demand requires.” He contended that the alleged glut of harvested cannabis biomass was “the root cause” of low wholesale prices - “and hemp-derived THC is not the problem.”
      • Synthesized cannabinoids accounted for “at most, 200 liters of distilled oil per month, or 8-10% of the market’s current demand” in Washington, according to Haehl, “and the oversupply problem is far greater than that.” He felt that there was a “need to work together as an industry to solve” the issue of oversupply of cannabis, and asked all licensees to “be honest about what the issue is.”
      • According to Washington State Department of Revenue (WA DOR) records, Haehl maintained a governing role in a cannabis product marketing business, Greenlight Approved.
      • According to his LinkedIn profile, Haehl was a “strategic advisor to top 10 Washington state producer/processor BMF Washington” in his position as president of Atlas Group and Atlas Technologies where he helped manage a “portfolio of regulated and ancillary cannabis and hemp business units including:
    • Blade Bolden, Unicorn Brands LLC Production and Product Development Manager (audio - 3m)
      • Bolden wanted agency leaders to include “all forms of THC derived from the cannabis plant within our state’s regulatory framework for the legal cannabis marketplace.” With a background “in I-502 processing and in product testing,” he remarked that his company used “proprietary technology to safely and efficiently process hemp-derived THC that we then sell to fellow I-502 license holders.”
        • Prior to Unicorn Brands, Bolden was employed by BMF Washington, one of the larger producer/processors in Washington, starting as a Technician and leaving the company as their Processing Manager. The company’s brands include Liberty Reach, Jackpot Seaweed, RSO+GO, SunGrown, Grassroots, Golden, and JuJu Joints.
      • "We do not manufacture synthetic cannabinoids, such as K2 or Spice" as the state defines them, said Bolden. He noted these were “artificial molecules designed to both mimic the effects of THC and evade law enforcement detection in drug tests,” whereas Unicorn Brands made “a safe, tested, legal, and quality controlled product derived from the cannabis plant.” 
        • The distinction between synthetic and artificial molecules was discussed during the deliberative dialogue on June 3rd. Invited experts agreed that artificial substances similar to cannabinoids were called “Synthetic cannabinoids” in law. Synthesized compounds created by chemical conversion but identical to naturally-occurring cannabinoids were included under the definition of THC in RCW 69.50.204(c)(30)(i). There is some uncertainty as to whether or not delta-8-THC is a compound naturally produced by the cannabis plant, and nuance with regards to the chirality of synthesized compounds which may similarly distinguish artificial from synthetic molecules.
      • Claiming to use “near 100% pure CBD isolate” from “hemp grown by farmers in the Pacific Northwest,” Bolden said they required “certified test results” from hemp producers showing CBD isolate was “tested for pesticides, heavy metals, potency, and residual solvents prior to purchasing.” Once purchased, it was “entered into Washington’s traceability system during intake, labeled with inventory ID number, and follows all requirements within WAC 314-55-109,” he explained. Bolden reported that the CBD isolate was “sent out for quality assurance testing, this time by Washington State certified analytical testing laboratories.” 
      • After passing “all tests” required in rule, he said Unicorn Brands staff “leverage proprietary technology to convert the CBD into THC products using a process identical to processes long-established in the food processing industry that are safe, efficient, resulting in clean THC product.” The synthesized cannabinoids were retested, “including another pesticide test,” Bolden told the board.
      • While he wouldn’t claim that “all technologies are safe,” Bolden believed synthesized cannabinoids should be “subject to strict oversight and regulations so that consumer safety is protected.”
  • 18 speakers called for a prohibition on synthesized cannabinoids, suggesting agency leaders should take emergency action or enforce existing regulations limiting use of CBD as an additive.
    • Jade Stefano, Puffin Farm Co-Founder and CEO (audio - 3m, written comments)
      • Stefano began by asking board members to “continue to allow the minor children of producer/processors onto a licensed premises,” a special allowance due to the coronavirus pandemic which was set to expire. She argued that since “children are still unable to be vaccinated, child care is not a safe option for our kids.” Stefano sought parity with “craft alcohol producers whose children are allowed at their distillery.”
      • She then told the board that the Washington cannabis market “for craft cannabis has declined 30% since the pandemic began.” Stefano argued market growth was being enjoyed “exclusively...by larger corporate processors” selling “synthetic cannabinoids derived from hemp” and that a “saturation of the market by super-cheap, synthesized THC” was the “last straw” for what she called Washington’s “hard working, independent, cannabis businesses.” She viewed the ingredients as entering the market “illegally via a loophole in the hemp and marijuana rules.”
      • Stefano believed synthesized cannabinoids posed a “safety hazard to the public” by not being labeled as “synthetic” and were “potentially dangerous, containing unknown and untested-for byproducts and residues.” She noted her company spent "hundreds of thousands of dollars" on compliance efforts annually, only for delta-9-THC to be “created, hundreds of pounds at a time, by a simple synthetic reaction,” bypassing all “compliance and regulation expenses of traditional THC production.”
      • Believing that the Farm Bill, which legalized hemp federally in 2018, hadn’t intended “for CBD to be used to create THC,” Stefano found it was “unethical for consumers” and left an “unfair business environment for the rule-following I-502 licensees.”
      • She was grateful for the board taking action against vitamin E acetate as an additive in cannabis vapor products, but warned that there was “another diluent called squalene which has been linked to vaping illness in Oregon” where regulators banned the compound in December 2020. Stefano called on the board to take similar action on diluents and additives “not proven safe.”
    • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner (audio - 2m)
      • Wagenseller observed that board members had dismissed the possibility of taking action against synthesized cannabinoids through emergency rulemaking since there hadn’t been “any health scares that we know of" related to the compounds in Washington. She argued that “the health of the industry was at stake" and that “it feels like bringing THCs from unregulated hemp into our highly-regulated market is shooting holes in our boats” so that even “a low tide” in the form of cheap cannabis could “sink us.” As rulemaking “drags on, and then we’re waiting for possible legislation,” Wagenseller was certain the “companies that are doing this are continuing to gain market share."
    • Chuck Ijadi, Medical cannabis patient and former Medical Marijuana Consultant (audio - 3m)
      • Ijadi did not want synthesized THC to be used in the legal market as “there are terrible side effects that are not being disclosed” and the compounds were “driving the price down” for cannabis, hurting “our craft producers.” Finding the industry over regulated as a whole, he nonetheless favored agency action in this instance.
      • Describing how he’d had a doctor’s authorization for cannabis for over 20 years, Ijadi specifically said agency leaders had “screwed the medical marijuana patients" and the imposition of “a 37% tax on disabled people who live on a fixed income...is just ridiculous.”
    • Scott Berka, Dreaming Green/Full Throttle Farms/Fresh Productions Owner and  Washington SunGrowers Industry Association (WSIA) member (audio - 4m, written comments)
      • Saying he was a “small craft producer” producing “some of the finest and safest grown cannabis flower in Washington,” Berka asserted that “hemp is not mentioned anywhere [in relation to WSLCB] because it has no business in our business." He agreed with the policy statement from agency officials on synthesized delta-8-THC, finding it clear that “synthesized THC is illegal to sell in the 502 stores.”
      • Berka wanted “craft” producers like himself to be able to sell “wholesale cannabis material deemed not for retail package sale.” Sales of such material had been “about 30 to 40% of our overall annual revenue” before the wholesale marketplace was “saturated with illegal foreign material.” The "near elimination" of this market segment left him forced to sell “material well below the cost to produce it” and was damaging his livelihood as well as that of his “staff and their families.” Berka observed that “the time to act was months ago, but I’ll be satisfied with right now, please.”
    • Jessica Straight, Eagle Trees Co-Owner (audio - 4m)
      • Straight noted her company used “regenerative farming techniques” to make “pretty much the most pure cannabis that you could ever get.” She reported that Eagle Trees produced medically compliant cannabis items which necessitated extra testing. 
      • The first growing season at Straight’s farm included “half of our canopy in CBD because we knew it was going to be a big deal” but that dropped dramatically after CBD from hemp was permitted as a cannabis product additive. “Why? There were a thousand farms waiting to produce this product,” she argued, “there was no reason to do that.” Allowing hemp-derived CBD from outside the I-502 system was “the original sin,” in Straight’s view.
        • HB 2334 (“Regulating the use of cannabinoid additives in marijuana products”) was passed in 2018. See testimony from the first public hearing on the legislation.
      • Straight also agreed with continuing to allow underage relatives of licensees to be present in facilities, rhetorically asking the board “have there been any problems" with the allowance since its implementation in 2020.
    • Jeff Newton, Heritage Cannabis Owner (audio - 2m)
    • Dave Varshock, BroCo LLC Chief Operations Officer (audio - 2m, written comments)
    • Monica Martinez, The Calyx Company Owner and a Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) appointee (audio - 3m, written comments)
      • Martinez noted she previously spoke to the board about the situation, saying her business had "barely sold any flower" in 2021 even as her prices were “the lowest they’ve ever been.” She’d seen estimates that 40,000 pounds of hemp entering the state would “replace at least 100 small farms” already operating. “They will soon be out of business, if they are not already,” predicted Martinez.
      • Farms simply couldn’t compete with the price point of synthesized cannabinoids, she stated, which were used in products throughout the legal market. Feeling “certain situations deserve emergency action,” Martinez called for emergency rules “to remove all high-THC derived from hemp from the retail shelves and stop the importation, processing, and sale of any high-THC synthetically hemp-derived products.”
      • The desperation of some licensed producers was fostering “an atmosphere of non-compliance and possible diversion” to the illicit cannabis market, Martinez warned. She added that she also supported permanently extending “the ability of minors [to be in] a cannabis farm.”
    • Jeff Merryman, IGrow Owner (audio - 2m)
      • Merryman had found synthesized THC to be “affecting our market” and “unfair competition” for business owners who “paid quite dearly to participate” in the legal cannabis sector. He told board members the situation empowered “the black market” and that regulators were incentivizing producers to “push more stuff out the back door” into an illicit market “that has a safer product than our regulatory [sic] market.”
      • Mentioning “kids on our farms,” Merryman thought producers had “shown that that can be done, no harm comes to our kids.” Moreover, he said it “exposes my child to farming and the types of farming I do” and requested the allowance be made permanent.
    • Dion Walter, Praxis Holdings Owner (audio - 1m)
    • Taylor Balduff, Forbidden Farms CEO (audio - 1m)
    • Crystal Oliver, WSIA Executive Director (audio - 3m, written comments)
      • Oliver said WSIA represented “more than 50 businesses who hold more than 100 LCB licenses,” and agreed with prior speakers’ suggestions for “immediate action” by the board “to enforce the laws and rules” to thwart “manufacturing, importation, and sale of chemically synthesized THC” to an “unknowing public.” 
      • Saying complaints about autoflowering cannabis impacting the legal market were “untrue,” Oliver suggested the synthesized cannabinoid products of one company accounted for “displacement of at least 29,000 pounds of biomass...that was not bought from a Washington farmer.” She estimated that as many as ten licensed producers would be cut out of the market for each processor synthesizing cannabinoids from CBD. Oliver claimed the lack of WSLCB enforcement on the issue had led to “millions of dollars of lost revenue” for licensees and the state, “and those impacts will continue to grow.”
      • She commented that the process for synthesizing cannabinoids described by Bolden was unlawful as CBD was not being used “to increase the cannabidiol content only” in the resulting product. “If you are adding CBD to increase the THC you are clearly violating the law. We need you to enforce that law.”
      • Like other speakers, Oliver also favored allowing minor “children and grandchildren” of licensees to continue to be on their licensed premises.
    • Charles O'Brien, Tier 3 producer/processor licensee (audio - 2m)
      • O'Brien agreed with the points raised by others opposed to synthesized cannabinoids, including emergency action by the board to remove the products from the legal market. He posited that since cannabis was “not federally legal,” interstate sale of CBD derivatives could be a violation of the Commerce Clause of the constitution if converted “outside the state.” He found the situation analogous to the vaping associated lung injuries (VALI) health scare since “we don't know what's going into these products” while at the same time being a broadly “unfair practice.”
    • Jeremy Moberg, CannaSol Farms Owner and WSIA Board Member (audio - 3m)
      • Accusing the board of protecting “the interests of non-licensed entities” over the licensees they regulated, Moberg expressed “frustration and bewilderment” at the continuation of a practice WSIA members reported to agency staff in November 2020. He noted the policy statement from April 28th “citing the laws and rules that would prohibit the synthetic conversion of CBD into THC and allowed on the market.” In reviewing the cited rules and statutes, Moberg was confident that emergency rules weren’t needed, “we just need action” to uphold existing regulations. However, agency officials released a clarifying bulletin “which effectively reversed this clear statement that synthetic THC was illegal,” he said, and called for rulemaking which “threw the issue into limbo.”
      • Saying the “interests behind synthetics” began lobbying and offering “nonsensical interpretations of the law” to justify the practice, Moberg alleged that “putting money into politics can change the conversation, even at the level of the LCB” and sway “government agencies away from the clear facts.”
    • Matthew Frigone, Lazy Bee Gardens Owner (audio - 3m)
      • Frigone supported emergency action to ban synthesized THC from the market as well, finding it “dishonest for anyone to say that it’s not a problem in the industry.” Licensees took on “all sorts of regulations that are not required of the CBD market,” he said, and allowing synthesized cannabinoids amounted to “a slap in the face” for his business and those “that operate specifically on the wholesale side.”
      • Even if “there is an issue...with autoflower being grown a lot,” Frigone believed “importation of CBD” for synthesization into THC had a negative impact on the cannabis sector. Furthermore, there was “no way to actually compete with" CBD sourced “from God knows where,” he said. He repeated his call for action to enforce current rules or implement emergency rules, as “something has to be done to protect the farms."
    • Jason Poll, Gorge Gold CEO (audio - 1m)
    • Galadriel Walser, Buddy Boy Farms General Manager (audio - 2m)
      • Walser shared the sentiments of previous speakers, finding that “synthetic cannabinoids” had already “severely limited our ability to sell our trim.” "Everybody” in the cannabis sector had been impacted by it, she asserted, finding claims it wasn’t hurting the price of cannabis biomass “untrue...it’s driving the price down significantly.” She argued that board members were implying that her company’s 640 acre production facility would “be better off going outside, growing hemp, and stopping this business altogether.”
      • Walser addressed Bolden’s statements that CBD imported by his company was tested: “while they may, they’re unregulated, so how do we know...everybody’s doing that?” She acknowledged that “they say they are” testing the additive, but thought Unicorn Brands was “unregulated” and therefore were not expected to “prove” products were tested.
        • As a licensed processor, Unicorn Brands is required both to show CBD input has passed testing, and to follow testing requirements of other processors.
      • She also agreed with letting “kids stay in the grow, it has definitely helped us.”
    • Jim MacRae, Straight Line Analytics (audio - 4m)
      • Offering the perspective of “a potential consumer” of regulated cannabis, MacRae said a “culmination of many things, [synthesized cannabinoids] being one of them” made him unlikely to “choose regulated cannabis as my source...Nor would I recommend, right now, my friends to do the same.” While liking some licensed producers, he argued there were "better places to get it...places I trust more."
      • He charged that agency staff lacked “any regard whatsoever for the differentiation between what I as a consumer consider to be a good player and a bad player.” MacRae encouraged the board to follow Oliver’s example in checking into the “downstream people that are buying their intermediate products and putting it into things out there.” Insisting “it’s not just oil, it’s not just vape cart[ridges],” he hypothesized that “your mom. doing an edible, could be eating this stuff.” Though “it doesn’t mean it’s going to hurt them,” MacRae felt “it certainly is not supporting...the majority of” cannabis licensees generally.
    • Joshua Rutherford, Dutch Blooms Owner (audio - 3m)
      • Rutherford described being the sole employee of his cannabis business “until this year,” organizer of a national conference centred on regenerative growing, and a medical cannabis grower prior to becoming a licensee. He supported everyone who had spoken against synthesized cannabinoids, particularly Moberg’s request to enforce existing rules.
      • Rutherford recommended agency officials collaborate with licensees to “loosen the rules that we have so that we can compete” citing things like “cameras, the traceability is too hard, we can’t have our children in.” He called for “accountability” to stop the use of synthesized cannabinoids, but also relief from “overbearing” regulations.
      • He noted he “also [had] a hemp license” and had brought “that hemp CBD into my 502 and have sold it in” cannabis oil. This way Rutherford knew the CBD was “tested, it’s grown regeneratively on my farm” like his cannabis, and he could “grow a lot more” since there were fewer restrictions.
      • The possibility of "a truly craft market" with direct sales to consumers, and “a scenario where people want to come to Washington to smoke our weed” was a goal for Rutherford. “We’re known for apples, we’re known for beer, we’re known for hops, we’re known for wine,” said Rutherford, “we could do something really cool if we all could work together.”
      • See a 2019 presentation from Rutherford on Regenerative Cannabis Home Growing.

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