WA House COG - Committee Meeting
(October 21, 2021) - WSLCB Updates

WSLCB leadership briefed the committee on “Cannabis Regulatory Issues and Implementation of Recent Legislation” after Gillian Schauer described delta-8-THC “health and safety risks.”

Here are some observations from the Thursday October 21st Washington State House Commerce and Gaming Committee (WA House COG) Committee Meeting.

My top 5 takeaways:

• Cannabis Regulators Association (CANNRA) Executive Director Gillian Schauer, a former Washington State Liquor and Cannabis Board (WSLCB) contractor, informed legislators about delta-8-tetrahydrocannabinol (delta-8-THC) and other “novel cannabinoids” (audio - 12m, video, presentation).
  • Schauer gave a presentation on delta-8-THC to the Oregon State House General Government Committee on March 25th. She presented the opening keynote at the Public Health + Youth Prevention Marijuana Summit on September 28th.
  • Schauer told lawmakers she’d been asked by WSLCB leaders to provide “a bit of an A to Z about delta-8 and novel cannabinoids” in a presentation designed to “underscore the urgency of this issue in terms of consumer safety.” Making clear she was a public servant and didn’t “take any industry funding,” she stressed that she was offering her personal opinion and not the official position of any state or federal agency.
  • Schauer noted the “more than a hundred different cannabinoids,” inclusive of tetrahydrocannabinol (THC) and cannabidiol (CBD), and asserted that “until recently, if you were talking about ‘THC’ it could be reasonably assumed you were talking about delta-9-THC.” However, the “last year has been replete with media articles about delta-8-THC and other novel cannabinoids,” she explained. Schauer indicated that the THC isomers had “the same molecular formula but a different arrangement of the atoms,” and said the World Health Organization (WHO) estimated that delta-8-THC was “less potent than delta-9,” or, “about 50 to 75% as potent.”
    • Washington law regulated cannabis as a controlled substance “under the definition of THC in terms of delta-9-THC” much like other legal cannabis states, Schauer stated. The 2018 federal Farm Bill legalized hemp and CBD production, she said, causing “a plethora of CBD production throughout the country” as “any part of [hemp], including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” were now legal, provided test results indicating “a delta-9-THC concentration of not more than 0.3% on a dry weight basis.” Schauer remarked that CBD could be “synthetically converted, using a chemical reaction, into delta-8, delta-9, or delta-10-[tetrahydrocannabinol] THC” involving “safe solvents or unsafe solvents...and acids” which could similarly be safe or unsafe for human consumption. The Farm Bill left isomers and novel cannabinoids found in hemp plants “in a gray area of legality largely outside of regulatory control at present,” she commented, and also “widely available online.”
    • Schauer added that “a clarification” had been issued by the Drug Enforcement Administration (DEA) in August 2020 which stated that “all synthetically derived tetrahydrocannabinols remain schedule I controlled substances” - but didn’t define “synthetically derived.” Schauer conveyed that left “this issue to the states.”
    • “A range of delta-8 and delta-10” products were being sold to the public, “largely vapes, edibles, oils,” as well as “smokable” items, Schauer told lawmakers. The products were promoted as “a high without the mental side effects like paranoia,” she commented, and advertised using claims of medical benefits.
  • Possible “health and safety risks” from the compounds included psychotropic effects, meaning products containing them could “be intoxicating,” however, they lacked the regulatory controls in place for “other intoxicating cannabis products.”
    • Her greatest concern was “the consumer awareness issue,” as rules around testing, packaging, and labeling of hemp products were nowhere near as stringent as they were for legal cannabis items.
    • Schauer noted the U.S. Centers for Disease Control and Prevention (CDC) sent out a health advisory on September 14th claiming 660 cases involving delta-8-THC were reported to poison control centers nationwide. She highlighted a report in Michigan where two children ingested gummies with the compound and were sent to the intensive care unit (ICU) following slowed breathing and heart rates, giving her understanding “that both were OK, but this is certainly a consumer safety issue that’s urgent.” Youth access to the products was another concern for Schauer, who indicated items were “much easier” to access online as age verification measures varied.
      • On June 29th, WSLCB staff reported that they’d reached out to the Washington Poison Center (WAPC), the Washington State Department of Health (DOH), and the Washington State Board of Health (SBOH) but found “there haven’t been any adverse events reported” in the state related to delta-8-THC. Cannabis Observer reached out to WAPC that same month, and staff confirmed they added a tracking code for delta-8-THC in March, but had not documented any cases involving the compound since that time.
    • Testing was another subject Schauer was worried about, as “the process of creating delta-8 and delta-10 can leave contaminants and byproducts” but had none of the testing rules applied to legal cannabis items “nor are there testing records if a recall was needed.” She cited the U.S. Cannabis Council (USCC), which “tested 16 of these products purchased from the legal hemp marketplace” and found that although all contained delta-8-THC, “some contained delta-9” with a “mean concentration” over 3% - or “ten times” the amount of the compound allowed for hemp. “Lead was detected, other metals were detected, residual solvents were detected,” Schauer stated, as well as compounds of “unknown identification” which she considered “perhaps the most concerning” health risk for consumers and the public. She mentioned the wave of vaping associated lung injuries (VALI) in 2019, “that was borne out of largely unregulated products from illicit or informal sources” that hadn’t been tested and contained “ingredients with unknown safety profiles.”
  • Schauer also noted the presence of “this parallel market where intoxicating cannabis products are sold...fundamentally undermine[s] the success and future of” the legal cannabis sector in Washington.
  • While certain novel cannabinoids had gained the attention of elected officials at the moment, she anticipated “a range of synthetic compounds that are not natural to the cannabis plant,” naming Tetrahydrocannabivarin (THCV), Tetrahydrocannabiphorol (THCP), and THC acetate ester (THC-O-Acetate). All the compounds were “being derived from hemp,” Schauer noted, highlighting a THC-O-Acetate patient advisory Oklahoma officials issued on October 18th. She hoped to avoid having regulators “play whack-a-mole” against emerging compounds.
    • Some research has found significant levels of naturally occurring THCV in cannabis plants whose genetic lineage traces to specific regions.
  • Wrapping up, Schauer drew attention to “the quantity of legal delta-9-THC that’s allowed to be in legal hemp products,” pointing out the “dry weight” criteria in the Farm Bill meant the possibility of obtaining “much more THC in a concentrated form.” She noted a Rolling Stone article describing the loophole that allowed hemp items with “the same amount of THC in [them] as what’s legally allowed in the adult use marketplace.” The response of state officials had varied, Schauer said. In some places, the products could be in legal markets while “other states have opted to outlaw these products” or only allowed their sale “within the context of the hemp regulatory framework.” However, the majority of jurisdictions “opted to outlaw these products in the hemp market,” she commented, only permitting their sale in a state’s legal cannabis sector, or adding restrictions like serving sizes. Other state officials were considering “regulatory authority over other cannabinoids,” Schauer remarked, along with “broader regulatory authority” for all synthetic cannabinoids.

• Justin Nordhorn, WSLCB Director of Policy and External Relations, offered lawmakers an overview of “high level challenges,” and “updates from some of the work over the last year or two” (audio - 8m, video, presentation).
  • Ongoing COVID Restrictions
    • The coronavirus pandemic necessitated an “emergency response” from agency staff, Nordhorn stated, that involved “adaptation and allowances for businesses to continue to operate, be successful, with public health and safety in mind.” This featured a “pause on enforcement,” in some areas, he told the committee.
    • Nordhorn indicated that some guidance to licensees in the context of the emergency conflicted with the Revised Code of Washington (RCW) and “we didn’t feel like we could continue working with those” as the pandemic seemed to subside. However, “since the pandemic emergency has not ceased,” some temporary allowances were extended. Staff had looked at the allowances and engaged stakeholders, he observed, and decided to continue curbside cannabis service by licensed retailers to help protect “consumers, especially the patient community.” Giveaway restrictions had also been modified to allow for distribution of masks or hand sanitizer, in addition to “walk up windows” for retail sales.
    • For licensed producers and processors, Nordhorn reported that the pandemic had contributed to “childcare challenges,” and that allowances for minors to be present at facilities in the company of a licensee parent or family member were continued as the restriction “was not a state law.” 
  • Social Equity
    • Nordhorn cited Board Member Ollie Garrett’s involvement in the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) as well as agency staff who “discuss things” with task force members “weekly.” This allowed WSLCB officials to inform task force members as to any “limitations that we may have” to ensure “the recommendations end up in the appropriate locations.” Nordhorn indicated regulators were preparing to act on the group’s required input on the social equity licensing program, and endeavored to be “in a good position to be able to facilitate those changes.”
      • The WSLCB board would be presented with a new social equity rulemaking project at their October 27th meeting. The CR-101 framed the effort as “considering new rules in response to future recommendations of the Social Equity in Cannabis Task Force, and changes to current rule that will reduce barriers to entry in the legal cannabis market.”
    • Nordhorn said WSLCB had also hired a “diversity manager,” Jim Weatherly, to lead on diversity, equity, and inclusion (DEI) efforts at the agency, “moving positively in those directions.”
      • Weatherly was introduced during the October 19th board caucus (video, audio - 3m).
  • Hemp-Derived Cannabinoids 
    • Nordhorn referenced the issue of synthetically created cannabinoids, stating that WSLCB staff were looking at the problem from a national perspective with CANNRA members because “everybody’s facing the same challenges.” He called attention to an agency rulemaking project on cannabinoid regulation and how representatives were “preparing some legislative asks that you’ll likely see in the” 2022 legislative session. Nordhorn stated that stakeholder feedback had already been solicited and incorporated into prospective legislative language. Additionally, policy and interpretive statements made clear the position of regulators and the board “that synthetic delta-8 and nine would not be allowable in the current system,” he said. 
  • Uncertainty of Federal Legalization
    • Agency leaders had reviewed a federal discussion draft of the Cannabis Administration and Opportunities Act (CAOA), Nordhorn told committee members, to consider “how is this gonna unfold federally.” He stated, “our plan is to provide some responses to our congressional members” as well as flexibility in agency rule. “We know that we started out with a tightly controlled and regulated marketplace, and that was the intent,” Nordhorn commented, but after several years the agency was prepared to look for areas to “loosen up” and allow cannabis licensees to “run their own business.” He said concerns about the CAOA were that “under the current language” there were potential negative impacts to the social equity program and “our medical patient community.”
      • Preparation for national legalization was also a subject discussed at the Washington State Cannabis Summit hosted by the Cannabis Alliance on September 24th, and subsequently by Nordhorn with board members on September 28th.

• Director of Legislative Relations Chris Thompson provided a legislative briefing to lawmakers emphasizing the outcomes of enforcement reform and hinting at draft legislation (audio - 18m, video). 
  • Thompson began by claiming that the authors of Initiative 502 “very intentionally created a tightly regulated market for what was then the first legal, adult use, cannabis program.” But there’d been “a lot of reasons to move beyond...that posture over time,” he said, mentioning SB 5318 in 2018 which had reformed how “Washington state approaches oversight and enforcement of the cannabis market.”
  • Turning to “agency wide efforts” around enforcement reform, Thompson stated that such efforts had increased after adoption of SB 5318, including changes to cannabis penalties and their structuring with a “closer focus on the relationship to public health and safety,” as well as a voluntary consultation program. He said there was a greater emphasis on educating licensees and achieving compliance, then shared “some of the more important examples” of what had been achieved:
    • Staff had taken “off the table entirely the potential for license cancellation in....quite a number of violation categories,” according to Thompson, as well as the establishment of a “deferral option for licensees when there’s been” an administrative violation notice (AVN) and certain conditions were met. He found the “innovative” option gave “some leniency” for the AVN not to count against a licensee. Thompson further noted removing “a more strict penalty for a tier 3 grower than a tier 2  grower,” saying the “differentiation” had been questioned by “the advocacy of licensees and industry” with staff determining it “didn’t make as much sense.” 
    • Thompson identified other efforts, such as Director Rick Garza’s directive to contact “the community of consultant experts to bring in some outside expert guidance,” leading to the independent enforcement review conducted by Hillard Heintze in 2019. He asserted the findings and recommendations of the report had been implemented by early 2021 and that “within the cannabis side of the house” there was “a 50/50 split” between commissioned enforcement officers and “compliance consultants.” Consultants were unarmed and didn’t have law enforcement badges, creating “a different look and hopefully a different feel,” said Thompson.
    • Enforcement officers had revised “position descriptions,” he indicated, as well as “less prominent” badges, different training, and different uniform expectations. The “investigation of complaints” against staff in the unit “are led by our [human resources] department, not the Enforcement unit,” added Thompson, with assistance from the Washington State Office of the Attorney General (WA OAG) and “the relevant collective bargaining agent.”
  • Thompson said that within Garza’s office “a new legal and policy team” had been created under the leadership of Nordhorn which involved staff handling rule and policy coordination with “a strong focus added” on external relations and engagement. Thompson said the group’s policy and interpretive statements were a “one stop repository” for agency positions and intentions, leading to “stronger consistency in how we work.”
    • Thompson emphasized an interpretive statement on “what marijuana retailers can and cannot sell” which addressed what he called a “conflict” in statute. As the retailer statute limited sales to, “basically, marijuana products and paraphernalia only,” he explained the belief of staff that shops couldn’t “sell standalone CBD products” except for cannabis health and beauty aids (CHABA), which could have “no THC in them.”
  • Thompson concluded with brief remarks about potential agency request legislation on novel cannabinoids, telling lawmakers that WSLCB staff shared Schauer’s health and safety concerns after having seen “hundreds of reports of adverse health effects.” Agency staff had “moved beyond” the last publicly released draft and were endeavoring to conclude internal discussions on “the most sensible proposal.” Thompson hoped to have a new draft to show legislators, the Washington State Office of the Governor (WA Governor), and stakeholders “fairly soon.”
    • Agency representatives hosted a webinar dedicated to the request bill on September 27th.

• Kendra Hodgson, Cannabis Examiner Manager, provided an update on cannabis testing laboratories, covering lab certification and the Cannabis Science Task Force (CSTF, audio - 6m, video).
  • Hodgson reported that there were 11 labs in the state accredited to provide cannabis testing for licensees.
    • Five labs had obtained optional certification for pesticide testing and three maintained heavy metals certification. These testing areas were optional “as pesticide and heavy metal testing is not yet required for recreational product.”
    • Of the 11 labs, nine were located in Western Washington, and two were in Eastern Washington.
    • All labs were “reviewed annually after they receive their initial certification and must participate in two rounds of proficiency testing each calendar year to maintain their certifications to test.”
  • Hodgson reviewed HB 2052, which formed the CSTF, and on which she served as WSLCB representative. She stated that the group was composed of representatives from state agencies and private labs in the state, having met almost monthly since August 2019, with work groups “tasked with making recommendations for the lab standards.” The first CSTF report to the legislature was delivered in June 2020, Hodgson noted, with the second and final report on a “wider range of testing topics...due in December of 2021.” A third report would be given to WSLCB leaders “in a memo format” to become part of the “implementation work” of the ICT.
    • This process was talked about during the CSTF meeting on October 25th in the “Sun Setting the Task Force” agenda item.
  • The “vital” work for 2022, she said, hinged on “critical legislation” which would be requested jointly by WSLCB and the Washington State Department of Agriculture (WSDA) to create an interagency coordination team (ICT) between themselves and DOH, a “multi-agency effort to move recommendations from the cannabis science task force forward.” Hodgson described the ICT as developing cannabis testing lab standards which would be encoded by WSDA. Though there remained “quite a bit of work to do,” she commented that staff collaboration continued towards “the successful transfer of lab accreditation to the Department of Ecology in 2024.”

• Chief Financial Officer (CFO) Jim Morgan brought the committee up to speed on the Cannabis Central Reporting System (CCRS) which the agency planned to use instead of seed-to-sale cannabis tracking software (audio - 9m, video).
  • The state’s traceability software, Leaf Data Systems, and the vendor providing it, MJ Freeway, had been accused of numerous problems which were not adequately addressed by a final system update in July 2019. Further development was halted in favor of maintaining stability and a transition to the CCRS was announced publicly on August 11th. Morgan last reviewed the project with the board on October 13th.
  • Morgan, identifying as the CCRS “executive sponsor,” stated that he would contextualize the intention behind the agency push for the change, which he termed “well underway.” The move to a reporting system was a response to “a number of aspects of our regulation of the industry,” he said, primarily around what information WSLCB staff needed to ensure compliance. The design for the CCRS incorporated some stakeholder feedback, Morgan claimed, from “late 2019 and early 2020” which had been “put on the shelf for a little while.”
  • As the Leaf Data Systems contract would expire in June 2022, Morgan stated staff had evaluated their data needs to consider what the process “could and should look like going forward.” Morgan said staff pared down reporting requirements to “what is absolutely necessary for” regulators to meet their responsibilities. The determination was reached to have “an in-house system for reporting,” he said, instead of extending the agency partnership with MJ Freeway. 
  • Morgan called CCRS a “reporting system only” and framed the move as WSLCB “getting out of the way” of the cannabis industry. Agency officials could receive and maintain reports in a database with no “business rules built into the system that create opportunities to stop transactions from happening,” he said. The “flexible” nature of CCRS was “simpler” and might entail fewer associated costs for licensees, but Morgan warned the committee that by removing WSLCB from “the transaction flow” within the cannabis sector, businesses could no longer rely on a shared traceability system for “facilitating transactions between licensees.” Such transactions would no longer be an “automated process,” he indicated, as “that positive piece is going away.” Morgan noted that third-party integrators were working together “to facilitate that process so they won’t be stuck with just manual processes.”
  • Morgan went over the communications plan for CCRS, saying “ongoing updates” for the system were being distributed via listserv and trade association leadership. He expected the system to go “live” in December 2021.

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