WA House COG - Committee Meeting
(February 3, 2020) - Summary

[ Event Details ]

The Committee heard cannabis-related legislation on local zoning, craft cannabis, and all three WSLCB request bills; and recommended the location compliance bill out of committee.

Here are some observations from the Monday February 3rd Washington State House Commerce and Gaming Committee (WA House COG) committee meeting.

My top 6 takeaways:

  • The House Commerce and Gaming Committee hosted public hearings on five new cannabis bills starting with HB 2870 - “Allowing additional marijuana retail licenses for social equity purposes.”
    • Staff Report
      • By Kyle Raymond, WA House COG Research Analyst (audio - 5m, video)
      • Bill Text (v1)
      • House Bill Analysis (Feb 3, 2020)
      • Fiscal Note (Feb 3, 2020)
      • Sign In Screen Capture (Feb 3, 2020 2:27:19pm)
      • Representative Shelly Kloba wanted to know “how many local jurisdictions are clamoring for more stores to locate in their communities, and would be willing to apply for this. And then, secondarily, where does that matching grant come from?” (audio - 1m, video)
    • Representative Eric Pettigrew spoke to the merits of his bill, saying a “strong reaction” to his earlier legislation addressing out-of-state ownership and equity program funding, HB 2263, led him to speak to “proponents and opponents in a little bit more detail.” He said he’d come away from those conversations believing the equity problem in the cannabis sector was not so much about licensing as “potentially a different distribution of wealth.” Pettigrew said that the “incredible opportunities” of early licensing allowed only applicants with “a ton of resources in the beginning” to successfully compete. HB 2870 had the potential to assist some of those impacted “disproportionately because they were distributing this product” as “now that it’s become legal, it's out of reach for them to actually legally distribute it and benefit from the success” (audio - 3m, video).
      • Representative Melanie Morgan asked Pettigrew about the bill’s language of “communities of color” and whether he’d agree that “African Americans need to come up to the same playing field as white people do before we open it to other communities of color” (audio - 2m, video).
      • Chair Strom Peterson confirmed Pettigrew would be “open to a couple more conversations here in the next couple of days?” (audio - 1m, video)
    • Pro (6)
      • Rick Garza, Washington State Liquor and Cannabis Board (WSLCB) Director (audio - 4m, video)
      • Angel Swanson, retail licensee (audio - 3m, video)
        • Swanson thanked Morgan and Board Member Ollie Garrett for their support. She said she was a “member of the Cannabis Advisory Council” appointed by “Ollie Garrett and the Governor to represent industry groups within the cannabis industry.”
        • Swanson outlined for members her “long and arduous journey” with “three retail licenses that I am unable to open.” Swanson said she’d contributed to the bill’s development at WSLCB and agreed with others’ comments that equity was needed “expeditiously.” She assured the committee she’d share written testimony with stories of many “black and brown people behind the scenes.”
      • Craig Brazell (signed in)
      • Seth Dawson, Washington Association for Substance Abuse and Violence Prevention (WASAVP) Lobbyist (signed in)
      • Eric Gonzalez Alfaro, American Civil Liberties Union of Washington Legislative Director (signed in)
      • Bailey Hirschburg, Washington NORML (signed in)
        • CAC Consumer Representative
    • Con (4)
      • Kyle Capizzi, Craft Cannabis Coalition Executive Director (audio - 2m, video)
      • Aaron Bossett, Black Cannabis Commission (BCC, audio - 2m, video)
      • Sharon Swanson, Association of Washington Cities (AWC, audio - 2m, video)
        • Swanson explained to lawmakers that AWC supported “the policies that the legislation is attempting to achieve. We certainly support creation of social equity in this market.” However, she said that the approach of WSLCB’s request bill “is one that we object to.” Swanson pointed to section four of the bill, which she described as asking cities “to bear the brunt of deciding whether or not they want additional retail” stores in their boundaries. This would create an “administrative burden” for cities and make them choose between more cannabis retail and “looking as though we were not supportive of creating equity in the market.” Instead, such allotment decisions should be made by WSLCB as “they’ve been doing this all along” by distributing licenses and then determining “what the market will bear,” said Swanson.
      • Briahna Murray, Cities of Kent and Spokane Valley (signed in)
    • Other (9)
      • Paula Sardinas, Washington State Commission on African American Affairs (CAAA) Commissioner (audio - 3m, video)
        • Noting she’d postponed a medical procedure to testify, Sardinas called it “rather insulting” for anyone to say that “we don’t need equity as African Americans.” She thanked Morgan and called for the representative’s “voice and support moving forward.” Referencing revenues from legal cannabis “that flow into communities that are not communities of color,” Sardinas said, “we believe this bill, although not perfect, is the first step in making sure we can address those inequities.” She argued the situation met a constitutional standard for “strict scrutiny law” where there was a “compelling interest to remediate race discrimination and such evidence has to consist of an entity’s passive support and a system of racial exclusion.” She believed any equity program must be “tailored” to racial groups “that were discriminated against.” Sardinas added that since work on the bill continued, “while we’re neutral, we do want you to exec[utive session] it out.”
      • Peter Manning, Black Excellence in Cannabis (BEC, audio - <1m, video)
      • Orlando Huff (audio - 2m, video)
      • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director and Lobbyist (audio - 1m, video)
      • Chris Marr, Principal at Chris Marr Government Affairs (audio - 3m, video)
      • Will Housa, CAA (audio - 2m, video)
      • Aaron Barfield, BEC (audio - 1m, video)
      • Kristin Baldwin, The Cannabis Alliance Executive Director (signed in)
      • Sean O’Sullivan, Cannabis Retail Business Association (signed in)
  • Next up was HB 2279 - “Improving the development of the marijuana market by enacting provisions specific to craft cannabis production.”
    • Staff Report
    • Representative Laurie Dolan, the legislation’s prime sponsor, noted the “cannabis industry keeps working through its infancy” and was concerned that local producers would be “taken over by big, out-of-state producers.” She said her bill would define craft cannabis “in a similar manner as beer and spirits” and offered “differentiation in rule and law” allowing direct sales by craft licensees. She indicated the bill “creates an advisory board of craft farmers to assist the LCB in future decisions about the industry.” Addressing a fear she’d heard about the bill’s impact to 502 retailers, Dolan said that after she travelled to wineries in eastern Washington she’d often end up asking local wine sellers to stock what she liked; she perceived her bill “as educating consumers so they can go to the retail outlets and ask for those products.” She questioned the WSLCB’s interpretation of the bill as expressed through its fiscal note, as the agency assumed a new licensing application period would be opened, inflating projected costs, rather than allowing “existing licenses to transfer over” (audio - 3m, video).
    • Pro (23)
      • Crystal Oliver, Washington SunGrowers Industry Association (WSIA) Executive Director (audio - 1m, video)
        • Oliver described an “uneven playing field” whereupon licensed retailers “held tremendous market power and our farmers struggle to remain in business.” She credited the product diversity of the 502 market while noting the loss of “talented and passionate farmers due to consolidation, oversupply, overtaxation, overregulation, and increases in cost.” Oliver warned of a “tipping point in the evolution of the marketplace where your action is required to save our remaining craft cannabis producers” and asked lawmakers to support the bill as it would restore the “direct relationship between cannabis consumers and farmers, empowering our craft cannabis farmers, and restoring our communities.”
      • Ted Youngs, Former Owner of Pure Joy Family Farm (audio - 1m, video)
        • Youngs stated that he “closed the door” on his cannabis company a year earlier due to “market pressure of dealing directly with retailers.” From his entrepreneurial experience, he found that it was “almost impossible to make a living for anyone in this business” due to heavy taxation and regulation. Youngs said that “direct to consumer” revenue would help growers “thrive,” particularly those in rural areas “that are not being served with the amount of jobs and opportunities” or larger cities.
      • Micah Sherman, Raven Co-Owner and Operations Director (written testimony, audio - 2m, video)
        • Sherman described the bill as defining craft cannabis “in relation to the scale of that operation and the relationship of the ownership of those businesses.” He said that the legislation was “about defining our economic relationships with each other and the results on the social relationships that come out of those economics.” Observing that the 502 market had experienced “massive consolidation” in recent years, Sherman supported the bill as it offered small producers “economic security and the opportunity to elaborate beyond where we’re at now.”
      • Lisa Vatske, Investor (audio - 1m, video)
      • Tamara Weinmann, Bellevue Cannabis Company Owner (audio - 1m, video)
      • Ryan Sanderson, Golden Leaf Owner (audio - 2m, video)
      • Mark Seegmueller, Mad Mark Farms Owner (audio - 1m, video)
      • James Dusek, Downtown Cannabis Company Owner (audio - 1m, video)
      • John Kingsbury, medical cannabis patient (audio - xm, video)
      • Jessica Straight, Eagle Trees Owner (audio - 1m, video)
      • Gary Green, Vancouver Weed Company (audio - 2m, video)
      • Mark Ambler, Breeze Trees Owner (signed in)
      • Kristin Baldwin (signed in)
      • Craig Brazell (signed in)
      • Lisa Hall, Raven (signed in)
      • Joshua Hames (signed in)
      • Bailey Hirschburg (signed in)
      • Bradley Orr (signed in)
      • Rebeca Potasnik (signed in)
      • Athena Ruggiero, Raven (signed in)
      • David Stein (signed in)
      • Dave Temke, Raven (signed in)
      • Michael Werkmeister (signed in)
    • Con (6)
      • Chris Marr (audio - 2m, video)
        • Marr shared a host of questions the bill raised for him including “what is ‘craft cannabis’? What public policy objective are we addressing? Who benefits and why is that particular group deserving of special treatment? So, I am in opposition to this bill.” He argued that craft cannabis was a “nice sounding, but vague and undefined term” and suggested additional criteria such as whether craft cannabis should be organic or “non-mechanically” produced. Marr expressed incredulity that any current cannabis licensee may be able to qualify for a craft license. He said direct sales under the bill “contradicts the intent of I-502 which was written that way and approved by the voters and the reason was not to allow vertical integration because that discourages market concentration and provides many more opportunities for potential entrance.”
          • Compare Marr’s views on the intentions of voters and the flexibility of I-502’s language offered a few weeks earlier while testifying in support of HB 2263, legislation to remove constraints on out-of-state ownership of Washington cannabis businesses (audio – 3m, video).
      • Sean O’Sullivan (audio – 1m, video)
        • O’Sullivan explained that he represented a newly organized “group of retail marijuana store owners” with 13 locations, more than 100 employees, and “approximately $45 million in annual tax contributions.” The Cannabis Retail Business Association opposed the measure as it went against “the very spirit of what the legislature intended to do when they intentionally separated the production [and] retail sales of cannabis products.” O’Sullivan advocated for broader vertical integration options that were “equal across the entire industry.” He suggested packaging and processing privileges for retailers as one possibility, adding that “we have all worked hard to bring the industry where it is today and we should all benefit from opportunities to expand our offerings.”
      • Brooke Davies, Washington CannaBusiness Association (WACA) Deputy Director (audio - 1m, video)
      • TJ Werth, Top Shelf Cannabis CEO (audio - 2m, video)
      • Kyle Capizzi (audio - 1m, video)
        • Capizzi represented the Craft Cannabis Coalition as “opposed to this bill.” He believed “this market was designed with craft in mind and was designed with a separation between production and sales.” He claimed WSLCB already had reservations over “how to address control of this product at a 500 store scenario and similarly we believe that this spreading out the efforts to all locations that there might be retail sales from, be it a current store or a farm at that point, would make it much more difficult and likely to have scenarios of diversion.” As Capizzi’s group was also “representing many retailers” who had created “many relationships” under the current market, he assumed “this will harm every one of those current retail businesses.”
      • Seth Dawson (audio - 2m, video)
        • Dawson visited the committee in person to oppose the bill as the Washington Association for Substance Abuse and Violence Prevention (WASAVP) agreed “with the business related issues with respect to this bill.” His group was also worried the bill might “substantially expand the marijuana market.” He used the opportunity to remind legislators of I-502’s original intent to direct “substantial revenue” to prevention organizations such as WASAVP yet “most of those revenues were siphoned into the general fund.” Dawson said “to their credit, the marijuana businesses helped us oppose that siphoning, so did the ACLU, but we were overruled” by lawmakers. He suggested “a work group be established to address this issue and others so that we can move off the dime and not always be here in opposition.”
    • Other (3)
      • Chris Thompson, WSLCB Director of Legislative Relations (signed in)
      • Aaron Bossett (signed in)
      • Samantha Grad, UFCW 21 (signed in)
  • Next, lawmakers held a hearing on HB 2871 - “Establishing a retail privilege endorsement to a marijuana producer license.”
    • Staff Report
    • Representative Steve Kirby said he was sponsoring the WSLCB’s agency request legislation because he “wanted to hear it” before the committee (audio - 1m, video)
    • Pro (10)
      • Chris Thompson (audio - 2m, video)
      • Mark Ambler (audio - 1m, video)
        • Ambler believed he and other tier 1 producers were a “different breed” of cannabis farmer facing a difficult canopy limit. “We need something,” he said while mentioning his support for HB 2279, “because we’re the broken part of the system.”
      • Gary Green (audio - 1m, video)
        • Representative Jesse Young wanted clarification on which bill Green felt would be most beneficial (audio - 1m, video).
        • Assistant Ranking Member Kelly Chambers asked if tier 1 producers had a “theme or speciality” (audio - 1m, video).
      • Mike Armstrong, Armstrong and Associates (signed in)
      • Craig Brazell (signed in)
      • Seth Dawson (signed in)
      • Anthony Golden (signed in)
      • Joshua Hames (signed in)
      • Bailey Hirschburg (signed in)
      • John Welliver (signed in)
    • Con (6)
      • John Kingsbury (audio - 1m, video)
        • Kingsbury outlined his problems with the bill while being grateful it was “there to address the lack of [medically] compliant product, I appreciate that discussion.” Nonetheless, he called the legislation a “disparate collection of elements that are more designed to making a venn diagram intersect than it is about creating any specific solutions for the problems that are out there.” Kingsbury described the home delivery aspect of the bill as “odd” because WSLCB had completed a legislatively mandated study showing patient delivery alone was “unlikely to work.” While he supported the bill’s effort to cover authorized cannabis patients and not only those who registered with the Department of Health (DOH), Kingsbury felt there was “a lot of work to be done” and called HB 2279 “simpler.”
      • Kristin Baldwin (signed in)
      • Kyle Capizzi (signed in)
      • Vicki Christophersen (signed in)
      • Chris Marr (signed in)
      • Sean O’Sullivan (signed in)
    • Other (2)
      • Crystal Oliver (signed in)
      • Micah Sherman (signed in)
  • Next up was the public hearing on HB 2826 - “Clarifying the authority of the liquor and cannabis board to regulate marijuana vapor products.”
    • Staff Report
    • Peterson stated that he’d backed the bill subsequent to the “hard work by the Liquor and Cannabis Board and the governor’s office” to craft a “great piece of legislation” following the state’s initial flavored vapor products ban (audio - <1m, video)
    • Pro (7)
    • Con (1)
      • Joshua Hames (signed in)
    • Other (1)
      • Philip Dawdy, Washington Cannabis Association (audio - 1m, video)
        • Dawdy reported that “some of my producer/processor clients have got some concerns about synthetic-derived terpene sources being excluded from this bill.” He maintained that some terpenes were “very, very expensive and very rare” leaving his clients to assert that “it’s going to push the price of product up so high that there may not be offerings to the public to do the things we’re all trying to do here in a helpful way.”
        • Following Dawdy’s testimony, Peterson had a comment on cannabis labeling “similar to what the bill in the, on the nicotine side is” (audio - <1m, video).
  • The last public hearing was on HB 2247 - “Aligning marijuana licensing decisions by the liquor and cannabis board with local zoning ordinances.”
    • Staff Report
    • Representative Keith Goehner told the committee that his bill’s purpose was to relieve “incongruities and inconsistencies that have developed in the past” over cannabis licenses approved by WSLCB which have “not been in compliance with local zoning.” He felt wording in RCW 69.50.331 was in “conflict” with WSLCB rules in the Washington Administrative Code (WAC) and that his legislation would bring “consistency” to cannabis licensing by making agency siting protocols more in line with alcohol licensing (audio - 3m, video).
      • Representative Bill Jenkin asked Goehner about “reissuance” of licenses following an “ordinance change” (audio - 1m, video).
    • Pro (8)
      • Paul Jewell, Washington State Association of Counties (WSAC, audio - 1m, video)
        • Jewell said that WSAC backed the bill as a "common sense measure that rights what we see as a fundamental wrong, essentially, with regard to state government collaborating in a productive manner with local governments when issuing licenses.” He argued that local governments get “stuck in kind of a cycle of enforcement, code enforcement around these issues when a license gets issued and it’s not proper zoning, it’s up to the local government to really bear the cost and the burden of doing that.” Jewell summed up the current situation as “expensive and time consuming” for counties.
      • Craig Brazell (signed in)
      • Lyset Cadena, City of Everett (signed in)
      • Seth Dawson (signed in)
      • James McMahan, Washington’s Association of Sheriff’s and Police Chiefs Policy Director (WASPC, signed in)
      • Briahna Murray, Cities of Kent, Pasco, Spokane Valley, and Tacoma (signed in)
      • Sharon Swanson (signed in)
      • Josh Weiss, Benton, Clark, Skagit, and Yakima Counties; Cities of SeaTac and Battle Ground (signed in)
    • Con (6)
      • Chris Thompson (audio - 2m, video)
        • While WSLCB did “sympathize with our friends in local government,” Thompson shared that the issue “is a little bit more challenging” as HB 2247 “in effect, would make local governments the final authority on licenses issued by the state." The result could be state officials enforcing “local zoning ordinances” leading to liability issues for state officials. Thompson noted cannabis licensees were still required to “get approval from their local authorities for whatever requirements apply.” Thompson closed by stating that WSLCB wasn’t “forcing any cannabis businesses on any local governments that are unwilling or have conflicting local provisions in their codes.”
      • Kristin Baldwin (signed in)
      • Aaron Bossett (signed in)
      • Kyle Capizzi (signed in)
      • Eric Gonzalez Alfaro (signed in)
      • Sean O’Sullivan (signed in)
  • Finally, the committee held an executive session to consider action on HB 2359 - “Creating a certificate of compliance for marijuana business premises that meet the statutory qualifications at the time of application.”