WSLCB - Board Meeting
(September 11, 2024) - Summary

WSLCB - Board Meeting (September 11, 2024) - Takeaways
[ Event Details ]

Rulemaking ruled the meeting including a petition on transportation, final rules on patient excise tax exemptions, and hearings on payment options, THC, and social equity; public comments followed.

Here are some observations from the Wednesday September 11th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 6 takeaways:

  • Policy and Rules Manager Cassidy West recommended the board accept a petition for rulemaking on cannabis Transporter Fulfillment Hubs (audio - 3m, video - TVW, Rulemaking Petition).
    • “The petition was submitted in July 2024 by Edgar Castaneda-Zarate, representing Dos Transportation,” West established, describing the request to allow “transportation licensees the ability to engage in cross-stocking activities at their own fulfillment hubs.” She pointed to laws on cannabis giving the board “broad statutory authority to adopt rules” related to transportation. West said staff had evaluated the petition “through various lenses to create a recommendation,” and after listing some of the perspectives they considered, they’d determined “cross docking could help mitigate driver fatigue and improve public safety. There are commercial driving laws that talk about hours of service, so this is fairly standard in other industries.”
    • Any proposal put forward by agency officials would “require strong security measures to prevent diversion during temporary storage,” stated West. Furthermore, her team believed the change “could reduce barriers to entry, as well as lowering operational barriers, and increase flexibility for operators. This could particularly benefit those new entrants into the market or smaller businesses, and improve their competitive standing.” West expected things like a “robust security, traceability, and surveillance system” would pose challenges to setting up a compliant transportation hub, yet the move would also “align with the board's goals to enhance public safety, improve operational efficiency, and promote market equity.”
    • Before requesting board approval to accept the petition, West noted transportation rules in WAC 314-55-310 “haven't been significantly updated since 2016, making this a timely opportunity for modernization.” The concept hadn’t elicited public comments since being posted on the cannabis rulemaking page, she told board members, “however, many stakeholders have…expressed an interest in us looking into these rules.”
    • Board Chair David Postman remarked it was “the first time transportation's come before us since I've been here, at least in any way. So I'll be interested to hear how this goes” (audio - <1m, video - TVW).
      • A 2019 petition from Kevin Lynch, CEO of Go Green Enterprises, requested a similar “warehouse-type facility or penned space,” though the board at that time voted to deny the petition and “explore alternative means to address the concerns raised” by Lynch.
    • Board Member Ollie Garrett wasn’t in attendance, leaving Postman and Board Member Jim Vollendroff to vote to accept the petition (audio - 1m, video - TVW).
  • Final rule changes to implement the HB 1453 medical patient excise tax exemption were presented by Policy and Rules Coordinator Daniel Jacobs (audio - 5m, video - TVW, Rulemaking Project).
    • Jacobs started off by saying board approval of the CR-103 would put the rules on course to take effect on October 12th. The legislation removed a 37% excise tax for patients registered with the Washington State Department of Health (DOH), provided it was the purchase of compliant products from retailers with medical endorsements. He indicated that WSLCB had “rulemaking authority to identify the records that need to be kept by retailers demonstrating that these requirements are met.” Additionally, he highlighted that the exemption was set to expire in June 2029.
    • After the board opened rulemaking on April 24th, they hosted two focus groups on June 3rd and 6th, after which staff revised their proposal, noted Jacobs. A new rule section was proposed “dedicated solely to this new excise tax exemption,” he said, and was set to be titled WAC 314-55-090. This was done “based on past experience with the alcohol delivery allowances that were temporary during the pandemic but then made permanent by the legislature,” meaning it could be more easily updated should the exemption be extended or made permanent. He said the section “repeats the requirements of 1453, as well as requiring retailers to keep the following records for every sale where they are exempting the excise tax: the date of the sale, the unique identifying number from the recognition card, as well as its effective and expiration date, what product is sold that is having the excise tax exempted from it, and the sales price.” 
    • Jacobs identified three existing rule sections also being amended to mention the bill and/or new rule section which included some technical changes “such as updating LCB mailing address and fixing some typographical errors.”
    • “We received predominantly positive feedback during the [August 28th] public hearing itself. A request was made to make clear that any patient information remains confidential per Department of Health statute in RCW 69.51a.230,” Jacobs said. Finally, he addressed a question “about requiring certificates of analysis to be uploaded via CCRS [Cannabis Central Reporting System] during the last board meeting, and I want to clarify that this rulemaking is not changing what quality assurance testing is required to be uploaded to CCRS.” DOH compliant items were already required to have licensees conduct and report heavy metals testing.
    • Board members voted to adopt the rule changes (audio - <1m, video - TVW).
  • Jacobs then introduced the public hearing on Payment Flexibility, and proposed changes received a supportive comment from a trade association trustee (audio - 4m, video - TVW, Rulemaking Project).
    • Jacobs mentioned the proposed changes to acceptable payment methods under WAC 314-55-115 responded to a petition accepted in March and a CR-101 for rulemaking initiated on May 8th. Absent major revisions to the CR-102, he stated staff would have a CR-103 to present to board members on September 25th, and go into effect on October 26th.
      • A survey of interested parties was active “on the LCB website from June 3 through July 8,” he reported. Most responses came from the manufacturing sector “and mostly supported the proposed rule changes.” However, a “decent portion of respondents expressed concern about an increase in NSF” or ‘insufficient fund’ issues, yet this was already addressed in section (6) of current rules, Jacobs said. He indicated the only written comment on the project emphasized this concern, and that the current policy was that NSF problems “have to be corrected by 3pm on the business day after the NSF issue is reported.” Jacobs added that an additional comment had come in that morning “that requests to remove the deadline requirement for depositing the check.”
      • The “proposed rule language clarifies that just as with the other payment methods, when paying with a check, a purchase order has to be done by an irrevocable invoice,” Jacobs commented. Moreover, both parties to a sale “have to keep records consistent with other LCB requirements.” He relayed how “the check has to be mailed no later than the next business day after cannabis delivery, and it has to be deposited no more than five business days post cannabis delivery.” There was also clarity that in the rule “delivery” referred specifically to “delivery of cannabis as opposed to delivery of payment.” 
    • Amber Vaughn, Terpene Transit CEO and Washington CannaBusiness Association (WACA) Trustee (audio - 3m, video - TVW)
      • Vaughn hailed the rulemaking as something WACA members supported, as “allowing retailers to mail a check for cannabis deliveries will help to ensure operational efficiencies that other businesses utilize regularly.” As a transporter, she claimed to have seen “a lot of different dynamics within the industry,” and felt the move would "overall improve compliance.” 
      • “In the event that an invoice amount is changed from the point of order to the point of delivery, sometimes what we experience is that the check denomination…does not match the new invoice total that was sent,” Vaughn warned. Also, since “anybody who is a signer for a checking account is considered a [true party of interest], there [were] minimal employees or staff at retail locations permitted to sign checks so often they're left in advance.” Because that practice risked having the check and invoice not match, “what we see is a lot of product that may be needing to be returned to the point of origin, which, given 48 hours, can be complicated.”
      • Vaughn argued the rule change “could reduce the potential check fraud, limiting access to checks within…potentially high turnover retail establishments. It will assign the responsibility of that check only to management or long term employees.” Furthermore, checks as a payment option reduced the need for larger cash transactions between businesses, she noted, “hopefully minimizing any kind of theft or crime related to cash exchanges.”
      • She had two other concerns: first, postal service delays beyond the control of a licensee. Second, “banking for the cannabis industry isn't necessarily accessible,” pointing out her company’s bank was in Seattle even though they were “based in Bellingham.”
      • Vaughn concluded the rule changes would be a “healthy move for the industry.”
    • Jacobs was sympathetic to Vaughn’s concern about including an end date for depositing a check due to postal delays, but suggested the requirement was viewed as important among staff. He agreed “our Rules team is going to circle back to this and…figure out” if there were improvements, but a limit would stay in their proposal (audio - 1m, video - TVW).
  • Proposed regulations related to tetrahydrocannabinol (THC) rules under SB 5367 had a public hearing hosted by staff eliciting a couple of comments from cannabis sector interests.
    • West told board members how the law was passed in May 2023, and involved regulating sale of hemp-derived consumable cannabis products available outside of regulated cannabis businesses which proliferated after federal legalization of hemp in 2018 (audio - 2m, video - TVW, Rulemaking Project).
      • Following an overview of the project history, she said there were “changes to the definition section…we amended serving size requirements to consider that various types of compounds are on the market and could be present…and then we focused on packaging and labeling concerns to promote consumer transparency and safety.”
      • Changes weren’t expected to impact costs for licensees, West attested, as they were centered around “squelch[ing] products on the unregulated market.”
      • West’s team had collected written comments as recently as that morning, and had fielded “questions from hemp manufacturers, asking what the requirements are and what detectable levels mean,” she said.
      • West mentioned a presentation by Enforcement Captain Jennifer Dzubay the day before which she said illustrated what WSLCB had been doing, and “we have had a lot of conversations with public health and prevention, and so I expect they will be providing a comment today.”
    • Caitlein Ryan, The Cannabis Alliance Executive Director (audio - 3m, video - TVW)
      • Ryan said she could "appreciate the challenges" of implementing the law, but nonetheless had concerns about how the rules would impact licensees. She’d wanted the opportunity to “comment on the CR-102 draft prior to its filing,” but instead hoped a supplemental CR-102 would incorporate several changes.
      • “The most concerning aspect of the proposed rulemaking…is the requirement that the limits of the amount of any additional single THC compound be no more than point five milligrams per serving, and that that combined concentration of all the additional THC compounds to be limited to one milligram per serving…this proposed rule is out of step with other states and will create unnecessary burdens on Washington's cannabis businesses, especially with regards to plant constituents that are fundamentally cannabis medicine.”
      • “Specifically, the rule is vague in terms of what constitutes additional…THC compounds. This lack of clarity makes it difficult for businesses to know exactly what is being regulated, which can lead to some confusion and potential compliance issues.”
      • “The CR-102 states that research on cannabinoid compounds remains limited, [although] we do operate in a closed market, it is still in the context of competitive products available on the internet. And this proposed rule is…out of alignment with regulations in other states, and then also what's available in the unregulated market…it's important to note the existing cannabis market is already heavily regulated. We do believe in high standards for product safety, but in essence, these new rules…place additional burdens on already following the rules [while] doing little to address the problem of the unregulated cannabis field.”
      • Ryan then proposed “that LCB create a list of allowable cannabinoids for clarity sake, and we also request that this list is something that can be easily modified over time as research evolves…list that we're proposing at this time includes:”
    • Wendy Hull, Fairwinds CEO and WACA Member (audio - 2m, video - TVW)
      • Supportive of the “approach outlined in this [rule],” Hull claimed the list of compounds proposed by Ryan “are exempt from the point five milligram combined one milligram threshold. So it's our understanding that those are exempt, and based on that understanding, we do support this.” With that in mind, Hull conveyed that WACA members “also feel that there needs to be more specificity” and a list of clearly exempted compounds would be beneficial “so that down the road…one or two years down the road, there's no question on what compounds are exempt from this bill.”
      • Hull acknowledged that "compounds are discovered all the time," making clarity on which compounds were included even more important. But broadly, she affirmed her support for the rule draft, and mentioned sending in written comments.
  • A final public hearing was hosted on proposed rules to implement SB 5080 which modified and expanded the agency social equity program.
    • West established that the law took effect in 2023, and was passed because elected officials sought “to address the social and economic disparities caused by the war on drugs by increasing opportunities for individuals from disproportionately impacted communities to participate in the cannabis industry.” Rulemaking was initiated in November 2023 and the changes centered on greater eligibility for the program with a revised scoring rubric for applicants, “and establishing safeguards for equity in licensing.” She mentioned a survey had been conducted around changes to WAC 314-55-570, along with two focus groups in May, followed by a second survey which staff discussed on July 31st. Absent substantive changes, the CR-103 would be presented on September 25th and would then take effect on October 26th (audio - 2m, video - TVW, Rulemaking Project).
    • Amirah Ziada, UFCW 3000 Cannabis Organizing Coordinator and former Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) member (audio - 3m, video - TVW).
      • Describing UFCW as “the largest union in the state,” Ziada urged the board to orient changes to rules around the December 2022 recommendations from WA SECTF. She was critical of “the certificate holder part of the legislation. I believe that that should be separate legislation. I don't really understand what it has to do with equity in cannabis…my understanding is that there's a different…threshold for them to be able to get a license and move their license around.” Ziada felt that the communities which should benefit from the program after facing disproportionate cannabis enforcement during the drug war was “being a little bit diluted with this certificate holder part.” She had “heard from other people and that we've seen, there's a lot of loopholes around that people can just ask someone to sign on and be part of their license so that they can move” a license. Ziada wanted to see that aspect of the rules “revisited.”
    • Peter Manning, Black Excellence in Cannabis (BEC) President (audio - 1m, video - TVW)
      • Manning took issue with the changes to applicant scoring, arguing that the law which established the equity program, HB “2870…I believe the success rate that reached our community were 75%” around Seattle. He looked forward to learning more about the demographics of equity licensees.
      • Manning disagreed with some of the changes in points awarded for different qualifications, and implied WACA was directing agency decisions, claiming the rubric was now “tailored to fit more Whites than it is that of Black and Brown, and title certificate holders should not be a part of this. This is not equity for them.”
      • “I also believe that the mobility, it's an insult to have a guy with, that got in under 2870 to get a license in Skagit County. He had 120 points, and he out did somebody in Seattle that had 250 in King County. Now you guys can allow them to move anywhere.” Manning anticipated, “you guys are going to have some hurdles there in the courts.” He also didn’t agree with lowered points for former dispensary owners, pointedly asking Postman “who's running stuff…is it you, or is it WACA?”
    • Mike Asai, BEC Vice President and Emerald City Collective Gardens (ECCG) Founder (audio - 3m, video - TVW)
      • Asai somewhat acknowledged that WSLCB leaders were “listening” to public feedback, meaning “you took stuff away and then you put it back in, that makes no sense.”
      • He argued that certificate holders should be removed from their proposed language, claiming, "there's nobody Black that holds a certificate." He asked “Why do they need to be hijacking the program?” He recognized he’d “supported it once, but once I found out exactly the details of it, there's nobody Black that has a certificate.”
      • Asai further disagreed with reducing points from medical dispensary “pioneers,” something that divided respondents in the second agency survey. He considered this moving the “goal posts” of the program and enabled “White folk who got these licenses under social equity, and they want to hijack the rules of 5080 saying, well, our license could be mobile after 2024 that's just, I don't know if it's racist…but it's unjust.” He argued if mobility had been initially permitted, applicants who entered a lottery for a limited number of licenses around Seattle could have instead applied where there was less competition, and potentially moved their businesses later. He again asked that the rubric points for dispensary ownership be increased, calling the rules under consideration “an insult. This is an attack on pioneers.”
    • Paul Brice,Happy Trees Owner and former WA SECTF advisory member (audio - 3m, video - TVW)
      • Brice called for more investigation of the outcomes of licenses which had already been awarded, as he felt officials were “trying to just push this next one through, because we know it's flawed, and…we can wrap this up, and then we can just completely dismantle social equity, and then we can give it to a lot of people who was not intended to go.” Brice felt the proposal had avoided legal challenges due to the urgency of bringing equity to the market, but that pushing forward with their current plan could invite litigation.
      • As part of WA SECTF “seeing all the studies, hearing all the studies, to try to push through this next part without seeing any of the studying just…there's just no words.” He then suggested that changes to disproportionately impacted area (DIA) mapping had also impacted people who were told they no longer qualified.
      • He agreed with others that including title certificate holders was a bad idea, stating it amounted to saying “any White person can now find any person off the street that lived in a DIA, made under [$]18,000, say, ‘hey, jump in with me. We'll have a management contract.’”
  • During general public comments, speakers took the agency to task for lack of transparency and suspected racial bias.
    • Christopher King (audio - 3m, video - TVW).
      • King built upon grievances with the behavior of the board he’d last discussed on August 28th, mentioning “I spoke with Scott McKinley,” an organizer of the Cantanna Fest at the McMillin Farm and Brewhouse in Puyallup which King had attended that summer, “I know they got the run around big time on that whole thing.” He talked about difficulties the property owner faced, “then there was not one, but two permitting events in Seattle, and then those were yanked away” and organizers had to “move the event again.” Accusing WSLCB, Seattle Parks and Recreation, and City of Seattle officials of letting his public records requests around event approval “stall…I bet you’ll be sitting here a year from now waiting for documents I just asked for” related to the event. He was confident “something’s not right about” how officials handled Cantanna Fest.
      • Having spoken with Ziada at the event, he said, “she’s right, the certificate holder[s] are not part of the social equity deal.” He’d suspected there would be “fake entities and straw people” in the equity program, and pointed to the inclusion of certificate holders as proof. He took issue with rubric changes, including allowing lesser points for non-cannabis drug convictions. He alleged it was “fact” that policy was “driven by like your corporate cronies in WACA and all those people.”
      • King alleged “the only time David Postman offers comment at meetings is to put us down when we complain about situations.” Continuing with his view the Board Chair “protect his people and says, ‘Oh, those are hard working people,’...but if you ask him a question that he's not comfortable with, he's not going to respond to anything…content-based and viewpoint-based discrimination.”
      • Wrapping up, he referenced a 2019 Seattle Stranger article which named WACA Executive Director Vicki Christophersen “The Woman Who Runs Weed Policy in Washington State,” and called her the “the most powerful person in legal pot industry. It's a fact!” King concluded the agency was a “cancer on cannabis.”
    • Sami Saad (audio - 3m, video - TVW)
    • Tamiko Henry (audio - 2m, video - TVW)
      • Henry felt WSLCB had “done a great harm to the Black and Brown communities,” and credited BEC for “bringing to light” the agency “shortcomings.”
    • Jamarr Irving (audio - 1m, video - TVW).
      • Irving viewed the agency as “a racist organization that needs to be replaced" since they’d “devastated the Black and Brown community.”
    • Lily Castillo (audio - 1m, video - TVW)
      • Repeating the sentiment that WSLCB actions had hurt “Black and Brown communities” and risked further disproportionate harm, Castillo expressed gratitude to BEC “for fighting the fight.”
    • Peter Manning, BEC President (audio - 3m,  video - TVW)
      • Manning repeated his concerns from the SB 5080 implementation hearing that there were problems with changes to the equity scoring rubric, due in part to “outside influences that have deep pockets." He told a story of a “White event that was held by Whites, and…it was a farm setting. It was just jubilant, and it was consumption and various forms of marijuana and THC products. No LCB in sight.” Manning contrasted this with an event hosted by the Washington Cannabis Workers Club with “LCB members everywhere.” This was evidence to him that agency officials “don't like Black people."
      • Manning called for several staffers at WSLCB to be fired. He claimed to have “damning evidence on these guys to show that they're in collusion” and that the agency had broadly been “corrupted.” Manning was unhappy that “you guys gave White[s] 10 years advantage over the Black and Brown people. There needs to be some type of reparation to that policy.”
    • Mike Asai, BEC Vice President (audio - 3m, video - TVW).
      • Asai noted Board Member Ollie Garrett was absent despite being “at her Tabor [100] gala over the weekend,” wishing she would have attended the hearing on SB 5080. Asai considered WSLCB leading the equity program equivalent to "the perpetrator trying to do social equity,” and that agency staff were “not listening” because they didn’t “make the pioneers a priority.” Naming legislation combining the unlicensed dispensary sector with retail licensees in 2016, he insisted “you didn't care. You just wanted the White people who had a lottery to get more licenses.”
      • Echoing concerns over the influence of WACA, Asai mentioned conversations he’d had with Director Will Lukela and others in 2023 in the “basement” at WSLCB’s headquarters, only to see him “come out of the elevator with White folk from the cannabis industry,” which he interpreted as “White folk can go up to the penthouse, but when Black people schedule a meeting, we're down here in the basement.” He claimed they met upstairs at a later date because “we voiced our displeasure to representatives and senators.” Nonetheless, Asai was convinced WSLCB “continued to be racist.”
    • Paul Brice (audio - 3m, video - TVW)
      • Brice talked about his history of applying for licensure in Tacoma and not being awarded a license in 2016 as dispensaries were merging with the industry, nor in 2023 through the social equity program. He stated the board could “look who's showing up” to see this was impacting the Black community in Washington. He reiterated his desire for research on the demographics of who received equity licenses, and whether there was actual ownership by qualified entities, or “whoever signed the right management contract where the Black person's another Shawn Kemp.”
      • “I know for a fact there's some individuals that walked away, groups that walked away with 12 licenses,” said Brice, “another group, four licenses, again, all managed by a White person at the very top.” He believed agency leaders just “want to just ramrod this through and have it just, ‘oh, well, it didn't work out right.’ And again, five years later, this is the outcome of it.”
      • Returning to title certificates, Brice felt they could be included in future licensing instead: “whatever new license types that you guys know are going to be very valuable…you want to make sure all your friends are also involved…I know without a doubt that's, that's a big part of just making sure this gets through so we can just award a bunch…of other people.”
      • Brice had been a mentor in the equity program, but no longer could once he applied. He argued they were told by third party scoring vendor Ponder Diversity Group “we can no longer gather or unionize…no one wants to see the truth of how this really rolled out.” He concluded “you guys are still obviously just trying to make this push out while you know it's flawed.”

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