WA House CPB - Committee Meeting
(January 17, 2025) - HB 1067 - Public Hearing

WA House CPB - Committee Meeting (January 17, 2025) - HB 1067 - Public Hearing - Takeaways

While taking no position, agency remarks on a bill to move producer/processor regulation to WSDA raised questions of cost and timing, though all but one member of the public testified in favor.

Here are some observations from the Friday January 17th Washington State House Consumer Protection and Business Committee (WA House CPB) Committee Meeting.

My top 4 takeaways:

  • Committee Counsel Peter Clodfelter briefed on HB 1067, “Transferring certain cannabis licensing activities to the department of agriculture,” describing the transfer of cannabis licensing activities from the Washington State Liquor and Cannabis Board (WSLCB) to the Washington State Department of Agriculture (WSDA) before a representative raised a question about traceability (audio - 2m, video - TVW).
    • Clodfelter went over the bill analysis of the legislation to transfer the "powers, duties and functions of the Liquor and Cannabis Board for the licensing and regulation of production, processing, and testing of cannabis to the Department of Agriculture.”
      • Clodfelter acknowledged WSLCB was the primary regulator, but WSDA and the Washington State Department of Health (DOH) also had established roles. WSDA was the accreditation authority for cannabis testing labs and issued endorsements to processors making edible cannabis products. The department also “administered pesticide and commercial registration programs that apply to the cannabis industry,” as well as a weights and measures program.
      • HB 1067 would have all records, files, furniture, equipment, software, and databases of the LCB related to the licensing and regulation of production, processing, and testing of cannabis transferred to WSDA, Clodfelter stated. Appropriations would be transferred to the department on July 1, 2026, along with all related rulemaking authority and pending business.
    • Representative Shelley Kloba inquired about traceability of cannabis products, in particular, “continuity between the processor stage and then the retailer,” reflecting how “we have problems with cannabis coming into the market illegally and also out of the market, and I want to make sure we have those tied up” (audio - 1m, video - TVW).
      • Clodfelter responded that the details of traceability would have to be determined in implementation. He added that WSDA would have authority over producers and processors, while the LCB would retain authority over retailers. Clodfelter said that the agencies could share databases, but each would have its own programs and "the bill doesn't get into detail on that question."
  • Representatives of WSLCB and WSDA gave remarks as ‘other’ on HB 1067, offering concerns and suggestions, then taking committee member questions, without taking a stance for or against the bill.
    • WSLCB Director of Legislative Relations Marc Webster testified that HB 1067 was an idea that was premature due to federal illegality, prompting questions for clarification on how federal regulations impacted the WSLCB and efforts to change perceptions about its punitive culture (audio - 2m, video - TVW).
      • Webster regarded the biggest impediment to the bill to be federal law, as the legal cannabis system in Washington was "absolutely more strict than what we have in agriculture" and business tax statutes "specifically differentiates cannabis from agricultural products.” Even after moving production and processing regulation to WSDA, Webster argued there would be other things in the law that remained to be changed which the legislature must address.
      • Webster advised leaving cannabis with WSLCB rather than an agency which might lose federal funds for taking the lead on regulation. If the "big structural impediment" of federal illegality goes away, the situation would be "very different,” he claimed.
    • Representative Melanie Morgan asked for clarification about how federal law was an impediment to moving the regulation of the production of cannabis to WSDA (audio - 2m, video - TVW).
      • Webster replied that since state law specifically declared cannabis to not be an agricultural product, and gave WSLCB responsibility for regulations around security, those mandates would remain even if oversight were moved to WSDA. He indicated the real issue was "culture," and “we are balancing the issue of the interests of public health and prevention, we're balancing the, the interest of a very robust industry, as Representative Reeves discussed, and I think we're making both of them a little bit angry.”
    • Kloba wanted to know how WSLCB was changing its culture following a 2019 report by firm Hillard Heintze which called for various changes to enforcement practices (audio - 2m, video - TVW).
      • Webster said that the biggest and most visible change was the creation of compliance consultants, whose "sole goal is to help folks come into compliance" before considering punitive action. He claimed a result of this change was that the WSLCB issued more "notice to correct" (NTC) actions than violations and warnings combined. Claiming the program had been "very, very successful," he noted agency leaders were bringing it to liquor regulation as well.
        • Following the 2019 passage of SB 5318, which reformed “compliance and enforcement provisions for marijuana licensees,” the report was released in December and advised changes for WSLCB enforcement practices and informed the revision of penalties adopted in early 2020.
    • Reeves was curious if WSLCB compliance consultants had an equivalent at WSDA. Webster deferred to his counterpart from that department regarding “how they would want to structure their regulation" if the bill became law (audio - 1m, video - TVW).
      • Reeves followed up by asking him if “the service that you've just outlined relative to those compliance support staff, would you consider that a duplication of activity that the Department of Ag also has, or can provide.” 
      • Webster said their staff would tell WSDA how compliance consultants “seems to work for us, or this has been better. I think the industry has liked it a little bit more than an approach of issuing violations first and gaining compliance that way. But they may have their own system, and I don't know what it is, but yeah, maybe that would work too.”
    • WSDA Agricultural Environmental Services Division Assistant Director Kelly McLain testified to her department’s lack of an enforcement-based regulatory structure, yet there were “significant implementation challenges” with the timeline and cost of HB 1067. Legislators asked her to clarify the WSDA's regulatory approach and how they interact with federal authorities (audio - 3m, video - TVW).
      • Mentioning the timeline and cost barriers, McLain observed it would be "very difficult" to stand up the program by July 1, 2025, and be ready to license operations by July 1, 2026.
      • While a fiscal note had not been released, McLain revealed their draft suggested it would cost $10 million the first year, and “a four year cost at close to $30 million, preliminary ongoing costs would be $13.4 million biennially.” Moreover, she reported that WSDA operated on a "very different fiscal plane" than most agencies, with a budget split into “non-appropriated fee accounts, federal dollars, and general fund” allotments. McLain cautioned this “move would risk our federal delegated authorities and the $30 million per year in federal monies that fund…vital State programs, including food assistance, food safety, animal health and disease response, and plant and pest disease response.” Such a loss, should it occur, would be "a large hit to public health and welfare in Washington."
      • McLain asserted her department was “eager to work with the sponsor and our partners at LCB as well as stakeholders to discuss the what, how, and when some programs at LCB could transfer to WSDA, but implore you to evaluate both the implementation timeline and costs in your deliberations.”
    • Kloba asked how the WSDA's compliance work with its regulated constituencies would translate to regulating a crop that was a federally controlled substance (audio - 2m, video - TVW).
      • McLain shared that the WSDA ran a "more technical assistance regulatory framework" than the LCB, and that the majority of their work was done in the Administrative Procedures Act space, where they worked through notices of intent and correction, and that a notice of violation is "usually the last space that we get to."
    • Representative Sharon Tomiko Santos inquired if the WSDA had a “dual role with respect to compliance,” education, and enforcement of both federal and state law, and to what extent the agency might be required to pursue investigations and enforcement against Washingtonians to uphold federal laws (audio - 4m, video - TVW).
      • McLain responded that this was a “totally accurate representation of our work,” and that her division had enforcement staff who carried both US Environmental Protection Agency (EPA) and state credentials to take enforcement actions under both federal and state law. However, she noted a federal delegation of authority does not exist in the cannabis space, which would make the situation very different.
      • Santos asked McLain if the WSDA had any agreements with the federal government that allow the federal government to deputize state and local law enforcement agencies, specifically referencing an immigration provision known as 287(g). McLain promised to follow up with department investigators to find out if any operated under a memorandum of understanding (MOU) with a federal organization for that purpose.
  • The bill sponsor and four others testified to likely improvements in cannabis oversight from having WSDA in charge of the cultivation, processing, and packaging of cannabis.
    • Representative Kristine Reeves testified that HB 1067 would transfer cannabis production regulation to WSDA, and that this change was needed because the cannabis industry was no longer new, and should be regulated like other agricultural producers (audio - 4m, video - TVW).
      • Reeves referred to a previous bill on the topic in 2024 which hadn’t been recommended by its initial policy committee. Her reasoning was that “after over a decade, the cannabis industry is no longer a new concept here in the state of Washington.” She noted the beer and wine industry involved production regulated by WSDA, and she argued officials there did "a very effective job at regulating grapes for wine, potatoes for vodka, [and] hops for beer." Reeves said it was "time that the Department of Agriculture take on the responsibility of regulating cannabis production the same way that we would any other natural resource for the purpose of this particular utilization."
      • Reeves stressed that HB 1067 wouldn’t change the responsibilities related to cannabis traceability for either WSDA or WSLCB, and that the agencies should be trusted to "navigate and negotiate the implementation." She mentioned that WSLCB staff raised "serious concerns" about the bill, but stated that "it is always hard to let go of things, particularly when you've grown this much, like we do our children, it's sometimes hard to let them go.” But she believed this was an “opportune time to create better efficiencies in government…both for the consumers, for our producers, and for our government entities who are accountable for this." 
      • Reeves acknowledged a personal “bias” for backing the legislation, stating that she still perceived WSLCB “as a law enforcement agency that operates with a law enforcement agency culture, and is struggling to find its transition to a regulatory agency... [By contrast, WSDA] I think has done a very effective job of building strong relationships with those that they regulate relative to the natural resource space.”
    • Caitlein Ryan, Cannabis Alliance Executive Director (audio - 3m, video - TVW)
      • Ryan suggested that the most important consideration for shifting regulatory authority should be how Washington addressed the growth of hemp under the US Farm Bill. Her members had contemplated where cannabis cultivation fits in the broader landscape of agricultural practice since the passage of SB 6505 in 2014, which established a statute that cannabis production would not be considered agricultural for tax purposes. Ryan indicated that interest in shifting regulatory authority from WSLCB to WSDA began with agreement that cultivation by farmers should be considered agricultural, but the most critical consideration was how Washington wants to address a "dramatic growth of hemp under the Farm Bill.” Ryan stated that this was an "artifact of the artificial differentiation" that puts the “exact same plant…into two different regulatory realities.”
      • She argued that many states with legal cannabis employed “a hybrid structure of putting hemp and cannabis together, either in its own department, or in relationship to the department of agriculture.” Advising a “streamlined” regulatory regime from a department that had a broad view of activities like soil management and pest control, as well as “purview over the federal classification of the plant grown in cannabis cultivation, simply makes clear sense."
    • Micah Sherman, Raven Co-Owner and National Craft Cannabis Coalition (NCCC) Member (audio - 2m, video - TVW)
      • Sherman viewed the proposal as a critical component which reflected "the reality that we need a substantial update in the way that Washington State manages its cannabis program." He addressed the concerns around potential loss of federal funding, stating that the Illinois Department of Agriculture had licensing authority and the University of Georgia held a research license, yet "the federal government has never pulled funding from a state agency for participating in the regulation of cannabis."
      • Vice Chair Representative David Hackney asked him to clarify whether the University of Georgia had federal approval for their cannabis license (audio - 1m, video - TVW).
        • Sherman responded that he understood the university received federal funding while also holding a state license to produce cannabis for research purposes. He emphasized that example to undercut concerns that state agencies receiving federal funding could lose it if they touched the plant.
        • Hackney followed up to ask if a new federal administration could set up new enforcement guidelines. Sherman agreed that was possible.
    • Peter Manning, Black Excellence in Cannabis (BEC) President (audio - 2m,  video - TVW)
      • Manning told lawmakers that WSLCB had “systematically excluded Black and Brown communities from meaningful participation in the state, the cannabis industry [which wa]s not an accident. It is a result of a regulatory framework steeped in the mindset of enforcement, a mindset that has long been wielded as a tool of oppression against our people.” He shared that BEC members supported HB 1067 over concerns the agency had "weaponized its authority to create barriers" which disproportionately harm the same communities that had borne the brunt of cannabis prohibition.
      • Getting away from regulation by an agency "entrenched in a punitive mindset" was important, said Manning, in order to “build a regulatory…framework that centers equity, justice, opportunity for all, particularly the Black and Brown communities."
    • Mike Asai, BEC Vice President (audio - 3m, video - TVW).
      • Also supporting the legislation, Asai agreed that WSDA had better regulatory experience related to agricultural products and was a better fit for cannabis production and processing oversight. Grateful for Reeves and the other sponsors, he noted that the idea of having WSDA regulate medical cannabis production had been passed in a bill in 2011 before being removed in a veto by then-Governor Christine Gregoire. He asserted that action contributed to the passage of Initiative 502 (I-502) by voters in 2012, which he found hadn’t sufficiently addressed the agricultural realities of cannabis cultivation.
      • Asai stated that while the stigma surrounding cannabis had changed dramatically, cannabis continued to be overregulated and inequitably policed by WSLCB. He noted several states had dedicated cannabis agencies, separating these functions from their liquor control agencies while maintaining enforcement measures to protect public health and ensure cannabis stayed out of the hands of youth while supporting the agricultural economic potentials of the industry.
      • Calling HB 1067 a “forward-thinking solution to strengthen our cannabis industry by placing its oversight where it belongs,” Asai argued it would assist cultivators, foster innovation, and help normalize cannabis as an agricultural commodity.
    • In addition to the four people testifying, 28 registered their support of HB 1067 (Testifying, Not Testifying).
  • Washington Association on Substance Misuse and Violence Prevention (WASAVP) Board Member Scott Waller testified in opposition to HB 1067, stating that WSLCB had the experience and credibility to regulate cannabis, and that the bill didn’t justify the move or the costs associated with it (audio - 3m, video - TVW).
    • Waller, who also registered opposition to the previous bill in 2024, stated that his organization “strongly oppose[d]” HB 1067 for two reasons. First, Initiative 502 promised a “tightly regulated state license system,” and that only WSLCB had a track record of providing this control. WSLCB had been expressly named in the voter approved measure given their "extensive and successful history regulating alcohol" and its mission to "protect, ‘welfare, health, peace, morals and safety of the people of the state.’"
      • At time of publication, the WSLCB mission was to “Promote public safety, public health, and trust through fair administration, education, and enforcement of liquor, cannabis, tobacco, and vapor laws.” However, the phrase was part of the “liberally construed” title of the agency established in statute in 1933.
    • “By contrast, there is no call in the mission of the Department of Agriculture to ensure the safety of the people of the state through operation of a tightly regulated state license system,” Waller claimed. He further felt that “there is no commitment like exists with LCB to keeping adults only products away from our state's youth.”
      • The WSDA strategic plan for 2022-25 stated their mission was: “Through service, regulation, and advocacy, the [WSDA] supports the viability and vitality of agriculture while protecting consumers, public health, and the environment.” 
    • Seeing no ground for making this "mammoth move," or for spending the money needed to do it, Waller advised a “prudent course of action would be to study the possible transfer during the current biennium, and use that information to inform policy decisions in the future.”
    • Waller speculated that I-502 lead author and campaign director Alison Holcomb “must be confused by the justification for the bill because she’d stated in 2022, ‘I think the board has done an amazing job at ushering in this country's first legal cannabis industry.’"
      • Holcomb was complimentary of WSLCB’s handling of cannabis regulation, but also gave support for changes to licensing, such as policies around cannabis consumption and home growing rights.
      • Cannabis Observer emailed Holcomb to inform her about Waller mentioning her views in testimony.
        • Holcomb expressed her appreciation for “WASAVP’s prioritization of public health, prevention of youth use, and prevention of substance use disorders. These were key goals of I-502, as reflected in the limitations placed on retail sales and advertising (see Secs. 14 and 18, e.g.), and the heavy investment of cannabis tax revenue in public health, prevention, and treatment services (Sec. 28…).”
        • She relayed that, “I stand by my statement that WSLCB did an amazing job ushering in not just the country's, but the world's first legal cannabis industry…WSLCB's experience operating state-owned liquor stores, and then creating a new regulatory structure for privatized retail bottle sales after passage of I-1183 in 2011, provided important reassurance at a time of significant fear of unknown consequences of legalizing another intoxicant.”
        • Holcomb then concluded, “state and local regulators, researchers, and communities now have more than a decade of experience with cannabis marketplaces here and in several other jurisdictions. Washington has demonstrated its ability to maintain control over this novel industry. Perhaps now it is time to evolve the regulatory structure to enhance the state's opportunity to leverage its renowned agricultural expertise.”
        • Holcomb pointed out that while I-502 made WSLCB the primary regulator for cannabis, sections 10(8) and 11 mandated a role for WSDA to consult on rules for cannabis classifications, qualitative measurements, accreditation requirements for testing labs; prescribing production, processing, and packaging standards; and other regulations enforced by WSLCB.
        • Additionally, she mentioned how beyond WSDA, section 10 of I-502 mentioned the role of DOH in regulating dispensing of medical cannabis.
    • Waller concluded that HB 1067 "looks like a solution in search of a problem," and encouraged the committee to take no further action on the bill as it was currently worded.
    • In addition to Waller, two registered their opposition to the bill (Testifying, Not Testifying).
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