WA House COG - Committee Meeting
(December 2, 2022) - WSLCB Work Session

WA House COG - WSLCB Update - Synthesized Cannabinoids - 2023 Legislation

A WSLCB briefing on cannabinoid regulation charted activity leading up to 2023 request legislation including an investigation of a licensee engaged in synthesizing cannabinoids.

Here are some observations from the Friday December 2nd Washington State House Commerce and Gaming Committee (WA House COG) Committee Meeting.

My top 3 takeaways:

  • A panel of Washington State Liquor and Cannabis Board (WSLCB) officials talked about the agency grant of authority as it related to oversight of synthesized THC and an Enforcement investigation into the practice, followed by an update on policy development, rules, and agency request legislation on the matter for 2023.
    • Kloba said the committee was ready to hear an “update on cannabinoid product regulation and enforcement” from WSLCB officials (audio - 1m, video). 
    • Justin Nordhorn, WSLCB Director of Policy and External Affairs, noted staff changes underway at the agency, in particular the retirement of Director of Legislative Relations Chris Thompson who would be succeeded by Marc Webster. He conveyed that the panel from the agency would “present on not only the THC [tetrahydrocannabinol] program, but also some of the enforcement issues, our authority issues, as well as our agency request legislation that we are going to be asking for [next] year” (audio - 2m, video).
      • WSLCB board members planned to recognize Thompson as well as departing Chief Financial Officer Jim Morgan at the Wednesday December 7th board meeting.
    • Nordhorn called attention to the “minimal” amount of authority the agency had around hemp products, compared to their general powers (RCW 66.08) and cannabis oversight abilities (RCW 69.50). “So, when you're looking at production, and processing, retail sales, and transportation issues across the state, we have the scope of regulatory oversight in these particular areas,” he stated. Whereas for hemp, Nordhorn said, “we have no…regulatory oversight or authority in hemp unless it's coming into the I-502 [initiative 502] system as an additive” which activated “authority over that particular product on the testing and safety standards” (audio - 2m, video, presentation).
    • WSLCB Enforcement and Education Director Chandra Wax—formerly Chandra Brady, who “just recently got married”—-elaborated on the limits of WSLCB power to regulate production and sale of THC synthesized through conversion of cannabidiol (CBD) extracted from hemp beyond I-502 licensees (audio - 2m, video).
      • After joining the agency in February 2021, Wax reported that staff made her “aware of some possible synthetic THC entering the marketplace,” including comments from people “seeing edibles and other products in the retail stores that included this synthetic THC.”
      • A review of “public safety and regulatory authority” was conducted before Nordhorn’s team released an April 2021 policy statement “saying that that is not allowed.” Wax indicated an enforcement bulletin distributed that May let “our retailers know that that was something that could not be done within the 502 marketplace, and then in July, we followed up with an interpretive statement.”
      • She noted there’d been “some folks in the marketplace, specifically some processors, that didn't agree with that interpretation and chose to continue manufacturing that product” as she turned to the Westside Cannabis Captain, Joshua Bolender, to offer details of a prominent violation investigation.
    • Bolender spoke about his work in the cannabis enforcement unit, where in June 2021 staff “received a number of complaints that were unique” and officers were unaccustomed to investigating. These complaints were “that a particular cannabis producer/processor was manufacturing THC from hemp derived CBD” which he said staff conducted “quick research on” (audio - 4m, video).
      • An investigation began into allegations “that this was criminal conduct and that it was unfairly competing with other licensed cannabis businesses,” Bolender told the committee. Officers found that there was a licensed processor which had been “synthesizing both delta-8[-THC] and delta-9-THC,” comparing the practice to “spinning straw into gold.” He explained how “there was very little cannabis coming into the business, but in our traceability system it appeared that there was a lot of cannabis coming out of it,” which their investigation found was “synthetic THC.”
      • Bolender reported that the process to synthesize cannabinoids included “using carcinogenic chemicals, or solvents, and it required manipulation of traceability data because there wasn't much cannabis coming in but a lot of it was going out.” Enforcement officers had determined it was “both an administrative and a criminal violation to do this,” he remarked.
      • Sharing a photo of the “GEMS Machine” at the facility, Bolender commented that “a lot of…laboratory instruments and chemicals” had been employed to “to synthesize the CBD into THC. So, this isn't normal extraction that we're used to seeing.” When synthetically created, THC “is typically a schedule one controlled substance,” he said. Bolender explained that WSLCB officers “seized over 800 pounds of synthetic THC, and then we seized hundreds more pounds of synthetic THC that had been sold to other cannabis licenses by this licensee.”
    • Though not specifically named throughout the presentation, the timeline and details align with a July 2021 administrative violation notice (AVN) alleging four violations by licensed processor Unicorn Brands LLC regarding the company’s conversion of CBD into synthesized THC.
      • Unicorn Brands Owner Peter Saladino filed an appeal, but reached a settlement that the company “shall not use its license to produce or manufacture Delta-8 THC, Delta-9 THC, or any similar synthetically-produced THC from any hemp-based sources in the State of Washington unless explicitly authorized by a subsequent change in state law.”
      • The Enforcement Evidence Report identified a “Chromatography Multi-Column Filtration Device ‘GEM’ machine” which applied methanol and water to an input solution that ”the GEM machine then separates the solution into two parts labeled as the following:
        • a) product-the desired ∆ 9 THC and some ∆ 8 THC, and
        • b) recycle-the unreacted CBD used again for separation.”
      • Find out more from the WSLCB:
      • When speaking before the Cannabis Alliance on October 1st, Kloba talked about how the settlement was a sign WSLCB was exercising their authority “to enforce the fact that it's prohibited under current rules and law in the regulated market.” At that time she mentioned that the agency may need additional power to “do enforcement outside of the regulated market.”
    • Kathy Hoffman, WSLCB Policy and Rules Manager, talked about overlapping rules, outreach, and legislative responses “concerning the regulation of THC products” underway at WSLCB (audio - 6m, video).
      • Following the 2022 legislative session after lawmakers didn’t pass cannabinoid regulation bills from WSLCB or others, Hoffman described how agency staff continued “hosting deliberative dialogue sessions and a month later we began exploring what we could accomplish by rule within our current statutory authority.” She mentioned the dialogues were “around the question ‘what might we determine is, or is not, impairing’” and featured panels of “scientists who informed our work for our legislation previously, our law enforcement partners, and our public health and prevention partners.” Hoffman communicated some themes that came into focus:
        • ​​The science on what is or is not impairing, or intoxicating beyond what we already know about alcohol is not settled, and all three panels agreed on this.”
        • “We learned that creating a chemical framework and attempting to draw a bright line between what is impairing or not depends on how cannabinoids bind to receptors, and how strongly they bind, and this varies from person to person.”
        • “We also learned that over time the burden has shifted to regulators proving product risk, rather than manufacturers proving product safety, and we confirm that some of the known hemp-derived compounds have not been studied in humans.”
        • All cannabinoids produced for human consumption that fall within a certain THC threshold” needed to be under “regulatory authority to assure safe manufacturing processes.”
        • “We should focus on risk, rather than what cannabinoids are or not impairing,” which led to the establishment of the WSLCB Cannabinoid Science Work Group, which had its inaugural meeting the day before on December 1st.
      • According to Hoffman, rulemaking served “to determine whether creating new or amending existing definitions might address public health risk associated with production and processing of cannabis products” and involved a July 28th listen and learn session on draft conceptual rules.
        • She conveyed staff findings that “the definitions cannot be extended in rule based on a variety of factors, but primarily lack of statutory direction,” as well as cannabis industry concern “about agency overregulation of cannabis concentrates produced and sold in the I-502 system.” Moreover, “confusion continues to exist around…what agency regulates hemp-derived products, and what agency regulates cannabis products,” she added.
        • All of this gave staff the impression that the rulemaking process wouldn’t be “productive in terms of further conceptual development, and we ultimately withdrew the CR-101” on September 14th, Hoffman remarked.
      • All of this, she said, helped to “inform our proposed legislation” for 2023, where the agency wanted to “create a safe pathway, or route for manufacturing, if the product will be consumed by humans” with the goal of synthesized cannabinoids “no longer being available in the hemp marketplace, but products like hemp seed and milk having a pathway to the market as food products.”
      • Hoffman wrapped up with an acknowledgement that “words like ‘impairing’ or ‘intoxicating’ may be more appropriate in law or rule related to motor vehicle operation, and that moving either of these words into product regulation on any level becomes vague very quickly.”
    • Nordhorn reviewed the development of agency request legislation on cannabinoid regulation for 2023, which he relayed had been approved by the Governor’s Office the previous day (audio - 9m, video).
      • He acknowledged that unpassed 2022 legislation on the matter “was very large, cumbersome, and confusing, especially with some of the terminology that…we were building in.” Following the session, Nordhorn explained they’d continued outreach to stakeholder groups, finding “underlying concerns and interest points from each side of those, and we came to a very good understanding of these, and then we drafted our proposal for this year.”
      • The revised request bill language had scaled “it way back into a few particular areas” of public health and safety, with Nordhorn specifying youth access and control over “products with THC…very commonly accepted as the impairing product. So, this year's legislation, we're boiling it down to regulating THC and then any…hydrocarbon that's coming off of that…such as hexahydrocannabinol (HHC).” As well as clear age restrictions, Nordhorn talked about increased education so  “businesses in the open market can understand what's legal and what's not legal to sell.”
      • The request bill would include “an option to change delta-9 to all THC” as the law had stated that “THC concentration” was specifically defined based on the amount of delta-9-THC, Nordhorn said. In addition to removing the reference to delta-9-THC, he brought up WSLCB staff working with officials at the “State Crime Lab on some of this concept so…we can make sure that this type of language doesn't impede their ability to test on their investigations.”
        • A February 4th fiscal note for the last WSLCB request bill on cannabinoid regulation included estimates from staff for the Washington State Patrol that updated equipment, laboratory methods, and personnel or training to conduct accurate product tests for compounds beyond delta-9-THC would cost $1,655,000 for first year costs and $127,000 annual ongoing costs.
      • Nordhorn then mentioned the bill would offer a way to regulate online sales of cannabinoid items, comparing it with WSLCB online alcohol regulation. “Alcohol is considered alcohol when it reaches one half of one percent alcohol by volume,” he said, and “anything above that, age restricted and regulated, anything below that it's on the open market.” With cannabis, Nordhorn commented that their request bill would propose “no more than one milligram of THC in a particular unit, and no more than three of those units in a package.” This was because they’d seen research indicating “no observable negative impact at the two and a half milligram level,” he explained. Not wanting children to get access to any product “that can get you high, or come close to a product that an adult should purchase” led to the three milligram package limit, below which would be a “hemp consumable,” and above which would be a “cannabis consumable.”
      • The legislation would also alter mentions of the ‘dry weight’ concentration of THC, with Nordhorn elaborating that “dry weight usually only refers up until harvest and so once you start converting it, and concentrating it, it doesn't have the same equations.”
      • “We're also trying to incorporate a little bit of consumer safety into this particular bill,” Nordhorn told lawmakers, because regulators recognized “there's a lot more growing interest in synthetics.” So, “if folks are utilizing any type of synthetic CBD,” he stated, “if it's a synthetic cannabinoid, we want that to be on the package so that the consumer can understand what they’re purchasing.” He compared this to “a disclaimer for peanut allergies.” 
      • The last component of the bill Nordhorn highlighted was “a very clear licensing requirement” in order to make sure online sellers “will have to adhere to the same standards” as any in-state manufacturer. This “would give local law enforcement as well as our folks an opportunity to try to intervene and curb that activity from happening online if they're exceeding these types of thresholds” in products.
      • By focusing on youth access and what needed to be regulated to manage that, Nordhorn asserted there was “some fairly positive support for this, and even from those who opposed it last year.”
  • Two questions about the WSLCB response to synthesized cannabinoids tackled the economics behind the practice, along with the risks such items might pose.
    • Chambers wanted to know “is the Delta 8 cheaper to produce?” (audio - 1m, video)
      • Nordhorn considered that a fair description “because it's unregulated, there's not manufacturing practices that are overseen for that and you're taking, basically your CBD, and converting and utilizing some acids, and creating that delta-8.”
      • Chambers followed up to see if there was consumer demand “because it's widely available in other states that are selling it.” He concurred the products were available in many states and Washington wasn’t “the only state struggling with this particular challenge.” He thought there were “29 states that have banned some of these products and then others are trying to regulate it.”
    • Wylie was curious about what a focus on “risk” meant in the WSLCB presentation, where it was mentioned as a deliberative dialogue theme (audio - 2m, video).
      • “There's a couple different risk factors that we're looking at,” Nordhorn answered, citing:
        • “Risk of folks selling product that they're not aware of what's in the product”
        • “Risk of the youth acquiring that product because it's unregulated and…easy to access”
        • “Risks involve the consumer and we're hearing anecdotally…from stories that consumers only realize that they are consuming something that was impairing after they started consuming it” leading to potential “traffic safety” issues.
    • Kloba included that she knew members were eager to start “reading that bill, and getting all the detail[s] involved.”
      • Legislative pre-filing of bills began on Monday December 5th ahead of the session which was scheduled to begin on January 9th, 2023.

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