The Board heard a rulemaking update and public testimony on the burdens of compliance with the new packaging and labeling rules, traceability, and retail in Centralia.
Here are some observations from the Wednesday August 7th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.
My top 2 takeaways:
- Policy and Rules Coordinator Kathy Hoffman provided a cannabis rulemaking update (audio – 7m, video).
- Hoffman’s last rulemaking update was presented at the August 6th Board Caucus. Later this same day after the Board Meeting, Hoffman also presented a rulemaking update to agency leadership at the Executive Management Team (EMT) public meeting. We’ve included additional observations from the EMT where appropriate.
- Cannabis Penalties (WSR 18-22-099). Hoffman explained that the rulemaking project implementing parts of SB 5318 had its final workgroup meeting July 12th, and stakeholders provided “excellent and substantive feedback.” Licensees would see draft conceptual rules about August 15th, with a listen and learn session on track for August 29th. From there, Hoffman hoped to create “a durable set of rules” and present a CR-102 around mid-October, but may delay release to coordinate with the True Party of Interest rulemaking.
- During the EMT meeting later that day, Board Member Russ Hauge expressed concern about “sticking with this very high dollar amount for cannabis penalties” that was not equivalent to alcohol penalties. Board Chair Jane Rushford weighed in, saying that while marijuana remained illegal at the federal level, “it’s time for that review” to leverage what the agency had learned about cannabis, including being “less restrictive.” Hoffman explained she was looking at structuring penalties fairly for multiple offenses. Hauge added his perspective that while a few cannabis businesses could “easily slough off” a $10,000 fine, most licensees “would have to move heaven and earth to meet that obligation.”
- Voluntary Compliance Program (WSR 19-15-074). Another SB 5318 component, Hoffman explained the CR-101 was filed last month. WSLCB had begun soliciting public feedback and received two comments.
- During EMT, Hoffman revealed one comment thanked her office for the collaborative rulemaking process, while the other asked why WSLCB was making more rules.
- True Party of Interest (TPI, WSR 18-22-054). Hoffman shared that the long-running TPI rulemaking process incorporated HB 1794 after it was signed into law. Staff planned to meet internally on Thursday August 8th and would present proposed changes to industry representatives on Monday August 12th. At the recent Regulators Roundtable, Hoffman gathered feedback on how to define “control” from other states’ Attorneys General. She foresaw more stakeholder collaboration and listen and learn sessions around September and reiterated her intention to align TPI rule changes with the new Cannabis Penalties. Hoffman expected the CR-102 would be ready in late October or early November.
- Quality Assurance (QA) Testing and Product Requirements (WSR 18-17-041). Hoffman planned to release draft rules to licensees “later this week” and host a second listen and learn session at WSLCB headquarters on August 22nd. Communications with licensees would include guidelines for “how that dialogue is going to happen.” Hoffman anticipated a CR-102 being filed by “late October/early November.”
- During EMT, she noted ideas under consideration included homogenizing lots and testing quarterly; and reducing licensee testing burden after demonstrating compliance over time.
- Packaging and Labeling (PAL, WSR 19-12-029). Hoffman said the rulemaking project, initiated in response to two Cannabis Alliance petitions for minor PAL changes, was on track to implement SB 5298 and drawing a large number of comments. Hoffman’s analysis and verification of comments aimed to find the best “qualitative and quantitative data” for a Small Business Economic Impact Statement (SBEIS) that would be presented first, and eventually accompany the CR-102. Listen and learn sessions would likely occur in September, and Hoffman emphasized her intent to include other state agencies and prevention stakeholders in addition to the cannabis industry. With the CR-102 possible by October, Hoffman hoped to avoid “bifurcating” the process to meet legislatively mandated deadlines in SB 5298. Hoffman’s next PAL step would be to revise board interim policy (BIP) 05-2018 at the August 21st Board Meeting in Bothell to include a retailer “sell down” period for products meeting the older PAL rules.
- Vapor Products (WSR 19-13-036). Hoffman said vape rules were “moving forward nicely” but had not elicited any written comments so far. She planned to have a CR-102 ready “in the middle of October” to meet the requirements of HB 1874 and HB 1074. Rushford asked Hoffman about outreach to the prevention community, which Hoffman said was “in the works” thanks to Public Health Education Liaison Sara Cooley Broschart. In coordination with the Board’s trip to Bothell later in the month, WSLCB staff were organizing a meeting of prevention advocates on August 20th to discuss vapor products and other topics.
- The Board heard public testimony regarding the burdens of compliance with the new packaging and labeling rules, traceability, and retail in Centralia (video).
- Rachael Weygandt (audio – 4m, video), the Compliance Manager and Project Coordinator at Evergreen Herbal, spoke as a Washington CannaBusiness Association (WACA) member to share thoughts on packaging and labeling. She was thankful that WSLCB extended several BIPs around PAL last month giving her business more time to adapt, but called for a “holistic look” at how the regulations impacted small businesses. Weygandt said less than half of her company’s products had received approval for updates required by the PAL rules that go into effect in 2020, adding that most of the approvals had only been received the week before. She pleaded for quicker turnaround, as each package change cost her company up to $50,000 and took an average of 70 days to get approved. One product had been rejected eight times since December “and we are nowhere near an approval.” Weygandt raised a compelling concern about homogenization of branding across the Washington marketplace: “all of the products are going to look the same. Consumers will be confused, they won’t know how to differentiate from one brand to another and there will be no brand loyalty.” And Weygandt concluded by highlighting how inconsistent, subjective judgment by WSLCB staff was permitted by the composition of the 2020 PAL rules: “being told ‘your white isn’t white enough’ or the black isn’t black enough or ‘Having two colors on a background makes it difficult to determine what a background color is,’ somehow means that that is appealing to a child is, I don’t think, the intention of the rules.“
- Before the conclusion of the Board Meeting, Hoffman asked to be recognized to respond to Weygandt’s comment (audio – 1m, video). Hoffman said WSLCB staff planned to meet with regulators from Colorado and Oregon for four hours on Monday August 12th. PAL was a subject they intended to discuss so the regulators could learn from one another’s experiences – a suggestion Weygandt put forth during her comment.
- During EMT, Hoffman said she had invited Weygandt to join the August 12th meeting, which would also include other industry representatives.
- Gregory Foster (audio – 4m, video), Cannabis Observer founder and WSLCB Traceability Advisory Committee member, talked about the latest release of MJ Freeway’s Leaf Data Systems, a troubled process Foster also commented on during the previous Board Meeting. He brought attention to SB 5130, 2017 legislation requested by the WSLCB which, in addition to increasing cannabis license renewal fees by $300, charged licensees a one-time, non-refundable fee of $480 during fiscal year 2018 expressly for “the agency to use to replace the BioTrack traceability system” – the eventual replacement being Leaf. Foster emphasized the bill’s fiscal note anticipated gathering $1,428,000 from licensees to procure a new traceability system, with the money going to either the WSLCB or MJ Freeway. He pointed out that SB 5130 sponsor Senator Ann Rivers claimed a different traceability system would provide “a greater return on investment for the taxpayers of this state.” Foster mused “hindsight is 20/20 of course” – but the traceability debacle had been “painful” and he urged the Board to “see what can be done” to help licensees who had been forced to pay in more ways than one.
- Joe Hyer (audio – 4m, video), a businessman and former Olympia City Council member, spoke as a “land use consultant” on city and county issues. He had helped find a second location for Grand Mound retailer Marijuana Mart, and claimed both stores had a “great compliance record.” Now considering a third location in Centralia, Hyer said the only viable site was in the city’s Gateway Commercial Zone and required local approval. Though having secured the approval of the city planning team, the Centralia City Council opposed the move. Efforts to look into the city’s cannabis-approved industrial areas proved complicated as “most of the M-2 industrial zone in Centralia is not actually in Centralia” and fell under the jurisdiction of Lewis County. While one parcel had a retail store going in, Marijuana Mart was barred from placing an additional store there. Hyer concluded that the “cumulative impact” of local, county, and state rules were hindering retail site selection. In the meantime, he asked the Board to provide his client a retail title certificate while they continued to work with the various government bodies.
- Chris Marr (audio – 4m, video), a former State Senator and former WSLCB Board Member, rose to respond to Hyer’s comment as he represented another cannabis business in that area, RIU420 and Uncle Ando’s Wurld of Weed. Marr acknowledged Centralia’s heavy restrictions on cannabis businesses, saying that while it was the town’s right, it created “some conflict” that cost the business he represented heavily to stay in the region. Despite the burden of meeting local regulations, he argued the “intent of the legislation and your rules seems to me to be clear: We need stores out there and open and operating to combat the illicit market and to serve the citizens of the state.” Marr closed on a note of skepticism regarding the troubles Hyer outlined, saying that every licensee should be expected to meet those requirements.
- Rachael Weygandt (audio – 4m, video), the Compliance Manager and Project Coordinator at Evergreen Herbal, spoke as a Washington CannaBusiness Association (WACA) member to share thoughts on packaging and labeling. She was thankful that WSLCB extended several BIPs around PAL last month giving her business more time to adapt, but called for a “holistic look” at how the regulations impacted small businesses. Weygandt said less than half of her company’s products had received approval for updates required by the PAL rules that go into effect in 2020, adding that most of the approvals had only been received the week before. She pleaded for quicker turnaround, as each package change cost her company up to $50,000 and took an average of 70 days to get approved. One product had been rejected eight times since December “and we are nowhere near an approval.” Weygandt raised a compelling concern about homogenization of branding across the Washington marketplace: “all of the products are going to look the same. Consumers will be confused, they won’t know how to differentiate from one brand to another and there will be no brand loyalty.” And Weygandt concluded by highlighting how inconsistent, subjective judgment by WSLCB staff was permitted by the composition of the 2020 PAL rules: “being told ‘your white isn’t white enough’ or the black isn’t black enough or ‘Having two colors on a background makes it difficult to determine what a background color is,’ somehow means that that is appealing to a child is, I don’t think, the intention of the rules.“