WSLCB - Executive Management Team
(August 10, 2022) - Legislative Affairs Update

A legislative affairs update featured the first public remarks on draft request legislation for 2023 covering “THC regulation,” social equity, and subpoena authority for cannabis investigations.

Here are some observations from the Wednesday August 10th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 4 takeaways:

• Director of Legislative Affairs Chris Thompson introduced the agency process for advancing request legislation ahead of the 2023 session (audio - 2m, WSLCB video, TVW video).
  • Thompson discussed the system by which state agencies receive approval for request legislation in June 2021. On August 2nd, Director Rick Garza indicated agency staff would use the “typical process” for sharing their concepts with stakeholders for feedback.
  • During the meeting, Thompson noted that the draft text and summaries for three request bills were emailed to stakeholders on August 4th and he’d begun “to get some response and feedback from stakeholders.”
    • He noted “detailed feedback” from “Seattle King County Public Health” and that he had set aside “time to talk” about the proposals with Washington State Department of Agriculture (WSDA) staff the following week.
    • Stakeholders were encouraged to submit comments by August 25th, something Thompson said “compress[ed] the timeline a little bit from what we originally sketched out” but gave time for outside input and potential changes while meeting “a September 14 target date for submission, hopefully we’ll be able to work through that.” He credited Garza with wanting to “give stakeholders three weeks” to review and provide a response, instead of the single week initially offered for input on the WSLCB 2022 request bills, which precipitated complaints and an extended comment period.
    • Proposed request bills from state agencies will be entered into the Washington State Office of Financial Management (WA OFM) Bill Enrollment and Agency Request System (BEARS), through which the Governor’s office and WA OFM staff can analyze and approve them to be offered for sponsorship in the Washington State Legislature (WA Legislature).

• A tetrahydrocannabinol (THC) regulation proposal was the board’s sophomore effort at controlling access to cannabinoid products without mentioning whether the compounds were “impairing,” a divisive distinction that bedeviled their previous effort (audio - 2m, WSLCB video, TVW video, Draft Agency Request Legislation).
  • In 2021, regulation of cannabinoid products besides those with delta-9-tetrahydrocannabinol (delta-9-THC)---most prominently synthesized delta-8-tetrahydrocannabinol (delta-8-THC) created from hemp-derived cannabidiol (CBD)—was a top priority of agency leaders and some cannabis stakeholders ahead of the 2022 legislative session. In June and July 2021, WSLCB officials hosted deliberative dialogues on cannabis plant chemistry to interrogate impairment as a way to develop rules and potential legislation. 
    • After giving stakeholders short notice in September 2021 to consider the resulting agency request legislation which was introduced as HB 1668, the bill was criticized for leaving what constituted impairing cannabinoids up to WSLCB rulemaking. Later in the session, other bills pertaining to cannabinoid regulation ran into this same objection.
    • Following the session, staff hosted dialogues focused on cannabis impairment on April 27th, May 31st, and June 21st. During the May dialogue, Policy and Rules Manager Kathy Hoffman acknowledged staff still had the goal of “understanding of how we might determine and define what THC compounds are, and are not, impairing.”
  • Thompson described "a new approach" which centered on “regulating products with THC” by “establishing a threshold above which the agency would regulate products, and below which they’d be available in an open market.”
    • The threshold in the bill draft would be “one milligram THC per unit, or three miligrams of THC per packaged product,” he told the group; anything above that point could only be produced and sold by WSLCB licensees “and all that that entails.”
      • These thresholds were included under a new definition for ‘hemp consumable,’ “a product that is not a cannabis product, as defined in RCW 69.50.101, and is intended to be consumed or absorbed inside the body by any means including, inhalation, ingestion or insertion that is sold or provided to another person.”
      • Learn more from a 2021 Above The Law article: The 'THC In Milligrams' Limit: A New Approach To Regulating Hemp Products.
    • The inclusion of synthetically derived cannabinoids would have to be disclosed on labeling specifying “how much and a description of that,” he stated, along with other revisions “required as scaffolding to support this proposal, particularly definitions in the Controlled Substances Act, and for hemp.” 
      • Cannabis would be redefined as “all parts of the plant Cannabis sativa L with a THC concentration greater than 0.3 percent on a dry weight basis during the growing cycle through harvest, and usable cannabis as defined in (yy); the term does not include hemp or industrial hemp as defined in RCW 15.140.020, or seeds used for licensed hemp production under chapter 15.140 RCW.”
    • Thompson described how the law would be expanded for WSLCB to regulate cannabinoids beyond delta-9-THC and regarding “the problem with measuring that on a dry weight basis, we fixed that by introducing this new standard” for cannabinoids in products.
      • Cannabis products, currently “useable cannabis, cannabis concentrates, and cannabis-infused products,” would also have an additional meaning under the bill “including any product intended to be consumed or absorbed inside the body by any means including, inhalation, ingestion, or insertion, with a THC concentration of more” than the thresholds mentioned by Thompson.
      • The summary indicated THC would be defined to include "any form" of the cannabinoid, with 'cannabis' and 'hemp' definitions changed to "accurately reflect the differing ways of measuring THC during plant production and post-harvest products." It also asserted the bill offered “clarity for local law enforcement for addressing illegal manufacturing, sales, and distribution." 
    • “The goal is to get the products of concern, like delta-8 gummies and such, out of the market,” added Thompson before moving on as he felt board members were “aware of what we have on the table.”
  • The approach in the draft request bill has some similarities to the regulatory track taken by officials in Oregon. In July 2021, the Oregon State Legislature adopted HB 3000 which enabled further regulation of hemp cannabinoids in order to strengthen “enforcement against illegal cannabis growers and increase multi-agency efforts to support Oregon's legal hemp growers,” according to an Oregon Department of Agriculture email. That bill focused on illicit production, whereas the WSLCB request bill proposal is more concerned with illicit sales.
    • The Oregon Liquor and Cannabis Commission (OLCC) adopted more rules in December 2021 which included changes to cannabis regulations and hemp standards.
    • An official told Washington lawmakers on May 10th the law had made it easier for their enforcement staff to “look at illegal cannabis grows, not marijuana grows, but those things that were from outside of the state program.”
    • Find out more opinions about the impact of HB 3000 from:
      • Cultiva Law - What House Bill 3000 Means for Oregon’s Hemp Industry (2021)
      • Green Light Law Group - How Did One Bill Reshape Oregon’s Hemp Industry? (2022)

• Another request bill sought to expand the number of available social equity retail licenses, make them mobile to any jurisdiction in Washington allowing additional retail, waive licensing fees for equity businesses, add restrictions on sale of social equity licenses for the first five years, as well as other changes (audio - 1m, WSLCB video, TVW video, Draft Agency Request Legislation).
  • HB 2870, 2020 WSLCB request legislation, established the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF), a social equity retail license program, and a technical assistance grant program. The statute was expanded through a 2021 law. The task force adopted recommendations in 2021, such as additional equity licenses with mobility throughout the state, which informed HB 2022, legislation to implement some of the recommendations which was not successful.
    • Task force members were set to consider adoption of recommendations on other mandated topics at their August 23rd meeting.
  • Thompson said the draft bill language, if encoded as law, would enable WSLCB officials to “increase the number of social equity retail store licenses based on population,” “detether those licenses” from a specific city or county, and “waive the license fee for those licensees, and a number of other provisions.”
    • The bill summary noted that the measure would:
      • Formalize use of a third-party vendor "to identify and score social equity applicants" under a scoring rubric "developed by the board."
      • Equity licenses could only be sold, also known as license assumption, to qualified equity applicants "for a period of at least 5 years." 
      • Definitions around disproportionately impacted areas (DIAs) and social equity applicants would be changed.
      • Social equity plans, which had been a requirement only for equity licenses, would become required for all cannabis businesses when renewing a license starting in 2024.
    • Under WAC 314-55-079, the board declared their intent to set a maximum number of cannabis stores per county based on “estimated consumption data and population data obtained” from WA OFM, but had not done so since the completion of the 2020 census results.

• A third request bill would create subpoena authority for WSLCB cannabis investigations, which Thompson highlighted as potentially useful in financial investigations (audio - 1m, WSLCB video, TVW video, Draft Agency Request Legislation).
  • The draft request bill would allow for use of subpoena authority “in the context of a cannabis investigation.” Thompson reported, “we already have that authority related to liquor, tobacco, and vapor” products. He emphasized their possible utility in “financial records investigations around true party of interest (TPI), or hidden ownership concerns that come up” and regulators didn’t “have that tool, today.”
    • The summary for the proposal described the use of subpoenas in “administrative investigations” and “in the investigation of underground economy activity.”
  • At time of publication, WSLCB had been granted subpoena powers under two statutes:
    • RCW 66.24.010(3)(f), dealing with conditions and restrictions around temporary alcohol licenses, addresses “disobedience of any person to comply with the order of the board or a subpoena issued by the board, or any of its members, or administrative law judges.”
    • RCW 66.08.145, covers their subpoena powers around tobacco and vapor products “in connection with any investigation, hearing, or proceeding for the production of books, records, and documents held…relating to the transportation or possession of cigarettes, vapor products, or other tobacco products.”
    • Additional statues on subpoena powers:
      • RCW 7.04A.170 within the Uniform Arbitration Act addresses the subpoena power of state arbitration.
      • RCW 34.05.446 in the Administrative Procedures Act also addresses general rules around subpoenas, legal discovery, and protective orders.
  • Learn more about how state subpoena powers and how they function outside of Washington state:
    • National Association of Attorneys General - Subpoenaing Out-of-State Witnesses in Criminal Proceedings: A Step-by-Step Guide (2021)
    • Lane Powell - Drafting and Issuing Discovery Subpoenas: Washington (2019)
    • AgileLaw - How to subpoena evidence from a third party in another state

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