Washington State Legislature – Bill Updates
(February 25-28, 2019)

Here are some observations of the Washington State Legislature’s activity on several cannabis bills during the week starting Monday February 25th. After the policy committee cutoff was reached this past Friday February 22nd, attention turned to the winnowing of cannabis bills through the fiscal committees in each chamber before the next of several legislative deadlines on Friday March 1st.

My top 3 takeaways:

  • The hemp bills, SHB 1401 and SSB 5276, had second substitute versions adopted and moved out of fiscal committees in their respective chambers.
    • HB 1401 – “Concerning hemp production”
      • On February 5th, the House Commerce and Gaming Committee hosted a public hearing for HB 1401.
      • On February 19th, the Commerce and Gaming Committee hosted an executive session for HB 1401 and moved a substitute bill out of committee with a “do pass” recommendation.
      • On February 25th, the House Appropriations Committee hosted a public hearing for SHB 1401.
      • On February 26th, the House Appropriations Committee hosted an executive session for SHB 1401. Commerce and Gaming Committee Counsel Peter Clodfelter presented the substitute (video).
      • Representative Derek Stanford presented an amendment (AMH APP H2012.2) which was adopted with support from Representative Drew MacEwen (video); the amendment was described as having the following effects on the bill:
        • Authorizes persons licensed to produce hemp under the existing Industrial Hemp Research Program to immediately, upon the effective date of the act and prior to the adoption of implementing rules, begin producing hemp when in conformance with state and federal law.
        • Provides that hemp and hemp products produced in accordance with the new authorization or produced lawfully under the laws of another state, tribe, or country may be transferred and sold within Washington, outside of Washington, and internationally.
        • Provides that the whole hemp plant may be used as food and that all tests and handling procedures generally applicable to the production and processing of nonhemp foods for human consumption must be followed with respect to hemp.
        • Requires notification to the Washington State Department of Agriculture (WSDA) of the source of hemp seeds and clones, and removes all other provisions related to seed sourcing and the WSDA’s duty to develop a list of approved seed cultivars.
        • Declares hemp seed to be an agricultural seed.
        • Prohibits the application of laws and rules relating to certified or interstate hemp seeds or buffer zones between hemp producers or processors and marijuana producers or processors.
      • An oral amendment to remove the bill’s appropriation (AMH APP FRAS 000) was approved by voice vote. Chairman Timm Ormsby said, “we don’t generally do appropriations inside bills, they’re budget decisions.”
      • First Vice Chair June Robinson proposed adding a null and void clause as a new section of the bill; it was adopted by voice vote (video).
      • The amended bill became Second Substitute HB 1401 (2SHB 1401). Following favorable comments from MacEwen and Stanford, the new version was passed out of the House Appropriations Committee. The bill was referred to the House Rules Committee to be reviewed for second reading and potential floor action.
    • SB 5276 – “Concerning hemp production”
      • The active hemp bill in the Senate is not the original companion bill of HB 1401. That bill, SB 5719, was introduced after SB 5276 was already moving in the Senate Agriculture, Water, Natural Resources, and Parks Committee.
      • See SB 5276’s shared documents below for details on the bill’s passage through its policy committee and its fiscal committee public hearing.
      • On February 25th, the Senate Ways and Means Committee hosted an executive session for SSB 5276 and adopted a second substitute version (P2SSB 5276_S-2103.4 – Pink). The second substitute (2SSB 5276) was described as having the following effects on the bill:
        • Requires that, when processing hemp for food products, all tests and handling procedures generally applicable to the production and processing of food for human consumption must be followed. Provides that any hemp products intended for human consumption that are allowable under federal law are permissible for sale and use within the state.
        • Provides that hemp and processed hemp produced under the hemp program or produced lawfully in another state, tribe, or country may be transferred and sold within the state, outside the state, and internationally.
        • Establishes that a person producing hemp must notify WSDA of the source of the hemp seed or clones solely for maintaining a record of the source.
        • Provides that WSU may, within existing resources, develop an internet-based application to assist hemp producers concerning recommended planting times.
        • Provides that no law or rule related to certified or interstate hemp seeds or a distance or buffer zone requirement applies to or may be enforced against a person with a license under the Industrial Hemp Program.
        • Makes technical changes.
      • 2SSB 5276 was referred to the Senate Rules Committee and has been placed on the Senate floor calendar.
  • The testing laboratory accreditation and cannabis science task force bill, HB 2052, successfully passed through the House Appropriations Committee without amendment.
    • On February 18th, the House Commerce and Gaming Committee hosted a public hearing for HB 2052.
    • On February 19th, the House Commerce and Gaming Committee hosted an executive session for HB 2052 and passed the bill without amendment.
    • On February 27th, the House Appropriations Committee hosted a public hearing for HB 2052. Clodfelter briefed the committee (video).
    • Linda Merelle, Appropriations Committee Counsel, described the legislation’s fiscal notes (video).
      • Merelle said the total estimated costs during the 2019-21 biennium were just over $1 million, and $764,000 for subsequent biennia.
      • Accreditation fee revenue was projected at $362,000 for the 2021-23 biennium, and $725,000 for the 2023-25 biennium.
      • The fiscal notes included costs for the bill’s proposed cannabis science task force. The Department of Ecology (DOE) included 3.75 full time employees (FTE) totaling $603,000 for the first biennium. WSDA estimates their task force costs at $80,000, which will be covered in an interagency agreement with DOE.
      • WSLCB’s costs administering third-party laboratory accreditation currently are about $23,000. Merelle told members the bill wouldn’t change the agency’s cost for the current biennium, but could lead to future savings.
    • James Paribello, testifying for the Laboratory Guild, said the legislation was critical to addressing a testing “bottleneck” among the “over a thousand” licensed producers and processors with thousands of products needing testing at “one of only 13” active accredited labs. The situation left the public “potentially at risk” for impure products. Paribello, a former Director of Legislative Relations for WSLCB, concluded that “without the proper levels of accreditation in place as soon as possible,” the “industry and safety of cannabis consumers is at risk” (video).
    • Jedidiah Haney, the Laboratory Guild Executive Director, said working to “reduce testing variability” was important to his organization. He spoke to the work his group had done with stakeholders and that the “expedited timeline” in the bill was needed as licensees were hurting and “good labs are leaving the sector.” Haney told members that Guild labs would open their facilities to state agencies to help them develop rules and best practices (video).
    • On February 28th, the committee passed HB 2052 during executive session. There were no proposed amendments. Stanford told fellow members the bill was about “keeping the cannabis products in our state safe” and that it would bring the public and industry “reliable labs.” MacEwen shared his support for the legislation. Only Representatives Mary Dye and Vicki Kraft voted against the bill (video).
    • The bill was referred to the Rules Committee to be reviewed for second reading and possible action on the House floor.
  • The WSLCB enforcement and compliance restructuring bills, SHB 1237 and SSB 5318, were heard in their respective fiscal committees. The House Appropriations Committee amended and passed 2SHB 1237.
    • HB 1237 – “Reforming the compliance and enforcement provisions for marijuana licensees.”
      • On January 28th, the House Commerce and Gaming Committee hosted a public hearing for HB 1237.
      • On February 21st, the House Commerce and Gaming Committee hosted an executive session for HB 1237 and passed a substitute version of the measure on.
      • The WSLCB Executive Management Team (EMT) discussed the bills extensively during their February 27th public meeting. Agency leadership said the Senate bill was preferable and discussed possible motivations behind the legislation.
      • On February 28th, the House Appropriations Committee hosted both the public hearing and executive session for SHB 1237. Clodfelter summarized the substitute legislation (video); from the House Bill Report:
        • Modifies how the Washington State Liquor and Cannabis Board (LCB) may enforce laws and rules against regulated marijuana businesses, and how these businesses may comply with laws and rules.
        • Requires rulemaking by the LCB regarding enforcement procedures, with specific components, such as to address de minimis violations.
        • Requires and authorizes rulemaking by the LCB regarding penalties, with limits, such as on the effect of cumulative violations, and on what types of violations may result in license cancellation when a heightened evidentiary standard is met.
        • Limits the LCB’s authority to issue violations in certain circumstances involving unpreventable employee misconduct, if the licensee has a documented, thorough internal-compliance program.
        • Prohibits the LCB from considering any violation from before April 30, 2017, as grounds for negative licensing actions, except for specific types of violations, including sales to minors and diversion of product, when a heightened evidentiary standard is met.
        • Designates the LCB’s officers and employees who enforce marijuana laws as inspectors with authority to issue notices of violations but who do not have law enforcement authority.
      • Merelle outlined the fiscal view of the bill. She prefaced the fiscal note saying it was for the original bill, not the substitute. “However,” Merelle noted, “the elements that drive the cost are the same in both the house bill and the substitute.” She said WSLCB reported needing 5 FTEs for the bill’s enforcement provisions for education of licensees and investigators to “meet that higher, ‘clear, cogent and convincing’ standard.” The agency reported the requirement for “affirmative evidence” that cannabis had been diverted to the criminal or out-of-state market would require more rigorous investigations. Merelle said WSLCB expected needing $1.3 million in the first biennium, $591,000 ongoing costs in future bienniums, and one-time equipment, training, and rulemaking costs of $131,000 (video).
      • Vicki Christophersen, Executive Director and Lobbyist for the Washington CannaBusiness Association (WACA), supported the bill while saying it was still a “work in progress.” She indicated she had been meeting with the bill sponsor Representative Steve Kirby, WSLCB, and stakeholders to lower the bill’s fiscal footprint. Christophersen expressed her belief that provisions of the bill would be amended which would lower WSLCB’s projected costs. She drew comparisons to the reformation of enforcement practices at Labor and Industries. Saying WACA cared about good practices and public safety, Christophersen concluded the bill helped licensees “fix problems that they have before they see a violation” (video).
      • Chris Thompson, WSLCB Director of Legislative Relations, expressed concerns about the original and amended legislation: “Those concerns that we have are both policy related and fiscally related.” He indicated there were elements the agency supported and affirmed commitment to use the “legislative process, rulemaking, or both” to improve the situation. Thompson confirmed he was working with advocates and the sponsor to make the bill agreeable to WSLCB (video).
      • During the hearing’s executive session, the committee included a null and void amendment passed by voice vote (video).
      • Stanford and MacEwen both urged passage. Stanford said the legislation “will assist companies that are trying to comply, give them more tools for voluntary compliance.” MacEwen mentioned 2SHB 1237 moved Washington to “a more business-friendly atmosphere” for cannabis licensees “without it being the heavy-handed tool” of enforcement (video).
      • The bill received a unanimous “do pass” recommendation and was referred to the House Rules Committee for review for second reading and potential action on the floor.
    • SB 5318 – “Reforming the compliance and enforcement provisions for marijuana licensees.”
      • On January 31st, the Senate Labor and Commerce Committee hosted a public hearing for SB 5318.
      • On February 20th, the Senate Labor and Commerce Committee hosted an executive session for SB 5318, adopted a substitute version of the bill, and referred it out of committee with a “do pass” recommendation.
      • On February 28th, the Senate Ways and Means Committee hosted a public hearing for SSB 5318. Committee Revenue Counsel Alia Kennedy introduced the bill and its fiscal impacts (video). From the Senate Substitute Bill Report:
        • Specifies when the Liquor and Cannabis Board (LCB) may issue a notice of correction under the technical assistance program.
        • Expands existing programs for compliance education and requires a program for voluntary compliance.
        • Requires rulemaking on enforcement procedures, with specific
          Components.
        • Requires rulemaking regarding penalties, with limits, such as on the effect of cumulative violations.
        • Specifies the types of violations may result in license cancellation.
        • Requires consideration of aggravating and mitigating circumstances.
        • Requires the LCB to define regulatory violations that have no direct or immediate relationship to public safety.
        • Allows a licensee to correct violations not related to public safety within a reasonable amount of time.
        • Limits the authority to issue violations involving unpreventable employee misconduct, under certain circumstance.
        • Modifies the settlement conference and agreement process.
      • Vice Chair David Frockt asked the bill’s prime sponsor Senator Ann Rivers, “what are we trying to accomplish with this bill?” Senator Rivers replied that inconsistency of enforcement had been the consistent refrain she had heard from licensees in her visits to their facilities over the past four years. She advocated for overhauling WSLCB’s approach to compliance on the model of Labor and Industries or the Department of Health “where you actually have somebody come in and say, ‘This is what you’re doing right, this is what you’re doing wrong.’” She concluded, “These people have invested so much – some of them their life savings. They want to be good actors and we need to help them be good actors.”
      • Vicki Christophersen supported the bill for WACA. She said the bill did not seek to change anything regarding “public safety-type violations.” Christophersen said the bill attempted to reform WSLCB into a “compliance-first” agency modeled on successful programs in other agencies: “So rather than issuing a violation to somebody who moved a shelf without filing a change of operation plan, or had a tag on one of their plants that deteriorated because of the soil that the plant is in, this would give that person the opportunity to have a compliance, to correct that act, that action without suffering the violations that compile and result in license cancellations.” She said she had been meeting with “other stakeholders” to refine the bill (video).
      • Chair Christine Rolfes concluded the public hearing by announcing two people had signed in but did not wish to testify: a representative from the Washington SunGrowers Industry Association signed in against the bill, and a representative from the Washington Federation of State Employees signed in “other.”
      • SSB 5318 is scheduled for executive session in the Senate Ways and Means Committee on Friday March 1st at 1:30pm.

Here are shared documents for your review:

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