WSLCB – Board Caucus
(March 26, 2019)

Grades of cannabis, on-site consumption, and ever more “sea change” at the agency.

Here are some observations from the Tuesday March 26th WSLCB Board Caucus.

My top 3 takeaways:

  • Board Member Russ Hauge suggested a path towards graded cannabis products and committed to advocacy for on-site cannabis consumption (audio – 10m).
    • In conversation with the Board and WSLCB Director Rick Garza, Hauge outlined an idea gleaned during a periodic review of statutes and rules which define the agency’s authority: “We have the right to, as a Board, to describe or to classify if you will—again, this is my reading—the different kinds of products, cannabis products, that come out of producers.
    • Hauge framed his research as driven by concerns about the future of small businesses in the Washington State cannabis marketplace: “How do, particularly as we’re facing, with Canada now, an onslaught of corporate money – it’s going to happen one way or another. We’re under attack, we don’t know exactly how it’s going to happen. Corporate money wants to find a place in here.”
      • During his regular update, Hauge reminded the Board that he would soon be sharing “pretty rarefied air” at the American Bar Association Business Law Section Spring Meeting in Vancouver, British Columbia. Hauge was scheduled to speak on a panel titled “Cannabis in Canada and the U.S.: From Banking to Bankruptcy” (audio – 2m). Hauge initially spoke about his conference appearance alongside “a bunch of big deal lawyers from New York and San Francisco and Los Angeles talking about how they’re gonna make money outta the bankruptcies that are going to be coming in the cannabis industry” during the March 19th Board Caucus (audio – 2m).
    • Hauge continued, “to me the best answer would be to allow on-site consumption,” but he acknowledged the necessity for legislative action to create that marketplace enhancement.
    • Instead, Hauge suggested a potential new path accessible to WSLCB’s rulemaking authority: “if we undertook to define different grades of product and, the analogy would be the organic label. Something that we came up with, with the industry, that allowed them to, by our rules, make their products stand out. So it would justify their role, maybe justify a bit higher price, who knows? However the market would respond to that.”
    • Hauge said, “I put a call into Susie Gress because, you know, she’s the poster child for this. I haven’t gotten a return call.” Gress is the co-owner of tier 1 producer/processor MerryEcho Productions (Vashon Velvet), a WSLCB Cannabis Advisory Council member, and Secretary of the Washington CannaBusiness Association (WACA).
    • Board Chair Jane Rushford warmed to Hauge’s idea and connected it to her Cannabis 2.0 initiative.
      • Rushford: “My aspiration, which will involve all of us, but my aspiration is that we will have a new story to tell in [legislative] session 2020 that starts to have references to—beyond opportunities—commitments. Commitments and opportunities that starts to preserve much of that, like the small growers, and how do we get that in a different place.”
      • Agency leadership will kick off their public Cannabis 2.0 discussion at the April 17th Executive Management Team meeting.
    • Board Member Ollie Garrett renewed a line of questioning about on-site cannabis consumption which she raised during the previous week’s caucus and asked about the authority of municipalities to establish their own social consumption venues. The Board and Director agreed that indoor clean air laws remained a primary impediment to the possibility of on-site cannabis consumption – but recognized hookah lounges had somehow been established despite this fact. No one present knew how that had been achieved.
    • Director Garza went on to commiserate with the Board about the legislature’s failure to grant the social consumption and direct sales bill HB 1945 a hearing. He opined: “there’s something missing that the lawmakers need.” Garza suggested sending WSLCB Director of Legislative Relations Chris Thompson to visit lawmakers about the bill, including House Commerce and Gaming Committee Chair Derek Stanford.
    • Hauge said, “The bill that Bailey [Hirschburg] drafted, it was really—well it was really well done—but it reached really far. I mean, there’s a lot of stuff in there you can pick and choose from and say, ‘Oh well, we’re never gonna do that!’ So maybe something more targeted from a market justification.”
    • Garza added, “I even suggested early on that they, because it’s local governments that want, that have to agree to this, that you make it conditional upon the local government approving it, so that legislators who don’t want it don’t feel like they’re allowing it in their community when they know the community may not want it. But I didn’t see that in the bill, so it may have had something to do with it.”
    • Wrapping up, Hauge sought and received the Board and Director’s approval to initiate research into a WSLCB program for grading cannabis and continue his advocacy for on-site cannabis consumption. Hauge concluded, “And this, of course, would be under the auspices of the Cannabis Advisory Council and [Cannabis] 2.0 but it seems like there might be a bite we can take right now.”
  • Board Member Ollie Garrett’s request for a review of the previous week’s Enforcement work session initiated a frank dialogue about the agency’s status (audio – 16m).
    • Garrett was unavailable for the work session hosted during the March 20th Executive Management Team meeting.
    • Hauge believed the agency had reached a “hiatus” while bills moved in the legislature and after initial drafts of revised rules had been shared with stakeholders.
    • Hauge summarized, “What I got from that was that Justin is with the program.” Rushford concurred.
    • Rushford extended the conversation to address a “scarcity theme” she had heard throughout the agency in response to challenges faced: not enough resources, time, and energy. Hauge characterized the response as “a reflex in state government and local government.” Rushford said she had developed a practice of asking in response, “So what goes away?” Hauge was impressed that Nordhorn “didn’t go there” during his presentation about shifting Enforcement towards “operational consistency.”
    • Hauge reminded the Board that “we’re still operating in a very artificial environment in that we have no interstate commerce. We are obligated to keep the trade within the boundaries of the State of Washington. I think we’re doing a pretty good job of that.” Hauge asserted, “a large part of that is because we have a very robust enforcement arm.”
    • Hauge believed Washington cannabis licensees enjoyed access to credit unions and state chartered banks “because we keep things screwed down pretty tight.”  He remained “a fan of strict enforcement.
    • Because of continued uncertainty around enforcement of federal cannabis prohibition, Hauge still felt “we can’t presume at this stage that this is a trade like any other.”
    • Garrett asked if agency leadership had asked Nordhorn about:
      • Disparities in frequency of visits to licensees
      • Prioritization of complaints
      • Evaluation of validity of complaints
      • Disparities in licensee relations with enforcement officers
      • Implicit bias training for enforcement officers
    • Hauge responded, “To me, the biggest obstacle we have with Enforcement right now is that it is, within the agency, an insular culture – like every police agency is. And the opportunity to really engage the practices, procedures, how discretion is organized – isn’t here yet, but it’s gonna be real soon. If we don’t, then we’re going to have our enforcement authority taken away from us.
    • Describing the revised cannabis penalty rules, Hauge said: “We cut back on the number of violations for which citations could be written. And we also specifically called out aggravating and mitigating factors, and pretty clearly communicated to Justin and Commander Dzubay, who was at these meetings, that those are items—aggravating and mitigating factors—that we’re gonna expect to see enforcement agents address in their reports. But how we actually make that happen has not been addressed.”
    • Hauge anticipated external pressure could initiate agency shifts: “maybe when we get our consultant in here that will open the doors.”
      • Towards the end of the meeting, Hauge inquired about the status of the request for proposals (RFP) for an independent consultant to evaluate Enforcement. Rushford said the agency had received “only two responses. One of those two was very impressive.” She indicated the agency had extended the RFP deadline one week “to see if they get more responses.” Director Garza and Contracts Manager Rachelle Amerine planned to review proposals after the close of the RFP window “next week.” Rushford anticipated next steps would be “a couple of weeks out” and added, “I will ask that we hear about the results before there’s a decision” (audio – 3m).
    • Garrett pursued her suggestion that enforcement officers should be required to receive implicit bias training. She indicated she had suggested the same idea the previous year and been rebuffed.
    • At the conclusion of the meeting, Chair Rushford identified the question looming before the agency: “how do we turn this ship? It’s a big sea change. And an imperative one.”
  • The Board and Director also reviewed the newly released House budget, revisited a previous discussion about tribal ownership of cannabis businesses, and mentioned the new Public Health Education Liaison.
Here are shared documents for your review: