WSLCB - Executive Management Team
(January 23, 2019) - Summary

The WSLCB Canopy Team’s findings were summarized for agency leadership.

Here are some observations from the January 23rd WSLCB Executive Management Team meeting.

My top 3 takeaways:

• WSLCB Marijuana Examiners Manager Kendra Hodgson delivered a summary of the Canopy Team’s findings from the first year of surveys and led thirty minutes of discussion with agency leadership (audio – 37m).
  • The Canopy Team report remains in draft form but the numbers discussed had been finalized.  A summary was distributed at the meeting which Cannabis Observer has requested.
  • Hodgson was careful to frame expectations for the conversation by clarifying terminology used by the agency. “Plant canopy” is defined in WAC 314-55-010(30) as “square footage dedicated to live plant production” and was distinguished from producer yield and market supply. Hodgson said, “the surveys that were done was an examination, ultimately, against the utilization of the licensed space.”
  • The first year of the Canopy Team’s work began in November of 2017 and completed a total of 792 surveys. 778 were “manual staff visits” and 14 were drone surveys of outdoor grows.
  • In their outreach to schedule surveys, 255 producers said they were not growing. The team could not contact or schedule surveys with 109 producers.
  • 49 of the 792 producers surveyed (6.2%) were over their licensed canopy allocation. Hodgson said, “we don’t believe…we have evidence of overproduction,” and was quick to reiterate, “when I say ‘overproduction’ I mean overutilization of the licensed space. We don’t believe we have an egregious overuse—right?—over what we have actually licensed.”
  • Within the subset of 49 producers measured to be over their canopy allocation, there was significant variance, “from one square foot over to 20,000 square feet over” and roughly split between indoor and outdoor grows. Here is the list of 48 producers over their canopy allocation identified by WSLCB as of the end of November (Source CSV obtained via public records request).
  • Hodgson emphasized the difference in potential yield between indoor and outdoor producers, and the limitations of the Canopy Team’s approach to snapshotting a producer’s footprint at a particular moment in time: “Canopy is not the same as harvest.”
  • Hodgson mentioned WAC 314-55-075(7)(b) in relation to the 255 producers reporting no canopy utilization and asserted industry reports of oversupply in the market would be demonstrably worse if producers were adhering to the Board’s requirement to produce at 50% utilization or higher in their first year of operation. Subsequent conversation focused on the unintended consequences of this rule and Cannabis Observer believes it is likely to be changed as part of the open rulemaking on Cannabis Production and Canopy (WSR 18-01-058).
  • Again drawing on the statistic of 255 idle producers, Hodgson asserted, “there is an imbalance between the total number of retail licenses that we have and the number of producer licenses that we have.” Director of Licensing and Regulation Becky Smith interjected that her team had examined the list of 255 producers that morning and “we found a lot of them to be discontinued.” She added, “Also, when a license is sold to somebody else, what happens sometime in the system is that somebody doesn’t close out one license as another one’s opened.” Smith encouraged “double-checks to make sure that those folks just really just aren’t, like, out of business.” Hodgson said that was “a fair comment” but seemed to infer it was a challenge for Licensing to document the status of licenses and make that information available throughout the agency.
  • Chief of Enforcement Justin Nordhorn dug deeper into the 255 number and Hodgson confirmed the Canopy Team only made a single attempt to contact those producers during the survey year, and documented a variety of reasons producers provided for their idle status. For the second year of the survey, the Canopy Team is validating producer assertions by examining their data in the traceability system.
  • Nordhorn asked if any producers were over their Tier 3 maximum allocation of 30,000 square feet. Hodgson confirmed several producers were in violation, with the largest canopy measurement at 51,000 square feet (Edgemont Group). Nordhorn would later say, “over 20,000 square feet, that’s significant, that’s actionable.” Hodgson said the Canopy Team would be providing monthly updates to Enforcement during year two.
  • In concluding her presentation, Hodgson said, “Overall, however…the total observations that we have say that we are way under the total licensed space. That for the 792 surveys that we conducted that would be 38% of the licensed area is being used.”
  • Hodgson was leading development of a communications plan for licensees in cooperation with Licensing and Enforcement. She advocated for a “moderate approach” to policy changes and would be coming to the Board with specific recommendations.
• The Executive Management Team discussed the previous week’s Cannabis Advisory Council (CAC) meeting and reviewed suggestions the agency could take action on (audio – 11m).
  • Board Member Ollie Garrett was eager to hear the impressions of others at the event: “Are there any things that stood out? That we can start taking a look at, that we can do?”
  • Board Chair Jane Rushford said the market was old enough WSLCB was seeing “imperfection and opportunity” and felt the agency was getting better information showing “where we need to be.” Garrett felt overall consensus had improved as compared to previous meetings.
  • Director of Communications Brian Smith observed a strong focus on making options available to small producers such as vertical integration.
  • Nordhorn compared small producer direct sales to the microbrewery model, but implementation remained beyond the agency’s statutory authority. Garrett agreed stakeholders often did not understand the limits of the WSLCB’s authority.
  • Garrett said the she was hearing the most interest for the Board to host meetings outside Olympia. Rushford said she’d gotten similar feedback. Executive Assistant Dustin Dickson had begun reviewing a two-year calendar to identify dates when the Board is available to travel and schedule stakeholder meetings while visiting other areas of the state.
  • Read Cannabis Observer’s coverage of the January 16th Cannabis Advisory Council meeting.
• The EMT received an update on open rulemaking and discussed other cannabis topics.
  • Policy and Rules Coordinator Kathy Hoffman brought leadership up to speed on cannabis and vapor rulemaking (audio – 12m).
    • The CR-102 for updates to mandatory marijuana signage had been postponed to improve language and “work on the communication piece of it” (WSR 18-24-033).
    • Rulemaking on True Parties of Interest (TPI) was going through internal review. Hoffman anticipated finishing in late February/early March (WSR 18-22-054).
    • Cannabis Penalty rules were in an early phase of development (WSR 18-22-099).
    • Quality Assurance (QA) Testing and Product Requirements language was “coming along really nicely” with a draft expected within weeks. Hoffman stressed a desire to obtain more stakeholder feedback (WSR 18-17-041).
    • After delivery of the Canopy Team report, drafting the Cannabis Production and Canopy rules awaited a new BOTEC report (WSR 18-01-058).
    • The CR-103 for Vapor Rules needed a “little extra work” and internal review of changes following the January 9th public hearing (WSR 18-24-031).
  • Brian Smith said Oregon Health Authority Principal Investigator Julia Dilley was researching racial disparities in arrests and had inquired about what Washington State was doing to encourage minority participation in the market. Dilley briefed agency leadership last year at the September 19th EMT on her study of the effects of state and local policy on cannabis use and public health. Policy Analyst and Tribal Liaison Brett Cain was assisting Smith on the agency’s response (audio – 1m).
  • City of Seattle staff briefed the agency on a survey of former medical dispensary owners and current retail licensees in the city. Garrett wondered about the potential value of a statewide survey if the agency were able to identify former dispensary owners.
  • Becky Smith reported the Licensing and Regulation division’s search for dedicated policy managers had produced “great candidates.” Licensing planned to interview for the Cannabis Manager position the following week (audio – 3m).