Cannabis Farmers Council Petition

502 FARMERS: BE HEARD! ACT NOW!

Sign this Petition to the LCB to Stand Up for Farmers!

The Washington State Liquor and Cannabis Board (LCB) announced on March 7 that, based on comments received at the February 10 public hearing, it was “considering filing a supplemental rulemaking to accommodate the requested revisions”. Such supplemental rules, it stated, could be filed in late March, followed by an opportunity for public comment.

This new rule-making effort by the LCB is thanks (we like to think) in part to the petition drive organized by the Cannabis Farmers Council (CFC) in which over 360 endorsements were obtained in less than four (4) days. At the hearing, its various points were well presented by many individuals, and this show of a united front clearly made an impression on the LCB.

LCB's undertaking of a supplemental rule-making exercise is a very positive development, and demonstrates the LCB's willingness to receive and consider your input. For that reason, we believe it is especially important to provide the LCB further constructive suggestions prior to the publication of the “supplemental rules” anticipated in late March.

We all know there are many other matters of direct concern to cannabis farmers, beyond those raised at the February hearing. This petition incorporates the attached Farmers' Proposed 10-Point Action Plan which addresses at least some of them. In putting together this petition, the CFC has received input from farmers of all Tiers throughout the state. This compilation reflects those particular points on which there seemed to be broad agreement and no objection. In selecting the points discussed, we have refrained from taking a position on issues where there are genuine differences of opinion (e.g., removing existing canopy caps on small and medium farms). A recurring theme is that the farmers want more and better communication channels with the LCB to address issues that directly affect us.

Our goal is to gather as many signatures to this petition as possible, with a view toward submitting this to the LCB no later than Wednesday, March 24. You are encouraged to use the Comments Section of the Petition24 website to add other concerns and comments, or just to put your own spin on the points raised. The important thing is to let your voice be heard.

If you find yourself in general agreement with the points raised, we ask you to indicate your endorsement by electronically signing this petition. We will forward the petition together with signatures and comments to the LCB on or about March 24. The more licensees and other stakeholders (employees, suppliers, landlords, consumers, etc.) who sign the petition, the louder will be our voice.

We hope you sign it, and encourage as many others as possible to sign it. We only have a few days, and your support will help us send a clear and resounding message to the LCB.

THE UNDERSIGNED HEREBY PETITION the Washington State Liquor and Cannabis Board to consider and implement the items contained in the Farmers' Proposed 10-Point Action Plan set out below:

 

FARMERS' PROPOSED 10-POINT ACTION PLAN

Prepared by the Cannabis Farmers Council

March 19, 2016

 

A. INTRODUCTION

Set out below is a 10-Point Action Plan that the CFC respectfully submits to the LCB for its consideration and implementation.  The first seven (7) items are the major issues of concern that farmers have made known to the CFC over the last several months. The remaining three (3) are suggestions regarding preparation of the next Small Business Economic Impact Statement (SBEIS), and enhanced access in respect of future public hearings.

We first provide an Executive Summary of the 10 Points, followed by a Detailed Discussion of each. 

We hope you will welcome this input as informative and useful. Up until now, other licensee groups have had better representation before the LCB than have the farmers, and the presentation of this paper to you is our attempt to play catch-up. 

Thank you for taking our proposals into consideration.

B. EXECUTIVE SUMMARY

1. Lift or Relax Caps on Retailer Licenses: Even with the recent decision to issue up to 222 additional retail licenses, there is a crying need from many quarters for more retail shops to be opened. The LCB should reconsider its cap on retail licenses for the following reasons:

  • The current cap imposed on retail licenses is unfair to many existing compliant dispensaries, and their forceable closure will eliminate hundreds if not thousands of jobs. 
  • The proposed closure of some 80% of existing dispensaries will exact a financial and physical toll on patients who rely on marijuana for pain management and relief of other symptoms. 
  • The relatively few retailers compared to the large number of Producers and their aggregate production volume has created imbalance of market power that is putting a severe economic strain on many farmers, especially those working small and medium farms. 
  • Because municipalities are in the best position to determine the needs of their own communities, we believe the LCB should respond favorably to Seattle and perhaps other places making similar requests for additional stores.
  • As a practical matter, making allowance for more applications would largely alleviate concerns regarding ongoing complaints of alleged irregularities in the approval process of new retail licenses.

2. Increase Lot Size for Testing Purposes: There is no justifiable reason why testing lots should be as small as five (5) pounds, and the test-lot size should be reconsidered. Strains are usually grown in the same manner and reaped in a single harvest. Five-pound lots effectively requires twenty (20) separate lab tests on every 100 lbs of virtually identical cannabis; this is excessive and unnecessary, both from the perspective of test validity, as well as public safety. Requiring small testing batches does nothing to prevent cheaters, but imposes a significant financial burden (+/-$100 per test) on farmers who would have followed the rules in any event.Larger lots by harvested strain or poundage are needed.

3. Eliminate or Reduce Quarantines: Quarantines hinder commerce, impede cash flow, create on-site handling obstacles, cannot be easily applied to live plants, and increase labor and other expenses. Yet they appear to serve no useful purpose in respect of traceability, and their elimination would not compromise the traceability system in any way. For all its faults, the seed-to-sale traceability system documents the movement of all marijuana material at every step of its existence up to the point of sale. Any deviation may warrant investigation – but the absence of a period of physical isolation does not at all degrade the “integrity” of the described system.

4. Address Traceability System Problems (BioTrack): Dissatisfaction with the so-called “free” BioTrack traceability system seems to be nearly universal. Common complaints are manifold. To address these many technical matters, the LCB should engage outside (non-BioTrack) software engineers to see what can be done. Ultimately, if a budget allocation is needed, so be it; but we call on the LCB to recognize that the BioTrack system needs a major tune-up, if not a complete overhaul or replacement.

5. Provide Additional Education & Guidance to Licensees: As a group, farmers would welcome opportunities to attend educational forums presented by compliance and licensing officers on a regular basis. The LCB might consider holding regional programs for licensees on a monthly or quarterly basis, to be presented by licensing and/or compliance officers. There would be a great deal of mutual benefit flowing from improved and direct communications between Producer/Processor (P/P) licensees and the LCB. The CFC stands ready to assist in arranging venues, etc., to facilitate educational forums or the like.

6. Form a Cannabis Advisory Council: By far, the largest group of licensees within the 502 regulatory framework is that of farmers, and our interests have so far been underrepresented to the LCB. We believe all stakeholders, including the LCB, would greatly benefit from the formation of a Cannabis Advisory Council, and we seek the guidance of the LCB on how to proceed.

7. Involve Farmers in Discussions re Pesticide Control & Lab Testing: Farmers are at the front of the line when it comes to effective control of pesticides, and we want the opportunity to share our knowledge, insights, and perspective. This is also true of lab testing, especially in light of recent unfortunate news involving at least one licensed lab. Whatever regulations are crafted, both the burden of compliance and the risk of sanctions will fall primarily on the farmers. This kind of issue underscores the importance of forming an advisory council, but even on an ad hoc basis direct involvement of the farmers in these discussions will ensure that all relevant stakeholders have a fair opportunity to provide input.

8. A New SBEIS is Required: The cannabis industry is in its infancy, and there are many relatively fragile licensees among the farmers who have invested their life savings in their venture, and are struggling to have sufficient revenue to pay ongoing expenses. Even seemingly small regulatory changes (e.g., another labeling requirement) can have major economic repercussions to licensees (e.g., larger packaging), and that is why we urge the LCB to conduct a more thorough SBEIS, preferably employing the services of trained economists in its preparation. 

9. Written Public Comments Delivered to the LCB Should Be Posted Online: Self-explanatory. Other agencies currently do so, and it would improve understanding among all stakeholders. 

10. Phone-In Access to LCB Meetings Should be Made Available: Self-explanatory. This would be a great convenience to stakeholders located in areas remote from Olympia.

C. DETAILED DISCUSSION

1. Lift or Relax Caps on Retailer Licenses  

Even with the recent decision to issue up to 222 additional retail licenses, there is a crying need from many quarters for more retail shops to be opened:

  • The current cap on retail licenses is grossly unfair to many, many qualified applicants who meet all First Priority criteria but will be denied a retailer license only because of the cap. Those deemed to be secondary or tertiary priorities appear to have no chance of even being considered for a license. As a result, many fully compliant dispensaries will lose their businesses resulting in loss of jobs presumably in the hundreds, if not thousands, throughout the state*. Even in the peculiar matter of cannabis legalization, widespread disruption and closure of businesses that are in general compliance with applicable laws is bad for the economy and has ripple effects throughout all strata of communities. Bad actors should be weeded out, but principles of both fairness and prudent management argue persuasively in favor of allowing all those meeting First and Second Priority qualifications to have an opportunity to submit an application for consideration.
  • Medical patients too will be disadvantaged by the dramatic reduction in the number of outlets, and in many cases this will be a real hardship on the ill and the elderly. It is estimated that some 80% of existing medical dispensaries will be closed. There can be no doubt that the inconvenience, time, and transportation costs will exact a financial and physical toll on patients who rely on cannabis for pain management, and the relief of many other symptoms. Principles of compassion favor the licensing of more stores, especially in areas where a high demand exists.
  • There is an imbalance of market power between the +/-800 licensed P/Ps and the +/-300 licensed Retailers (around a quarter of which have yet to report sales).  The relatively few Retailers are unable to absorb the production output of so many P/Ps, creating a bottleneck as existing inventory seeks to enter the stream of commerce through the only available portal, i.e., Retailers. This has resulted in depressed wholesale prices, though the low wholesale prices are not always reflected in the relatively high retail prices. . Simply put, it is a buyer's market artificially created by the LCB's existing policy of limiting the number of retail outlets. Some level of equilibrium should be sought, and an additional 222 new stores as proposed is insufficient.
  • The City of Seattle is on record as requesting that its quota of retailers be increased beyond the LCB's allocation. Individual municipalities are in the best position to determine the needs of their own communities, and we urge the LCB to respond favorably to Seattle and any other places requesting  an increase in their allocation of additional retail outlets.

For all these reasons, the LCB should substantially increase the cap on new retail licenses. At a minimum, the LCB should respond favorably to Seattle and any other places requesting  an increased allocation.

2. Increase Lot Size for Testing Purposes

There is no justifiable reason why testing lots should be as small as five (5) pounds, and this lot size should be reconsidered. 

Farmers frequently grow a commercial quantity of relatively few strains, typically selected for their particular attributes and the grower's personal experience and preferences. Once selected, these strains are usually grown in the same manner and reaped in a single harvest. 

On a Tier-2 or Tier-3 farm, a harvest of one strain can easily weigh well over a hundred pounds of what might be termed a “fungible commodity”, at least in respect of all contemporaneously harvested plants of the same strain. Requiring twenty (20) lab tests on 100 lbs of virtually identical cannabis is excessive and unnecessary, both from the perspective of reliability and validity, as well as public safety. Requiring small testing batches does nothing to prevent cheaters, but imposes a significant financial burden (+/-$100 per test) on farmers who would have followed the rules in any event.

The additional cost imposed by this unavailing requirement results in higher wholesale and shelf prices, thereby impeding the regulated market's ability to compete on price with the black market. 

The DOH's approach of requiring pesticide testing per harvest makes sense for the same types of reasons explained above (assuming our interpretation of DOH's proposed regulation is correct). LCB might borrow a page from DoH's book and do the same for recreational marijuana by permitting potency and microbe testing to be done for a single, well-defined “harvest”. 

If this is too drastic a step, a modest increase in testing lot size to 10 lbs. or even 25 lbs. should be considered. Doing so would not make test results any less valid, would still far exceed the rate of testing done on other food crops in the state, and would provide some much needed financial relief to farmers by reducing overall testing costs.

3. Eliminate or Reduce Quarantines

It seems hard to defend the necessity of quarantines in light of the rigorous and detailed monitoring function of the seed-to-sale traceability system. 

Quarantines are said to be justified because they “protect the integrity of the system”, but it is unclear as to what that actually means. As a practical matter, the removal of the quarantines would not compromise the traceability system in any way. This product is under recorded observation until leaving the premises, is logged into the traceability system at the time of departure, and is again under recorded observation upon delivery at which time it is again logged into the traceability system. Any deviation from this pattern is suspicious and may warrant investigation – but the absence of a period of physical isolation does not at all influence the “integrity” of the described system. 

For the most part, these mandatory quarantines only serve to inhibit commerce, creating attendant costs and cash flow delays for the licensees in the process. 

The 24-hour pre-delivery quarantine increases costs and is a drag on business, but provides no apparent concomitant benefit or safeguard.

The 72-hour quarantine for waste material (WAC 314-55-097) serves only to create a smelly, sloppy, and sometimes fetid mess. Degrading waste is a magnet for bugs, mold, fungi, etc., and other pests that farmers go to great lengths to discourage and control. Immediate disposal also makes more sense from a nuisance-odor perspective.

Quarantining of live plants is especially troublesome. When sold from one farmer to another, live plants are typically coming out of a climate-controlled nursery dedicated for such purpose, but are then required to be moved to a “quarantine room” which in practice is almost certainly not a room conducive to plant growth. Even a 24-hour change in light cycle, temperature, and/or humidity, can adversely impact a plant. Quarantining is also likely to increase the risk of bio-contamination. From the farmer's perspective, once again the detriment caused by quarantining cannot be justified by any apparent tracking benefit.

Lastly, during the peak of an outdoor harvest, moving heavy and voluminous amounts of plant material creates an unwelcome additional handling step (read, “labor cost”), but accomplishes no apparent practical purpose. 

4. Address Traceability System Problems (BioTrack)

This is a highly technical subject. Whatever else might be said, however, dissatisfaction with the so-called “free” BioTrack traceability system seems to be nearly universal. Common complaints include:

  • System is generally too slow and “clunky” in operation;
  • Inordinately long pauses between functions;
  • System times out too quickly, and freezes without apparent cause too frequently;
  • No cut-and-paste function available, resulting in excessive labor costs;
  • Inability to select more than a single line item, e.g., for harvest or destruction;
  • System's inflexibility regarding product transfers between Producers and Processors; 
  • Poor customer service; Generally non-responsive;
  • And many more.

On a deeper level, outside software engineers have identified a multitude of fundamental defects in  BioTrack's Database, System of Record, and Application Programming Interface (API). The root of the problem may lie in the fact that BioTrack's platform is derived from a pharmaceutical model (Oxycodone) rather than an agricultural model. It is rather like software designed for an aspirin factory being used for an apple orchard.

In lay terms, the day-to-day problem is that many of the processes and procedures established in the traceability system do not work in a reliable and predictable manner. Inconsistencies are the death knell of any software application, and many, probably hundreds, have been discovered and reported to BioTrack with little or no response. But many more inconsistencies still dog the system, and we believe the provider should be held to some higher standard of performance. 

These are clearly technical matters about which we would like to see the LCB engage outside (non-BioTrack) software engineers to see what can be done.

Ultimately, if a budget allocation is needed, so be it; but we call on the LCB to recognize that the BioTrack system needs a major tune-up, if not a complete overhaul or replacement.

Lastly, without meaning to seem contentious, it must be observed that in this case a state contractor is providing a software that is so obviously and admittedly insufficient for its intended use that the contractor itself sells a “paid version” of fixes necessary for the system to have practical utility. This strikes some as being an actionable conflict of interest, as well as an amazingly frank admission of how ill-suited their traceability system truly is. 

5. Provide Additional Education & Guidance to Licensees

As a group, farmers would welcome opportunities to attend educational forums presented by compliance and licensing officers on a regular basis. We understand there are indications that the LCB is planning outreach activities along these lines in the coming months, which is welcomed news.

Topics in which there would probably be keen interest among growers might include:

  • Labeling requirements (note the ambiguity in the WAC regarding “accompanying material”);
  • Video camera system compliance & pitfalls, e.g., coverage rules and responding to system failures;
  • Correct response to, and obligations arising from, major property damage caused by elements;
  • Tips regarding physical security of Licensed Premises, and response protocols to breaches.

Specific topics might also be selected by identifying the most common types of violations found by compliance officers,  and then using educational forums to explain mistakes and offer suggestions to ensure compliance. Individual licensees and their organizations would surely be happy to suggest other topics as well.

The LCB might consider holding statewide programs for licensees on a monthly or quarterly basis, to be presented by licensing and/or compliance officers. These programs should be topic-specific so as to focus on just one or two things, and should be organized to prevent their descent into a general airing of grievances. Consider whether these might be sponsored by regional representatives of the CFC , . These kinds of actions would lead to fuller compliance, and also dispel a common perspective that compliance guidance is not always easy to find. We believe a large majority of growers are intent on following all applicable rules, but first need instruction and correction to gain a clear understanding of applicable compliance standards.

We know that one of the repeated goals of the LCB as set out in its 2015-2017 Strategic Plan is the education and engagement of licensees by the LCB. Stated activities and objectives laid out in the Strategic Plan include:

  • regular engagement with “key stakeholders and partners”;
  • seek to understand stakeholder and partner expectations;
  • complete an outreach campaign to the public, stakeholders, and media;
  • bolster communication through data & public accessibility to information; and
  • clarify agency priorities to customers & employees, and ensure consistent operational policy.

These are all positive and constructive undertakings, and the cannabis community looks forward to participating in them to the full extent that it is invited to do so. There is mutual value in information and concerns flowing both ways. We read the above bullet points as encouraging just that type dialogue.

These types of initiatives would also help to dispel the apprehension that many farmers feel when their only interaction with enforcement officials is at the time an armed officer is conducting an inspection of their site. While nearly all reported encounters with compliance officers have been cordial, respectful, and professional in all respects, some heavy handed and/or inconsistent treatment has also been reported. Any forum in which the farmers can be educated and guided in ways to ensure compliance, will surely have beneficial results.

6. Form a Cannabis Advisory Council

By far, the largest group of licensees within the 502 regulatory framework is that of farmers, and our interests have so far been underrepresented to the LCB. 

We believe all stakeholders, including the LCB, would greatly benefit from the formation of a Cannabis Advisory Council, similar in some ways to the existing Business Advisory Council for liquor. 

While not very familiar with how the existing Business Advisory Council functions, we believe it important that each group of 502 licensees be represented within any such council structure so that Retailers, Producers, Processors, and Testing Labs are all provided with individual voices to express viewpoints on issues as they arise.

There are several other organizations that support this idea. The guidance of the LCB in how best to go about forming such an advisory council would be welcomed.  

7. Involve Farmers in Discussions re Pesticide Control & Lab Testing

Farmers are at the front of the line when it comes to supporting effective control of pesticides, and we want the opportunity to share our knowledge, insights, and perspective. The same goes for general 502 testing for microbials, potency, etc.

From news reports and other sources, we know the LCB is actively exploring these subjects, and is engaged in conversations with various parties including the WSDA, DOH, and various trade groups representing retailers and laboratories, but none speaking on behalf of farmers. Especially since the burden of compliance as well as the risk of sanctions fall primarily on the farmers, we wish to be kept in the loop and allowed to comment and participate in the rule-making process. This is true for both pesticide control and lab testing in general.

This issue underscores the importance of forming an advisory council, but even on an ad hoc basis some involvement of the farmers in these discussions is crucial to ensure that all relevant stakeholders have a fair opportunity to provide input.

Substantively, we offer two (2) points for your consideration: (a) WSDA, as the only agency with the requisite technical expertise, should have the lead in all things related to pesticides, including establishing a compliance protocol, the scope & type of required testing, a sample-collection protocol, appropriate threshold levels, and all other technical issues, and (b) care should be taken to avoid placing too much reliance on universal lab testing  since it is extremely expensive and far from foolproof in protecting the public. Random testing with severe penalties for egregious or repeat violations, as suggested by others as well, is by far a more effective deterrent.

8. A New SBEIS is Required 

Given the recent indication that the LCB is considering filing a supplemental rule-making in late March to accommodate the revisions requested at the Public Hearing on February 10, 2016, a new SBEIS will be needed.

We do have a concern about the depth of research, sources of data, and real economic analysis that goes into the preparation of the contemplated SBEIS. Major policy decisions of the LCB, and especially those that figure to fundamentally impact the structure of the entire industry, should be made only after sufficient due diligence and analysis has been completed. Doing so will ensure that the course of action chosen is prudent and not likely to cause major disruptions in an already fragile, new business sector in the state.

The cannabis industry is in its infancy, and there are many relatively fragile licensees among the farmers who have invested their life savings in their venture, and are struggling to have sufficient revenue to pay ongoing expenses. Even seemingly small regulatory changes (e.g., another labeling requirement) can have major economic repercussions to licensees (e.g., larger packaging). These companies are in precarious financial circumstances, and are not positioned to withstand shocks in the form of regulatory measures that add material operational costs or burdens. The next SBEIS should strive to identify and assess the actual economic impact of the newly proposed rules.

To this end, it would seem essential for professional economist(s) to be involved in preparing a SBEIS, using reliable data and valid models with which to arrive at reasonably verifiable findings and conclusions that support any particular policy recommendation. Especially in this new and complex  business sector in which small investors represent perhaps a majority of all licensees, care should be taken in assessing the economic impact of proposed regulations.

9. Written Public Comments Delivered to the LCB Should Be Posted Online

Some state bodies have a policy of posting the public's written comments online, so that stakeholders may access what others are thinking and saying about proposed rules, e.g., the State Building Code Council provides this online access.

We request that the LCB implement a similar policy in order to allow all interested parties to see all written viewpoints being presented to the LCB. 

10. Phone-In Access to LCB Meetings Should be Made Available

To extend ready access to stakeholders who are not located within a convenient distance to Olympia, the LCB should consider arranging for telephonic participation at its public hearings. Again, we know that some other state agencies offer this accommodation as a matter of course, and that the LCB apparently has some capability to do so since the one of the Board members telephonically participated in the meeting of February 10, 2016.

D. CLOSING

The length and detail of our comments should not be taken as a sign of some fundamental dissatisfaction with the performance of the LCB to date. 

While we believe there is room for improvement in the structure and operation of the 502 system as it exists, the cannabis community as a whole is appreciative of the receptive disposition of the LCB toward receiving input from stakeholders. Our suggestions and requests are offered in a positive and cooperative spirit, with the hope that sharing the perspective of farmers will inform the decision-making process of the LCB for the better.

The industry as a whole stands ready to help regulators at all levels by providing fact-based information on any aspect of marijuana, including its cultivation, processing, and sale. We welcome more opportunities to do so. Better mutual understanding among all stakeholders and regulatory agencies will doubtless lead to better-tailored regulations.

In that vein, it would be helpful for the LCB to issue contemporaneous explanations of underlying policies and intended effects of  proposed rules at the time of issuance in order for stakeholders to understand the context of the LCB's proposals. Having an appreciation of the underlying issues that prompt proposed rules would help licensees formulate their comments in a responsive and meaningful manner. While sometimes the concerns behind a rule are obvious, in many instances they are not, e.g., see the many questions raised regarding the meaning and implications of the new definition of “licensed premises” in the 2016 Draft WAC. 

Continuing thanks for your attention to, and consideration of, our views.

 

 

 * There is widespread dissatisfaction with the manner in which new retail licensees are being selected under the provisions of SB 5052 and its accompanying WAC emergency regulations. Multiple credible reports indicate that new comers to the industry (enabled by collusive individuals who would not otherwise be eligible for licensing) are obtaining retail licenses based on clever backdated paper structures that give the illusion of meeting so-called First Priority qualifications, while legitimate business owners of long-standing, compliant dispensaries that really and truly meet the First Priority qualifications are being shut out. SB 5052 charged the LCB with the task of developing a “competitive, merit-based application process that includes . . . the opportunity for an applicant to demonstrate experience and qualifications in the marijuana industry” (SB 5052, Sec.6(a)). To do so, the LCB is given broad authority to inspect and inquire as to “all matters in connection with the construction and operation of the premises” (supra, Sec.(6)(b)). The CFC urges the LCB to exercise that power by ensuring that applicants who actually operated a brick and mortar dispensary prior to January 1, 2013, held appropriate business licenses, and paid their taxes, are given priority over “tricky operators” whose very tactics in the application process raise questions about their ethical qualifications to participate in this industry. More retail licenses are needed, and should be granted based on actual and demonstrable merit rather than a mere aptitude for cobbling document packages together.