State marijuana regulators are considering opening the door for smaller-scale farms producing medical-quality cannabis to deliver directly to consumers.
The Washington Liquor and Cannabis Board sent draft legislation Tuesday to members of the state’s marijuana industry, seeking input on a pair of proposals that they said would help small businesses compete with larger firms and extend business ownership opportunities to communities of color, women and military veterans.
The legislation is intended to be introduced during the 2020 legislative session and has yet to receive input from Gov. Jay Inslee’s office, said Brian Smith, a spokesman for the state agency responsible for policing Washington’s legal marijuana industry.
“It’s to give them a leg up,” Smith said of the smaller-scale producers that the new legislation would apply to.
Local growers reacted tepidly Tuesday to the board’s legislation. While they praised its push for diversity in an industry perceived as dominated by white men and its options for direct sale between producers and their customers, many said the proposal falls short of necessary changes to promote competition.
“If I was able to deliver, that could save my business,” said Aaron Juhl, owner of Funky Farms, a small-scale farm in Deer Park. “But the medically compliant thing, the testing for that is so stringent and so expensive that it’s really hard to work around.”
Home delivery would be one of three new available direct-sale options for “tier 1” marijuana producers in Washington. State marijuana laws initially split marijuana producers into three categories based upon the amount of the drug they could grow. Tier 2 and tier 3 producers may grow up to 10,000 square feet and 30,000 square feet, respectively, of marijuana, while tier 1 producers are limited to 2,000 square feet.
Smaller farms have argued for years that mounting regulatory costs and declining wholesale prices brought about by a market glut of product are pricing them out of business.
The new state laws, scheduled to be submitted to the governor’s office in the middle of September, would allow those smaller farms to apply for home delivery, conduct sales at their place of business or pool together with other small-scale farms to open a “common retail location” that could only be open two days every month.
Chris Marr, a former state legislator and Liquor and Cannabis Board member who now lobbies on behalf of marijuana companies in Olympia, said the most opposition to the law may be from larger firms who object to the preferential treatment granted to tier 1 companies.
“You’re providing privileges to the smaller guys that the bigger guys don’t have,” Marr said. “A lot of them are also having their own struggles.”
Direct-to-consumer sales have only been authorized in Washington state at licensed retail stores since summer 2014. State law allows for delivery businesses, but only from producer or processor locations to retail shops licensed to sell the drug to customers or medical patients who receive a tax break on purchases.
Should Washington authorize limited home delivery under the new law, it wouldn’t be the first state to do so. California state law allows for delivery of marijuana directly to consumers, but there have been legal challenges to the state law by local governments, according to a report from the Sacramento Bee in April. In Massachusetts and Colorado, lawmakers have been pushing for legal home delivery beginning next year.
Direct sales in Washington would require local approval, which means governments at the town, city and county level would have to give their OK before small-scale farms could begin delivery or sales at their own locations.
The law also requires that a “significant portion” of marijuana grown by the producer be targeted for medical patients and subject to approval by the Health Department, which requires such products to be tested for heavy metals and pesticides.
Products sold with Health Department approval must also contain certain amounts of the chemicals tetrahydrocannabinol, or THC, and cannabidiol, or CBD. THC is the psychoactive element of marijuana. CBD is a nonpsychoactive element in cannabis that is seeing a boom in the therapeutic market despite little research on its health effects.
It’s those more stringent requirements and a lack of dedicated funding to help small farms expand to produce Health Department compliant products that should give pause to the small growers the laws are intended to benefit, said Crystal Oliver, executive director of the group Washington SunGrowers Industry Association, which advocates on behalf of outdoor cannabis growers in the state.
“If the state was really interested in supporting small independent producers, there would be a funding mechanism in the form of grants or interest-free loans,” Oliver said.
There is a dedicated stream of money directly from taxes collected on marijuana sales in the second piece of legislation the Liquor Cannabis Board is proposing. That law would allow local governments to petition the state for more retail store licenses in an effort to increase representation in ownership in the legal marijuana industry.
The board would give preference in its allocation of the new licenses to owners who are members of groups affected by the previous criminalization of marijuana. The law specifically cites a 2019 Washington State University study that showed a disproportionate number of arrests of black people for alleged marijuana crimes compared to the white population following decriminalization of the drug in 2012. The law also mentions women and military veterans as potential beneficiaries of the targeted approach to marijuana business recruitment.
The law proposed by the Liquor Cannabis Board would set aside $100,000 each year for what it calls “technical assistance grants” to support businesses launching as a result of the license diversity initiative. That money could be used for training on compliance with the state’s laws regarding the sale of legal marijuana, equipment purchases and other eligible expenses.
State regulators will be accepting comments on the proposed laws through Sept. 5, with plans to submit the draft legislation to Inslee’s office later in September. The legislation would not be considered until the 2020 legislative session, which means local governments would not be able to consider home delivery or other potential direct sales in their communities until after July of next year at the earliest.
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