Compliance goes beyond Liquor Control Board regulations
By David Kerr
The Washington State Liquor Control Board rules are the touchstone of regulatory compliance for recreational marijuana businesses. After all, if you make a habit of violating Liquor Control Board rules, or if you violate one of the rules that can result in termination of license on the first violation, you are not going to be in the legal marijuana business very long. These rules are codified by WAC 315-55.
Every applicant and licensee needs to read, understand and be familiar with the rules. Keep in mind that these rules are constantly changing, as is the LCB’s interpretation and application of the rules, so reading them isn’t a “once and done” activity.
To emphasize this point, the LCB has issued 373 administrative violations to date. The violations include: failure to maintain required security alarm and surveillance systems; failure to submit monthly tax reports and/or payments; licensee and/or employee opening or consuming marijuana on a licensed premises; failing to display required security badge; improper record keeping; retail outlet selling unauthorized products, and so on and so forth. Twenty-six of these violations resulted in fines between $500 and $5,000. There were nine license suspensions ranging from five days to 30. One producer was hit with the destruction of 25% of its harvestable marijuana.
Compliance with LCB regulations is not something to take lightly. But compliance with LCB rules isn’t the end of your regulatory compliance obligations. Recreational marijuana businesses are also subject to additional local, state and regional regulations and requirements.
Looking at some of agencies and areas of regulation will help you be prepared (or at least make it less of a shock) when they come knocking.
• Department of Labor and Industries: L&I has several branches, including the Division of Occupational Safety and Health (DOSH) that focuses on employee health and safety. Developing an accident prevention plan specific to your business operation is the first step in compliance. Then there are specific regulations that apply to the hazards of the job that must be followed and these can have additional requirements for the prevention of employee injury or illness during their day-to-day activities. DOSH explains that businesses that grow marijuana are mainly subject to the safety standards for agriculture (WAC 296-307). Processors who perform extractions need to be aware of their responsibilities when it comes to providing safety data sheets for the chemical extract that they produce (WAC 296-839 through June 1, 2015 and WAC 296-901).
• Department of Agriculture: The Department of Agriculture provides oversight of scales used for all commercial transactions, including marijuana transactions. Since these scales must meet strict accuracy and technical standards, they require annual inspection.
The Department of Agriculture is also responsible for the required sanitary inspections at state-licensed marijuana processing operations to ensure product safety and maintain state-level oversight of food safety concerns for both processors and retailers.
The department maintains the registry of pesticides allowed for use for the production of cannabis. Growers can use any fertilizer that is registered by the Department of Agriculture except for those fertilizer/pesticide products that are specifically not allowed for use on marijuana. However, pesticide use has areas of overlap between different government agencies, including the agriculture, ecology and L&I departments.
• Department of Ecology: Waste management is regulated by the Department of Ecology. Regulation of dangerous waste is of particular concern. Since legal marijuana is such a new industry, the scope of potential dangerous wasted isn’t fully known, but potential hazards include: waste from marijuana processing with 10% or greater THC content; waste pesticides; waste fertilizers, process waste contaminated with solvents, waste solvents, lighting with mercury and lead content, and laboratory wastes generated in QA testing. A dangerous waste generator is responsible for designating waste and keeping accurate records of the designation, the management and the proper disposal that waste.
• Clean air agencies: The regional air quality agencies are based on the county. Eleven separate agencies cover the state of Washington. For example, the Puget Sound Clean Air Agency covers King, Kitsap, Pierce and Snohomish counties. Because marijuana production and processing can “impact air quality, produce odorous emissions, and/or cause off-site nuisance impacts due to odor,” marijuana producers and processors are subject to air quality regulations.
Puget Sound Clean Air Agency requirements include permitting and registration. The permitting program is referred to as a Notice of Construction (NOC). This is a pre-construction application and review process that results in a permit for your business. A $1,150 filing fee is required with your NOC application. Additional processing fees are due after review of the permit application. They are based on the information in your application and the specifics of your facility and equipment. The registration program includes on-site inspections, compliance reviews and annual fees. To keep your permit in effect, you must maintain an active registration.
There are useful publications available on the websites of each of these agencies (and others) that provide more information and greater detail with respect to the numerous, varied and complex regulatory environment that awaits marijuana licensees. Avail yourself of these. Be proactive and don’t assume that “all that stuff doesn’t apply to me,” because it does. Keep your business on the right side of the compliance curve.
Attorney David Kerr serves business clients throughout the state, including an emphasis on the emerging legal, regulatory and compliance issues facing new cannabis businesses.