Implementation of Washington's I-502: A progress report

By Steve Freng
Northwest HIDTA Prevention/Treatment Manager
The previous edition of this newsletter closely followed the full implementation of the production, processing and retail sales of marijuana and marijuana-infused products in Washington State. On July 8, 2013, the first five retail stores opened, offering products legalized and produced for persons 21 years of age and older under the auspices of Initiative 502. Much has happened since that date, with several recent events and ongoing developments detailed as follows.
Just before the publication of this edition, the Washington State Liquor Control Board (LCB) had approved and issued licenses for 119 of the 334 retail stores stipulated in the Initiative, 113 of which have reported retail sales. A total of 381 licenses have been approved and issued to marijuana producers, with 330 active licensees, and a total of 335 licenses have been approved and issued to processors, with 288 active licensees. These figures do not indicate the number of licensees that have been approved to operate as both producers and processors. In total, the LCB reports that this nascent industry has to date generated sales of over $95 million, with over $23,700,000 in excise taxes due to the State of Washington.
 
And, as the shortages that characterized the start of the state’s legal marijuana market have eased, prices in retail stores have decreased as much as 40 percent since June of last year. LCB data show that licensed producers had harvested approximately 31,000 pounds of marijuana as of mid-January, but the limited number of retail stores have sold less than one-fifth of that total. Nonetheless, prices that had been as much as $35 a gram in July have been reduced to $10-15 a gram in some locations.
 
However, as had been previously reported, the industry is not developing uniformly throughout the state. Of the 281 cities and towns in Washington, 80 have approved moratoriums temporarily restricting the operation of licensed marijuana businesses, and 41 have enacted permanent prohibitions against any marijuana-related businesses.

Three cities – Kennewick, Fife and Wenatchee – have in fact prevailed in court cases that support their bans. Among the 39 counties in Washington, 10 have moratoriums in place and three have enacted prohibitions. Superior Court judges in five jurisdictions have now ruled that I-502 as drafted does not prevent cities and counties from banning marijuana businesses and ruled that the bans in Pierce and Clark counties are permitted. The case involving Pierce County has been appealed to the state Supreme Court, and the Legislature may also address the issue in legislation during the current session.
 
With regard to the Legislature, both the Senate and the House of Representatives moved quickly to address several issues involving I-502 after convening, with over a dozen bills introduced in each chamber. On Feb. 13, the Senate passed Senate Bill 5052 on a bipartisan 36-11 vote, seeking to reconcile the state’s medical marijuana industry with the heavily taxed recreational sector. Sponsored by Senator Ann Rivers of La Center, the bill has many provisions, including the creation of a database of patients who would be allowed to possess three ounces of marijuana (I-502 allows for the possession of one ounce), and would be able to grow up to six plants at home unless authorized to receive more by a health professional (home growing is not allowed for recreational users under I-502).
 
Further, the current collective garden structure would be eliminated as of July 1, 2016, but four-patient “cooperatives” – limited to 60 plants – would be allowed, as long as the location of the collective garden is registered with the state and is not within 15 miles of a licensed I-502 retail store. The bill will also rename the LCB as the Washington State Liquor and Cannabis Board, which will be allowed to raise the 334-store limit on marijuana retailers in order to accommodate the medical industry. The bill now goes to the House where, as of the week of February 16, over 20 pieces of legislation regarding marijuana have been introduced in several committees.

Nationally, the U.S. Department of Justice announced in December that it will allow American Indian tribes to grow and sell marijuana. While this has generated debates in tribal communities across the country, it has piqued the interest of some of Washington’s 29 federally recognized tribes.

The Suquamish Tribe has begun considering potential business opportunities and the Tulalip Tribe has voted to pursue discussions on allowing medical marijuana, while the Yakama Nation has banned marijuana on the reservation and is trying to halt state regulated sales and grows on lands off the reservation where it holds hunting and fishing rights. In Olympia, Senate Bill 5848 has been introduced which will allow the Governor to enter into “agreements” with tribes for their production, processing and sales of marijuana. Tribes are sovereign, federally recognized, and federal law still prohibits possession and use of marijuana. But such “agreements” will allow the state to enforce its laws and regulations on recognized tribes – including I-502 – and will exempt Tribes from most of the state taxes on marijuana.
 
In related news:
  • The LCB is considering increasing the allowable land for I-502 production from 2 million square feet – the limit established when the system was first set up – to 8.5 million square feet, or approximately 195 acres. The Board has already licensed growers to plant more than 3 million square feet although all of the licensed land is not in production at one time.

  • A federal judge will rule later this year on whether marijuana should continue to be classified as a Schedule I drug under the 1970 Controlled Substances Act. U.S. District Judge Kimberly J Mueller will be hearing final arguments soon and, should she rule that marijuana is not a Schedule I drug, the ruling will initially only apply to the defendants in a federal case against alleged marijuana growers. Assuming an appeal, the case will go to the 9th Circuit Court of Appeals where, if the law is found to be unconstitutional, all Western states would be affected.
  • The Washington Traffic Safety Commission, with support from the Washington State Patrol, has asked the Legislature to create a clear rule stating that neither drivers nor their passengers can smoke or have open packages of marijuana inside a vehicle. The intent is to mirror the state’s open alcohol container law.
  • Washington State – at least some southern border communities – will now be facing competition from the State of Oregon following the passage of Measure 91, legalizing the creation of a recreational marijuana industry in that state. In marked contrast to the tax scheme stipulated in I-502, Measure 91 will charge a one-time tax to producers only on marijuana sold at wholesale: $35 per ounce for flowers, $10 per ounce for leaves and $5 each for immature plants. The Oregon Liquor Control Commission is to create a regulatory system for the industry by January 1, 2016, with implementation of the system expected later next year.
This writer will continue to follow I-502 implementation activities and events, and will provide an update in the next edition of the NW HIDTA newsletter.