Washington State Officials: It's Going To Take A Year To Devise Pot Rules

AP WIRES - It's going to create a lot of jobs for a lot of people," says Paul Lugo, owner of a five-month-old medical marijuana dispensary in Spokane who sees big possibilities in legal pot sales to the public. "This could be the thing that gets the economy rolling again."

Possession becomes legal Thursday, and just two things stand in the way of what is expected to become a thriving billion-dollar-a-year industry in Washington state. It will take a year for the state Liquor Control Board to draft new regulations for the business. Until then, the production and sale of marijuana for non-prescription use is illegal. And of course there's that other little problem. Pot still is illegal under federal law, and no one knows whether the feds will go to court and nip the whole thing in the bud.

At a hearing Friday, lawmakers said they just wished the process could move faster. "Deliberate speed is the issue here," said state Sen. Adam Kline, D-Seattle. "The more time goes on, the more we are asking for trouble."

It didn't take much to send Prohibition toppling — Initiative 502, the first legalization initiative to make the ballot in Washington, passed with a whopping 56 percent. Voters in this state joined Colorado last month in approving first-of-their-kind legalization measures, establishing procedures for the sale in stores of small amounts of the forbidden fruit. Under the complicated taxation scheme set forth by Initiative 502, the state Office of Financial Management says Washington will reap $2 billion in tax revenue over five years, not to mention all the money it will save by not enforcing a widely flouted law. Not that anyone's holding their breath.

Unless and until the feds go to court to block it, though, the initiative is the law. So for Washington it becomes a matter of implementation. The duty falls to the state Liquor Control Board, which is charged with developing a licensing and regulatory program for the production and sale of marijuana. Unless the board gets other instructions it's full speed ahead. That's where things promise to get mighty complicated over the next 12 months.

Washington is going to need help, Deputy Director Rick Garza told the Senate Labor and Commerce Committee on Friday. "There are a lot people who think they have a lot of expertise in this area who have been calling," he allowed. But this is a job that calls for a marijuana expert. Nowhere in the world has a government agency been charged with developing a regulatory program for legal marijuana, he said. The agency is drafting a request for proposal [RFP] for consulting work and it will ask the Legislature next session for permission to spend $900,000 from the state liquor revolving account to develop the new rules.

While regulators in the Evergreen State will monitor what happens in its Mile High counterpart, Washington is responsible for developing its own rules. So you can expect a rulemaking process that works like any other, with public hearings and regular announcements of progress. State officials say in this case public input will be a big help. If they know anything about the subject, it's not something they care to admit. Said Garza, "I can share with you that even this week there are folks here in the state that have come to us to share information, and so that's a really big piece to start with – to tell us more about this product that we know very little about."

The new law is pretty prescriptive about what the Liquor Control Board has to do – in one sense there won't be many opportunities to drop the ball, but there might also be a thousand of them. The board is supposed to come up with new rules for management of pot stores, packaging, labeling, regulation of quality, employee training, reporting forms, and so many other details that it might wind up writing a new volume of the Washington Administrative Code. It can impose limits on stock-on-hand and on the number of outlets in any given geographic area. But lest it get too restrictive, the law stipulates that one of the board's goals must be "the provision of adequate access to licensed sources of usable marijuana and marijuana-infused products to discourage purchases from the illegal market."

The key details are these. Producers will have to obtain licenses that specify where marijuana is to be grown. One might say it's a boon to Washington agriculture: Marijuana must be grown within the state's borders.

Another license will be required for marijuana processors, who will process, package and label marijuana and marijuana-infused products. And a third license is needed for those who sell it at the retail level to customers, through storefront operations whose advertising and signage is to be tightly regulated. In each case, the application fee is pegged at $250 and the issuance and annual renewal fee will be $1,000.

For now the Liquor Control Board is estimating there might be as many as 363 stores – the same number of stores as in the old liquor-store system. And there is another detail that might seem familiar: Producers and processors are barred from obtaining sales licenses, and vice versa. The language leaves the possibility that growers might also obtain processing licenses, but the structure of the law in many ways mirrors the old restrictive three-tier system for liquor sales that governed the state for 78 years until Washington voters tossed it out with I-1183 last year. That's deliberate, said Alison Holcomb, campaign director for I-502 and one of the initiative's authors.

"We wanted it to look and feel as much like the state monopoly liquor stores as possible, understanding that we could not put state employees in the position of actually distributing marijuana," she explained. Thus the stores will be privately operated, probably the biggest difference between the old system and the new. Holcomb, who has resumed her duties as drug policy director for the American Civil Liberties Union, explained, "We wanted it to look as much as possible like the state monopoly, very controlled, very boring, stores separated from kids, limited signage – in fact the details of the stores are even more restrictive than our state monopoly stores — they cannot display marijuana to passersby, very tight advertising. We wanted to really not promote, as our liquor laws did [not]. They did not intend to promote alcohol use but instead to meet an existing demand through a regulated legal way."

The initiative allows the Liquor Control Board to take up to a full year developing its policies, but Kline said Friday he is bothered by the idea that it might take the full time allotted. The longer it takes to launch the pot stores, the more likely it is that organized crime might meet the demand. "Drug gangs are nobody's friends," he said.

Holcomb isn't worried. Washington has had an underground pot market for a century or so and the state's estimated 363,000 marijuana users already get their herb somehow. She says the new law basically means that users won't risk arrest until the pot stores can open. And when they do, it's going to be hard for illegal sellers to compete.

Spokane's Lugo is looking forward to what looks like a booming business. He opened his prescription-only marijuana store, The Herbal Connection, in the heart of the Garland Avenue shopping district last summer and since then he's had an education in the sorts of issues any small-business owner faces – sales tax reports, workers' comp taxes, business permits. Plus the added complication of not being able to establish an account at a federally-insured bank. Bankers tend to frown on illegal activities, even if the law is a tad murky. Lugo says the moment it becomes possible to apply for a license to sell to the general public, he'll be in line.

Lugo actually voted against the initiative, as did many in the trade. Its restrictive standards for DUI arrests, based on THC levels in the bloodstream, could snare regular users long after the buzz has gone. And while the Legislature might alter the law to make it less draconian, its record isn't good. Washington voters approved marijuana-with-a-prescription 14 years ago, and dispensary operators are still waiting for lawmakers to fix nagging problems with that law. If the feds crack down, Lugo figures stores like his will probably be the first target, and conservative Spokane could be ground zero. "They'll probably make an example out of Spokane, because we're the next biggest city to Seattle where dispensaries have any kind of a presence," he says.

Then there are the new packaging requirements the Liquor Control Board might impose. It's not like he's selling whiskey. "It's a lot different. People want to smell it, and you know, look at it – but we'll see. It's kind of wild and exciting. Whatever happens, we'll follow it, and we want to be in the forefront."

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