WSR 16-16-118

PROPOSED RULES

[Filed August 3, 2016, 10:08 a.m.]

Preproposal statement of inquiry was filed as WSR 16-12-012.

Title of Rule and Other Identifying Information: The subject of this rule is adoption of regulatory guidance under WAC 51-54A-0105 and 51-54A-3800 for the cannabis industry, specifically marijuana processing or extraction facilities. The council established a special technical advisory group (TAG) to include industry representatives, local officials, and other affected parties to develop proposed permanent rules. TAG met from March through May 2016 and developed the draft language; the proposed rules were adopted by the council on an emergency basis on June 10, 2016.

Hearing Location(s): Spokane Fire Department Training Center, 1618 North Rebecca Street, Spokane, WA 99217, on September 9, 2016, at 10 a.m.; at the Department of Enterprise Services, 1500 Jefferson Street S.E., Olympia, WA 98504, on October 14, 2016, at 10 a.m.

Date of Intended Adoption: November 18, 2016.

Submit Written Comments to: Steve Simpson, Council Chair, P.O. Box 91449 [41449], Olympia, WA 98504-1449, e-mail sbcc@ga.wa.gov [sbcc@des.wa.gov], fax (360) 586-5366, by October 21, 2016.

Assistance for Persons with Disabilities: Contact Peggy Bryden, council staff, by August 25, 2016, (360) 407-9280.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of this rule-making proposal is to provide regulatory guidance on life/safety requirements for the cannabis industry as regulated by the Fire Code, chapter 51-54A WAC. It is intended that this will improve conditions for those working in processing/extraction facilities, and enhance life/safety for communities where these facilities are located. Emergency rules are currently in place under WSR 16-13-077 to address life/safety concerns.

Reasons Supporting Proposal: The Washington liquor and cannabis board (LCB) regulates licensing for the newly established and fast-growing cannabis industry in Washington state. The legalization of cannabis in Washington provided opportunity for business development in the new industry; legal production and sales began in 2014. As a result, administrative oversight was needed to protect public health and safety as well as the health and safety of industry employees. LCB adopted regulations in WAC 314-55-104 which requires processors using closed loop systems to meet certain standards, and the use of the system and facilities must be in compliance with any required fire, safety, and building code requirements specified in WAC, including the State Building and Fire Codes, NFPA standards and other applicable standards. The state building code council (SBCC) worked with LCB, industry representatives, local officials, and other stakeholders to collaboratively adopt rules to ensure life/safety.

Statutory Authority for Adoption: Chapter 19.27 RCW.

Name of Proponent: SBCC, governmental.

Name of Agency Personnel Responsible for Drafting and Implementation: Joanne T. McCaughan, 1500 Jefferson Street S.E., Olympia, WA 98504, (360) 407-9279; and Enforcement: Local building officials, local jurisdiction address.

1. Description of compliance requirements: SBCC is filing proposed rules to adopt changes to WAC 51-54A-0105 and 51-54A-3800, the State Fire Code. These changes will establish permanent rules to regulate fire safety in the extraction/processing functions of the cannabis industry. The marijuana extraction businesses are required to be inspected for compliance with the State Fire Code by the local fire marshal, in order to be licensed to produce plant oils. The rule is intended to facilitate the Fire Code inspection by identifying the Fire Code related provisions for marijuana plant oil extraction. The proposed rules apply where hazardous materials are used or equipment is regulated by the existing Fire Code. An engineering report is required for unlisted extraction equipment. An exhaust ventilation system, backup power supply, and gas detection are applicable depending on the type of extraction process and hazard identified.

The proposed WAC 51-54A-0105 covers permits and is being filed to correct citations for operational and construction permits, and WAC sections related to the Fire Code. These marijuana processing/extraction business operations are already required to apply for permits under the Fire Code, per licensing regulations promulgated by LCB.

2. Professional services that a small business is likely to need to comply: To meet fire safety requirements for marijuana processing/extraction requires professional services of a licensed engineer when extraction equipment is not listed. Installation of backup power, exhaust ventilation and gas detection systems require a professional mechanical and electrical contractor.

The proposed rules do not require any additional reporting or recordkeeping for the small business owner. Permits are required under the current Fire Code. Additional time for plan approval is expected under the newly revised rules, for a limited period of time.

3. Costs of compliance including equipment, supplies, labor, professional services, and increased administrative costs: As reviewed for this report, engineering/design bids for unlisted equipment are not to exceed $5,000. Actual costs incurred may be less. The bids include the required technical report, a general process flow diagram, review of construction documents for the building where the equipment is located, and a site inspection to verify conformance with the technical report.

The incremental cost from one manufacturer for listed extraction equipment versus an unlisted product is $8,500. Use of listed equipment avoids the cost of the engineering technical report.

A hazardous exhaust fume hood is required for extraction processes using flammable or combustible liquids. Installation of the fume hood interlocked with electrical components in the extraction area, equipment and labor is estimated at $1,500, where the Fire Code allows a Type II hood based on quantities of combustibles.

Extraction processes using gaseous hydrocarbon based solvents must have a gas detection system. Installation of gas detection system equipment and labor estimated at :$5,000.

An emergency power supply is required for extraction systems using electricity, and where lighting, ventilation, gas detection, emergency alarms or automatic fire extinguishing systems are installed. Installation of emergency power supply equipment and labor estimated at : $10,000.

Systems using over one hundred pounds of carbon dioxide must post a sign indicating the hazard. Estimated cost $100.

Building/fire permits are expected to range from $117 to $800.

The total estimated incremental cost to comply with the rule ranges from $17,000 for an unlisted system using nonflammable or noncombustible liquid or other than gaseous hydrocarbon solvents; to $25,500 for a listed system using flammable or combustible liquid or gaseous hydrocarbon solvents. This assumes these costs are not already required by the Fire Code.

Several estimates submitted by stakeholders included the costs of constructing the building used for extraction at $45,000 to $60,000; and the cost of installing electrical service including panels, wiring, lighting and receptacles, and also including emergency power and gas detection, at $37,000 to $40,000. This report assumes cost for initial build out of the facility, including the cost of a new or refurbished building, would not be impacted by the rule making. Normally expected construction costs are not included in the estimated incremental cost. These are base costs necessary to operate a cannabis extraction business. Emergency power and gas detection are considered separately. 

The proposed rule requires the extraction process to be located in a code compliant building. As with other businesses these facilities will be reviewed using the State Fire Code to determine if they would be classified as hazardous occupancies. If so, then they would need to meet the Fire Code general requirements for hazardous occupancies along with the specific requirements based on the type of hazard present. The proposed rule prohibits locating a marijuana processing business in an assembly (Group A) building, or a school or nursing facility.

4. Small business sales and revenue: The marijuana extraction businesses are required to be inspected for compliance with the State Fire Code by the local fire marshal, in order to be licensed and conduct business. The rule is intended to facilitate the Fire Code inspection by identifying the Fire Code related provisions for marijuana plant oil extraction.

The required engineering report provides a method to allow for the use of equipment that has not been listed by a nationally recognized listing agency for the use. The report requirements are based on administrative requirements that have been tailored to extraction processes. Such reports are used by other industries when listed equipment is not available; manufacturer's detailed specifications can often substitute if sufficient information is presented.

The State Fire Code also permits approval as an "alternative method" which could apply to a piece of equipment or process that has been historically used for botanical extraction in other industries. Thus, the proposed rule provides guidance on approving equipment where no listing exists; and allows for flexibility for the businesses and the code officials, thereby reducing cost impact.

The proposed rule will not cause businesses to lose sales or revenue. The proposed rule provides a path to secure a license needed to conduct business.

5. Disproportionate cost impact on small businesses: The proposed rule will not have a disproportionate impact on small businesses. The Washington Federation of Marijuana Businesses surveyed their membership during July 2016 to help identify potential impacts of the proposed rule making. The data collected indicate that most (ninety-eight percent) of the businesses identified as "processors" have fewer than fifty full-time employees. The cost per employee to meet the fire safety requirements will be uniform across the businesses licensed to extract oils from marijuana. The costs for compliance are similar to costs to comply with the unamended Fire Code.

6. Steps taken by the agency to reduce the costs of the rule on small businesses: The location for extraction operations is broadened from an earlier requirement to have a dedicated room within a production facility, to allow certain operations to take place in a dedicated "area."

The definition of "processing" was modified to limit it to hazardous processes that utilize chemicals or equipment regulated by the Fire Code. This ensures that harvesting, trimming or packaging of the plant is not subject to these rules.

Identification requirements for certain/specific manufacturing/part numbers is eliminated so as to protect proprietary information.

7. How the agency will involve small businesses in the development of the rule: SBCC convened a special TAG on cannabis issues to bring together the affected parties: Representatives of the cannabis industry, building officials, a local clean air agency and state agency representatives including LCB and the department of labor and industries (L&I), fire officials and other entities affected by the rule. The group met seven times over the course of three months to develop the rule(s), reaching consensus on most issues;

SBCC created a special page on the SBCC web site for the cannabis issues TAG to report progress of TAG, meeting minutes, and draft documents.

SBCC developed a stakeholder list in GovDelivery for interested parties to notify them of the activities, purpose and progress of TAG.

SBCC worked with representatives of LCB and L&I to ensure that the code language developed is consistent with other rules and state agency regulations.

SBCC requested information re: Potential impact on small businesses from the "interested parties" list developed during the 2015 code amendment process, and from the 2016 cannabis issues TAG/interested parties list.

SBCC worked with industry partners to assess potential impact by contacting the Washington Federation of Marijuana Businesses to survey their membership.

8. A list of industries that will be required to comply with the rule: Licensed marijuana processors that utilize extraction methods are described in the rule. LCB has issued eight hundred ninety-four licenses for marijuana processors; there are an additional seven hundred licenses pending. A list of the processor businesses is available at http://lcb.wa.gov/records/frequently-requested-lists.

9. An estimate of the number of jobs that will be created or lost: It is estimated that no jobs will be created or lost due to the proposed rule regulating the fire safety of marijuana extraction. The proposed rule facilitates compliance with the Fire Code for businesses seeking a license with LCB.

A copy of the statement may be obtained by contacting Joanne T. McCaughan, SBCC, P.O. Box 41449, Olympia, WA 98504-1449, phone (360) 407-9279, fax (360) 586-5366, e-mail joanne.mccaughan@des.wa.gov.

June 10, 2016

Steve Simpson

Chair