How to Open an Oregon Recreational Grow Operation

Cannabis Production

So you’ve set your sights on joining the next generation of Oregon cannabis producers. Congratulations! You’ve identified talented growers, you’ve resolved the intractable indoor vs. outdoor cannabis growing dilemma, you’ve saved up some money, and now you are eager to get your cannabis operation up and running.

In this article:

Choosing a Location for Your Oregon Recreational Grow Operation

Your first question is a classic: Where will I grow?

When you apply for an Oregon Liquor Control Commission license, you will need to prove you have a deed or lease to an eligible property. A letter of intent to lease or to purchase will also suffice, but the OLCC will not actually issue the license until you close the lease or sale. You should work with a realtor with experience in the cannabis industry to identify a few possible locations. As you begin your search, remember the following:

Not All Counties and Cities are Alike

On the most basic level, you need to be aware of the various cities or counties that have banned recreational producers outright. The OLCC maintains a list of these hostile local governments and you may be sad to hear that Grass Valley, Oregon is still off-limits!

Even the cannabis-friendly local governments vary significantly in their local requirements, with some counties going to great efforts to be cannabis-friendly, and others putting up an unfortunate amount of red tape. An exhaustive county-by-county or city-by-city analysis is beyond the scope of this post and we recommend you speak with cannabis entrepreneurs and professionals who have worked with your top choices for county or city to get a sense of potential local government roadblocks.

Distribution Channels

Though rural land is likely cheaper, your best markets will likely be in the cities. It is never too early to begin cultivating relationships with wholesalers, processors, and even retailers to help bridge this gap. Proximity to testing labs is also a plus.

Perform Your Due Diligence

 Once you find a location in a friendly area with room for your operation, you need to ensure that the property complies with all state, county, and municipal requirements and regulations. This can be done by thoroughly reviewing county codes, city comprehensive plans, land use regulations, relevant zoning ordinances, and CC&Rs and, in some cases, talking with the appropriate government officials. You also need to be sure your property has access to adequate water as you will be required to show proof of “water rights,” and adequate power.

Failing to do due diligence on a property can have disastrous consequences. We recently had a cannabis client come to my law firm ready to close on a perfect piece of real estate in a location with a cannabis-friendly local government. This company had even paid for certain improvements to the property, and it was just days away from closing on the property transaction. Fortunately, as soon as we were provided the counties’ records on the property, we noted a provision from the 1980s that prohibited their business. We identified this issue just in time to prevent the purchase and free up our client to move on to greener pastures.

Once you’ve acquired rights to your perfect cannabis property, you are ready to apply for a Land Use Compatibility Statement (LUCS) from the local jurisdiction and to begin preparing the property for the OLCC licensing/inspection process.

Preparing for the OLCC

By now you have found a perfect site in a cannabis-friendly area. Your new location will comply with all state, county, and municipal requirements and regulations. You are certain you will have adequate power and water. You have your letter of intent to either lease or purchase the property. You are now ready to begin the OLCC licensing process. Remember that each local government has its own unique approval process. For example, some jurisdictions require you to apply for a separate local business license alongside the Oregon Liquor Control Commission (OLCC) license. You should begin developing a relationship with your local planning department and should move forward with both the state and local procedures at the same time.

Land Use Compatibility Statement

The OLCC won’t simply take you at your word that your property is compliant. The OLCC application process requires you to submit a completed Land Use Compatibility Statement (LUCS) proving your property is eligible for cannabis cultivation. You will submit the LUCS form to your city planning department (or county planning department if your property is outside city boundaries), as well as an application fee. Assuming you have done your due diligence correctly, the planning department will return your LUCS with an all-clear.

Ownership and Control Information

As part of the OLCC process, you will need to provide detailed information on your business entities, as well as key owners and officers. Depending on the type of entity, the following individuals must also submit Information History forms:

  • Sole Proprietorship
    • The sole proprietor
  • General Partnership
    • Each general partner
  • Limited Partnership
    • Each general partner and each limited partner owning 10% or more of the partnership
  • Corporation
    • Principal officers, directors owning or controlling at least 3% of the stock, natural persons owning or controlling at least 10% of the stock
  • Limited Liability Company
    • Members owning at least 10% of the LLC and Members committing at least 10% of the total investment in the LLC

Generally, the spouse or domestic partner of anyone required to submit an Information History form must also submit an Information History form. The OLCC Investigator may also require additional forms from anyone with a financial interest in your grow operation, including landlords under profit sharing leases, silent majority investors, and anyone else with ownership or control who doesn’t fit into one of the above categories. The Investigator may also require some or all of these individuals to provide fingerprints for background checks.

Now that you have started the LUCS process and have gathered your business entity and individual history information, you can move on to preparing your electricity and water estimates, as well as your operating and security plan.

Security, Power, and Water

The OLCC wants to know some basic details about your business, such as when you will be open, your cultivation process, and your security setup. Fortunately, the OLCC has recently simplified the producer application, so these requirements are all clearly laid out.

Hours of Operation

As part of the producer application packet you will need to provide your hours of operation for each day of the week, as well as any anticipated variations for seasonal or other reasons. This requirement helps OLCC inspectors know whether they can enter your property on a whim (while you are open) or whether they must first have a reason to believe a violation has occurred (while you are closed).

Cultivation Plan

The application has a short essay question where you will need to describe your grow op in depth. The OLCC wants to know your growing medium, the specialized equipment you will be using, and whether your crop will be indoor or outdoor (or both for mixed producers). You will also need to explain whether you will be using seeds, clones, or a mix and detail how you will be handling your immature cannabis plants. Since you will ultimately need to submit a cultivation plan to the OLCC, you should create one as part of your initial business plan. Savvy investors will likely want to know this information anyway.

Electricity & Water Use

When you initially apply for an Oregon cannabis grow license you will need to provide month-by-month electricity and water usage estimates and you will need to prove you have a legal source of sufficient water. This proof can take the form of 1) a copy of a water use authorization, permit, or certificate from the Oregon Water Resources Department, 2) a statement with the name and contact information of a public or private water provider that will be providing water to your site, or 3) a Marijuana Producer Exempt Water Form from the Oregon Water Resources Department showing that your water does not require a water right. You should contact the Water Resources Department to determine which option will work for your site.

Security

The OLCC is understandably concerned about licensed cannabis flowing into the black market, so all growers must meet strict security requirements. Generally, you will need to do the following:

  • Keep all exterior access points locked with commercial grade locks outside of business hours;
  • Store all usable cannabis, harvested plants, and finished products within a secure, indoor steel-framed room (outside of business hours). This requirement should be on your mind as you search for a location;
  • Have an alarm system that covers all potential entry points, can detect movement within any area housing mature plants or usable product, and automatically notifies authorized personnel in the event of a breach (you can ignore this requirement if you will have at least one person in the premises at all times outside of business hours);
  • Have at least two operational “panic buttons” inside the premises that will immediately notify a security company and law enforcement, or have mobile “panic buttons” carried by all of your employees and representatives, or have a landline telephone present in all limited access areas.

One of your more significant up-front costs will be designing and installing a compliant video surveillance system. Your 24-hour a day system must satisfy the following:

  • Cover all areas where cannabis items or waste will be present or in transit;
  • Cover all areas within 15 feet of all entry points in all directions;
  • Record at a minimum resolution of 1280 x 720 pixels in all lighting conditions;
  • Record at a minimum of 10 frames per second (5 frames per second for exterior non-restricted areas);
  • Be contained in a dedicated room containing a list of all personnel authorized to access the surveillance system;
  • Have a backup battery that can independently power the system for at least an hour;
  • Provide automatic notification in the event of a failure of a security camera or other portion of the system;
  • Include a monitor for viewing video from any camera, a digital archiving system, and a printer; and
  • Maintain recordings for 90 days both on-site and continuously backed up to a secure off-site location.

You will also need to keep a log of all maintenance activity on the system.

Now you have your surveillance and alarm systems set up, you’ve let the OLCC know when and how you will be growing, and you have satisfied the OLCC that you have enough water and power.

Public Safety and Cartography

Now it is time to tell the OLCC how you plan to keep the public, and especially minors, away from your product. Then we will discuss the various site maps you will need to include in your application.

Preventing Public Access

You will need a plan to prevent public access to any indoor areas, all outdoor areas used for cultivation, and also any outdoor areas where cannabis may be stored, even on a temporary basis.

The application packet provides two favored options:

  • Enclose all outdoor areas (and exterior paths between indoor areas and greenhouses) in at least a six-foot tall fence or wall; or
  • Enclose all cultivation areas with at least a six-foot tall fence or wall, and ensure cannabis is only outside the enclosed areas while in the possession of one of your representatives for the limited purpose of transportation between enclosed areas.

In either case, any fences should be constructed of “rigid wooden or metal posts securely anchored to the ground and a woven or welded wire mesh such as ‘chain-link’ fencing or by a solid, rigid barrier, such as wooden fencing planks or similar material.”

You also have the option of creating your own plan, but you will need to specifically detail all the actions and methods you will use to prevent public access. This may subject you to delays as the OLCC can reject your plan or request additional information and clarification.

Minor Control Plan

In addition to your public access plan, you will also need to provide a detailed description of your proposed methods for preventing access to your cannabis by minors, such as identification, perimeter security (physical and personnel), employee screening, and what you will do if you find a minor on your premises. The OLCC conveniently provides an example plan in the application packet:

All doors and gates will be locked at all times. Prior to allowing any person access to the property, age will be verified by checking ID. Employee IDs will be checked prior to hiring and no person will be employed who does not have a valid marijuana worker permit. Signs will be clearly posted at all entry points indicating that minors are not permitted on any portion of the premises. If a minor attempts to gain access to the premises, they will be immediately told to leave and if they do not, law enforcement will be contacted.

Premises Map & Floor Plans

You will need to submit a few maps of your entire cannabis grow property and more detailed floor plans of all structures. The first is sometimes referred to as a Premises Map or Premises Sketch, and the second as the Premises Floor Plan(s).

Premises Map

This map (example here) must include your entire property and must show, at a minimum, the following:

  • The boundaries of your tax lot;
  • The perimeter of the licensed premises (labeled with “Limited Access Area” along the perimeter line);
  • The location of any residences on the property;
  • Dimensions of each structure on the property;
  • Labels showing other activities on the property, such as farming or livestock;
  • Fences and walls;;
  • Labeled compost/waste areas;
  • Labeled canopy areas (cultivation areas); and
  • All entry/exit points for the premises.

You must also include a tax lot map marked to show your premises (which can be obtained from the County Assessor), and an aerial map identifying the area to be licensed (from Google Maps, for example).

Premises Floor Plan(s)

You must prepare a separate plan for each structure that includes, at a minimum, the following:

  • A label for the structure;
  • An indication of which floor of the building is shown in the plan (there should be a separate floor plan for each level of each structure);
  • The boundaries of the structure that will be licensed (if you aren’t using the entire structure);
  • All areas where cannabis may be located at any time;
  • All doors, windows, and permanent fixtures;
  • All walls, partitions, counters, and windows;
  • Clear labels for each room, such as “storage area”, “surveillance room”, “trimming”, etc; and
  • All ways in and out of the enclosure.

Make sure your labeling is consistent across your security plan, your premises map, and your floor plans.

At this point, you should have everything you need to submit your OLCC application.

Canopy Sizes

Canopy Sizes

Your “canopy” is the part of your licensed premises that can be used to cultivate cannabis plants. In your cannabis license application you must tell the OLCC how much square footage you intend to use for cannabis cultivation, and you must clearly designate canopy areas on your site plan (see here for an example). The larger the total area, the greater your annual license fee:

  • Micro Tier I – $1,000
    • Indoor: Up to 625 sq. ft.
    • Outdoor: Up to 2,500 sq. ft.
  • Micro Tier II – $2,000
    • Indoor: 626 to 1,250 sq. ft.
    • Outdoor: 2,501 to 5,000 sq. ft.
  • Tier I – $3,759
    • Indoor: 1,251 to 5,000 sq. ft.
    • Outdoor: 5,001 to 10,000 sq. ft.
  • Tier II – $5,750
    • Indoor: 5,001 to 10,000 sq. ft.
    • Outdoor: 20,001 to 40,000 sq. ft.

It gets a bit more complicated if you have a mixed use site, but generally one foot of indoor area is equivalent to four feet of outdoor area. So, for example, a mixed-use Tier II producer could have all 10,000 indoor, a mix of 5,000 indoor/20,000 outdoor, or all 40,000 outdoor.

Oregon cannabis grow licenses

When you are deciding on your cannabis canopy limits, keep in mind that the limits apply only to mature plants, not to immature plants. You can grow as many mature plants as you can fit in your canopy areas.

Medical Bump-Up Canopy

Oregon’s legislature recently approved the “medical bump-up canopy” program, which allows recreational cannabis producers to set aside a small portion of their premises to cultivate medical cannabis. If you are interested in growing medical cannabis alongside your recreational cannabis, you can enter into a Producer-Patient Medical Canopy Agreement with up to 24 OMMP (Oregon Medical Marijuana Program) cardholding patients. These patients can reimburse you for your reasonable expenses, but you must give these patients their marijuana medicine free of charge.

Nevertheless, a medical canopy is still potentially profitable. Though you can grow up to six plants per patient, you can transfer no more than 3 pounds to a single patient in a year. This means you will likely have a surplus for each patient. The bump-up program allows you to generate some income from your medical marijuana crop by transferring up to 25% of that crop to registered producers and dispensaries.

Marijuana Worker Permit

Each of your employees must have a marijuana worker permit, including seasonal employees. Each permit costs $100 and each applicant must pass an online test and a background check. The OLCC has set up a simple website explaining the process, which includes a link to the study book.

What to Expect When the OLCC Follows Up

Once you submit your cannabis grow license application, the OLCC will conduct a preliminary review. You will likely receive a follow up letter from the OLCC identifying any deficiencies in your application you must resolve before you can obtain your grow license. To minimize delays, make sure your initial application is thorough and correct. The following are examples of issues that have come up:

  • Failing to properly identify the portion of a tax lot that will be leased to your company.
  • Including a residence within your licensed premises boundary.
  • Failing to properly label your site and floor plans, including the location of your cameras.
  • Failing to be consistent in your labels across site and floor plans.
  • Failing to provide dimensions for each structure on your property.
  • Failing to identify the materials that make up your fences/walls.
  • Failing to label each camera with a number on your security plan.

Once you are confident you have met all of your Oregon cannabis grow application requirements and you have the required documents in order, you will be ready to request an inspection. If all goes well, and you have complied with all local requirements, you will soon be a licensed recreational grow operation. Congratulations!