Oregon Marijuana Processors: Playing it Safe

imagesOver the past year, cannabis in Oregon has been the subject of many national headlines. Most of this coverage has been positive, with reportage ranging from the state’s innovative recreational pot program to the recent display of marijuana plants at the Oregon state fair. Last week, however, Oregon cannabis was in the spotlight for a wholly undesirable reason: a hash oil explosion from an apparently illegal operation destroyed a house, damaged two more houses, and sent someone to the hospital. These incidents are not uncommon nationwide.

Oregon takes illegal processing of marijuana seriously, having made the activity a Class B Felony earlier this year. This class of felony is punishable by a maximum prison term of 10 years and a fine of $250,000. The sudden legislative attention to cannabis processing was a new development in the state. As we previously explained, until this year there was virtually no mention of pot processing in ORS Chapter 475 (the cannabis regulation statutes), or in the related Oregon Health Authority’s (OHA) administrative rules for medical marijuana. Everything was happening underground.

Our cannabis business lawyers represent quite a few cannabis processors both within and outside Oregon. In our view, the regulations related to processing are cumbersome as compared to any other class of license under the OHA’s Medical Marijuana Program, or the Oregon Liquor Control Commission’s (OLCC) recreational program. This is understandable, given the nature of the activity, but it is also frustrating because of the considerable overlap in baseline rules and fees for OHA and OLCC. When you add local fees to that (like those required by the City of Portland) the costs of doing business as an Oregon cannabis processor begin to feel oppressive.

The state could probably do a better job with regulating marijuana processors, by taking us up on our recommendation to combine the medical and recreational marijuana programs. Although streamlining the regulations of cannabis industry participants will not eliminate illegal activity entirely, one can infer that more sensible, navigable regulation will nudge some underground actors into compliance. It certainly couldn’t hurt.

The Oregon legislature meets again in February of 2017. Until then, local law enforcement will need to be especially vigilant as to underground hash oil processing, and OLCC and OHA will need to monitor cannabis tracking systems closely to ensure that black market products do not seep into the system. Regarding our clients, legitimate processors need to satisfy ongoing compliance requirements for activity under administrative watch. That includes the requirement that OHA licensure (and not just a pending application) be in hand on October 1 for continued operation.

Hash oil explosions are very serious incidents and we hope to see Oregon lead the way in preventing them to the extent possible. The Oregon legislature’s felony designation was a start. Next, we could use a few carrots to go with the sticks.

EDITOR’S NOTE: Three of our California cannabis lawyers (Tiffany Wu, Alison Malsbury and Hilary Bricken) will be putting on a FREE webinar on September 14, moderated by our lead cannabis corporate lawyer (Robert McVay). This webinar will focus on what you should be doing now to prepare your existing or future cannabis business for California’s soon to be legalized landscape. Go here on Eventbrite to sign up to attend.