The 2019 Oregon legislative session formally concluded on June 30 and it was a doozy. With respect to cannabis, however, the session was significantly less eventful than any conference since 2014 (and that is mostly a good thing). If you’d like to track how we got here, we previewed the 2019 session in March and we gave a mid-session update in May. If you’re just here for the final tally, we didn’t get any legislation on hemp, social consumption, off-work use, or grow taxation. Instead, we got new laws limiting production, allowing the possibility of interstate trade, allowing the expungement and reduction of marijuana crimes, and banning system development charges targeting marijuana grows. Each new law is summarized below.
Production License Caps (Senate Bill 218)
This law authorizes the Oregon Liquor Control Commission (OLCC) to refuse to issue initial marijuana production licenses at its sole discretion, based on supply and demand in the state. As we’ve covered extensively on this blog, there is massive marijuana oversupply in the OLCC market. Although demand is also higher than anticipated, Governor Brown (who requested this bill pre-session) and others have been eager to curb production, apparently due to some combination of protectionist instincts and perceived federal pressure.
Although SB 218 is straightforward, existing and potential clients have come to us with confusion over certain aspects of the new regime. Here is a summary of how the law affects certain parties:
- Existing licensed producers. No change. If you are already licensed in the OLCC system, you will be able to renew your license annually (if you have been behaving), apply for changes in ownership in any amount, and apply for a change in location.
- Pending producer applicants in general. OLCC will no longer allow changes in ownership greater than 51% for these applicants, or changes of premises location. Who qualifies as a pending producer applicant? Anyone with a license dashboard status of “New,” “Local Government Review,” or “Applicant Hold.”
- Pending producer applications submitted on or before June 15, 2018. OLCC will continue to process producer applications received prior to the June 15, 2018 “pause” so long as those applicants have submitted an approved Land Use Compatibility Statement (“LUCS”). Applicants in this category without an approved LUCS has been moved to “inactive” status.
- Producer applications submitted on or after June 16, 2018. OLCC will inactivate all producer applications received after June 15, 2018, regardless of whether a LUCS has been acquired. It is unclear whether OLCC will refund the $250 application fee.
Is SB 218 going to fix the oversupply issue? We doubt it very much. As I wrote a few months back, if Oregon had wanted to cap marijuana production in the OLCC market, it’s about four years and 900 grows too late. Still, SB 218 creates some new wrinkles and affected parties must plan accordingly.
Interstate Trade (Senate Bill 582)
This law authorizes the Governor “to enter into agreements with other states for purposes of cross-jurisdictional coordination and enforcement of marijuana-related businesses and cross-jurisdictional delivery of marijuana items.” The export provision would take effect on the earlier of: (a) the date Federal law is amended to allow for the interstate transfer of marijuana items between authorized marijuana-related businesses; or (b) U.S. Department of Justice issuance of an opinion or memorandum allowing or tolerating the interstate transfer of marijuana items between authorized marijuana-related businesses.
In an impressive show of state-federal coordination, Oregon Senator Rony Wyden and Representative Earl Blumenauer introduced the State Cannabis Commerce Act shortly after SB 582 passed, which would protect all state licensed cannabis industries from federal interference, and which specifically shields commerce between states that have entered into trade agreements. This is a critical move. As we explained in the spring of last year:
“the interstate compact would almost certainly need to be buttressed by Congressional consent, which is a formal legislative action contemplated by Article I, Section 10, Clause 3 of the Constitution. When Congressional consent is given, an interstate compact literally transforms into federal law.”
Does the State Cannabis Commerce Act stand any chance of passing? It seems like a long shot given the current composition of the U.S. Senate. Still, the export and interstate trade discussion is a positive development and Oregon has shown both leadership and creativity in moving the conversation forward.
SB 420 allows individuals to use an expedited process to set aside most convictions for possession, delivery and manufacture of marijuana, so long as the underlying conduct is no longer a crime. Anyone with a conviction that wouldn’t be illegal now, is eligible for an expedited process to expunge the conviction. Companion law SB 975 allows for a reduction in offense classification for other marijuana convictions.
Ban on Transportation Systems Development Charges (SDCs) (Senate Bill 365)
Last but not least, SB 365 prohibits local governments (namely, Deschutes County) from imposing SDCs for increased use of transportation facility resulting from marijuana production in exclusive farm use zone. Deschutes County has generally made a mess of cannabis regulation, and its ham-handed attempt to levy SDCs on cannabis production forced the legislature’s hand.