Oregon’s New Recreational Marijuana Market (Sorry, Eastern Oregon)

Oregon’s House-Senate marijuana committee unanimously approved House Bill 3400, a significant milestone in regulation of the commercial cannabis market.

HB 3400 was approved after weeks of wrangling in the legislature. A primary sticking point was whether cities and counties would be allowed to ban pot sales (both medical and recreational) in their communities. Unfortunately for eastern Oregon advocates, the answer in those counties is “yes”.

Specifically, HB 3400 allows local governments in Oregon to ban marijuana sales in counties where at least 55 percent of voters opposed Measure 91 for marijuana legalization in 2014. A total of 15 counties showed that level of opposition, all of them East of the Cascades. So, although recreational marijuana will be legal on July 1, 2015 in all Oregon counties, selling marijuana may be restricted in the eastern part(s) of our State.

That’s not to say that recreational marijuana storefronts will be opening soon anywhere in Oregon. Measure 91 placed the production and sale of recreational marijuana under the control of the Oregon Liquor Control Commission (OLCC), which will write the rules on Measure 91. Probably because the OLCC is charged with this task, HB 3400 grants the OLCC discretion to peg the actual start date for recreational sales, as well. The commission, in turn, estimates that it won’t license retailers to open until the latter half of 2016.

Now that HB 3400 has been approved by the joint committee, it must be passed by the House and Senate at large, and signed by Governor Kate Brown. In the interim, legislators say they will debate separate legislation that would allow temporary sales to recreational users. The sales would be made from medical marijuana dispensaries. Although possession becomes legal on July 1, a temporary sales program would not start before October — and consumers may have to wait until OLCC-licensed retailers open more than a year from now.

Going forward, HB 3400 grants the OLCC broad police powers to monitor and investigate the industry. HB 3400 also gives a large role to the Oregon Health Authority, which currently administers Oregon’s Medical Marijuana Dispensary Program.

Finally, HB 3400 is omnibus in scope, and covers the following: marijuana production (including a “seed to sale” tracking system, to curb diversions to the black market), product regulations (labeling and testing), residency requirements for marijuana business owners (two years for owners, none for investors), crime sentences (generally reduced), advertising (not allowed to appeal to minors, promote excessive use, or endanger safety), marijuana workers (whistleblower protections; right to organize). It also creates a tax force to promote energy efficiency and minimize water use.

Notably, the joint committee has not yet passed a companion measure, House Bill 2041, which creates a new “point of sale” tax of an estimated 17 percent on marijuana products at retail. However, HB 3400 allows localities to levy a local tax of as much as 3 percent.

I will continue to update as HB 3400 moves through the legislature. Although recreational sales are still a ways out, savvy industry players already have begun to lay the groundwork for success in Oregon’s recreational market and would be wise to track this bill moving forward.

2 responses to “Oregon’s New Recreational Marijuana Market (Sorry, Eastern Oregon)”

  1. While I personally do not agree with the provisions in HB3400 that allow counties with more than 55% opposition to ban sales outright (and I believe allow counties with 45% or above opposition to require a ballot measure to overturn a ban), I’m very curious whether your firm has done any analysis on the whether this provision holds up in court if challenged (and it’s likely to be). The precedent it sets for future ballot initiatives regarding any subject – taxes or background checks for gun sales or healthcare potentially creates an untenable governance issue. How is it possible that certain jurisdictions can just opt out of a new law that passed statewide just because an eastern Oregon legislator wanted to cut a deal?

    • We haven’t done analysis on that but it’s a great legal question. One thing to note is that the opt-out has to come with a vote of city council or commissioners within 180 days. If a jurisdiction opts out, they will not be able to impose the 3% taxation or collect distributed funds under Measure 91 state taxation. So, by opting out of the sales piece they are also opting out of significant tax revenue. In addition, medical grow sites, designated caregivers and home production under Measure 91 are untouched by the opt-out option, so those activities should be unassailable. Finally, even in an opted-out county, it seems that delivery may be available under HB 3400 as written.

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