Oregon marijuana industry wins regulatory relief, receives surprise licensing news

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oregon cannabis laws, Oregon marijuana industry wins regulatory relief, receives surprise licensing news(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the cannabis industry. Danica Hibpshman is a cannabis industry attorney for law firm Tonkon Torp, based in Portland, Oregon.)

The Oregon marijuana industry was victorious in the state’s 2021 legislative session with the passage and signing of Senate Bill 408.

The omnibus bill rightsizes regulatory enforcement and eliminates red tape across an array of cannabis industry issues.

This win is a credit to the productive collaboration between marijuana trade associations and advocacy group leaders, legislators and the Oregon Liquor and Cannabis Commission (OLCC).

Following is a primer of the major provisions that will improve market potential for cannabis in Oregon:

Clearer on violations

One of the biggest achievements of SB 408 is clarity around violations.

The OLCC may cancel a license only for major offenses that pose “significant risk of harm to public health and safety,” such as intentionally selling to minors.

The bill further prohibits the OLCC from pausing or delaying a license application because of pending compliance actions unless the offenses are serious enough to warrant outright cancellation.

Another significant change is that SB 408 gives the OLCC discretion to charge individual permittees with violations rather than the businesses for whom they work.

This is big, given that many violations stem from the conduct of rogue employees, not the business entities themselves.

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When determining sanctions for violations, the OLCC must now consider three mitigating factors:

  • Self-reporting of a violation.
  • Evidence that the conduct is not persistent or serious.
  • The ability to demonstrate willingness and ability to control the premises.

With this requirement, licensees gain some ability to reduce sanctions by taking the proper steps both before and after violations are committed.

The rulemaking provisions of SB 408 require the OLCC to report on its efforts and – most significantly – mandates that violations are recategorized to clearly define what offenses can lead to license cancellation.

Flexibility, growth

SB 408 brings many welcome changes to increase operational flexibility and market-growth potential for cannabis businesses.

For example, commonly owned producers and processors can now transfer and store product.

The bill also transfers rulemaking authority over THC serving size from the Oregon Health Authority to the OLCC and increases the maximum serving size from 50 milligrams a package to 100 milligrams a package.

Some transfer-manifest requirements are reduced, and producers can obtain a certain number of seeds from sources other than licensees.

Most of the bill’s provisions are not yet effective, however, and must first pass through OLCC rulemaking.

The agency has indicated it will begin this process soon so that permanent rules can be in place around Jan. 1, 2022.

Licensing update

The passage of SB 408 coincides with a long-awaited update on licensing.

Since June 2018, Oregon has not processed new applications for any cannabis license type, when the OLCC hit “pause” on processing new applications because of concerns of a large cannabis oversupply.

Since then, only applications submitted on or before June 15, 2018, have been eligible for potential issuance.

During the 2019 legislative session, new producer applications were further prohibited in statute until at least January 2022.

The OLCC has made a concerted effort to streamline its licensing processes and reduce burdensome requirements since the pause and moratorium began.

As a result, the commission has almost entirely eliminated the backlog of applications and said it was nearly ready to begin processing new applications again.

With the producer moratorium set to sunset in January 2022 and SB 408 on deck to streamline regulations and create new market opportunities, many were hopeful that Oregon was ready to allow new license applications.

The OLCC recently announced it would recommend that the Oregon Legislature extend the moratorium on new producer licenses for two more years but didn’t address opening applications for other license types.

Factors that the agency considered for continuing the producer license pause include:

  • Market conditions.
  • Resources.
  • Equity issues.
  • The need to get illegal grow operations under control on a statewide basis.

The OLCC’s standing Advisory Committee, of which I’m a member, discussed the moratorium at length in a recent meeting as well, and the commission took the feedback offered by committee members into consideration.

On Nov. 8, in a rather unexpected move, the agency announced it is resuming processing new retailer, wholesaler and processor license applications.

Now, there are two pathways available for obtaining a permit: submitting a new application or purchasing an existing license.

For both routes, working with the help of advisers is key.

January 2022 will bring welcome relief and opportunity to Oregon cannabis businesses.

I’m optimistic that the OLCC’s commitment to fast-tracking SB 408 rulemaking, its desire to simplify licensing and its willingness to continue collaborating will result in a healthy, competitive and progressive industry.

Danica Hibpshman can be reached at danica.hibpshman@tonkon.com.

The previous installment of this series is available here.

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