One State Over the Line

Advocates, producers and at least two politicians hope new legislation passes to allow out-of-state cannabis sales

In the past two years alone, state-licensed producers in Oregon have harvested more than 3.6 million pounds of usable marijuana. At the current pace of sales, that’s enough to last them nearly eight years.

“We have an economic catastrophe over here,” says Adam Smith, the founder and executive director of the Craft Cannabis Alliance and the driving force behind a campaign to allow interstate commerce. “Here in Oregon we have $500 million in local capital that’s at risk of going under.”

To protect local investments, businesses and jobs, many in Oregon see exporting cannabis as a possible solution. The legislative effort starts with state Senator Floyd Prozanski and Representative Ken Helm, who have co-sponsored Senate Bill 582. As introduced, the bill would allow Oregon’s governor to enter into an agreement with another state to permit the export of cannabis across state lines, much like a similar, failed 2017 proposal. But since Congress oversees interstate commerce, moving marijuana across state lines would be a violation of federal law without the state protection that keeps domestic cannabis markets safe.

In addition to the massive federal question, Oregon would also need to find a partner. But except in some of the more restrictive medical programs, every state with a legal program is already meeting — or exceeding — its own demand.

Craft Cannabis Alliance executive director Adam Smith.

Playing the Odds

While there are still plenty of unknowns hanging over the legislation, Smith sees an interstate cannabis trade as less of an “if” and more of a “when.”

Passing the legislation for exports “doesn’t get us out of the state. It only clears the first hurdle,” Smith says. If the legislation is passed, the Oregon Liquor Control Commission would need to find “allies that would be interested in buying the cannabis” and then determine the logistics of moving the cannabis from Oregon’s system to the buyer’s, as well as physically moving the product to that state, Smith says.

But even after both states’ regulating agencies agree on all the specifics for how the export would work — and there are quite a few — it still “won’t move anything anywhere,” he adds. The next step, and the real trigger that would start the export process, is a little more complicated.

Smith and Helm, the bill’s co-sponsor, both admit the goal of this bill is to give Oregon officials the highest level of authority possible to approve out-of-state transfers and to get a framework in place for exporting its cannabis surplus so that when the time comes, Oregon will be ready to ship.

“We are being proactive, preparing for a day when the federal government might decide to allow cannabis to be exported across state lines,” Helm wrote in a statement to Marijuana Venture. “However, to be clear, such export would not occur prior to federal approval.”

But Smith adds that “approval” isn’t actually necessary.

“I don’t know who the attorney general is going to be in six months to a year,” Smith says. “We could end up with an attorney general with so much on their plate that if you say, ‘hey, we have two governors that want to move stuff between secure systems,’ it’s not going to be a big enforcement priority.”

While this may sound more like carefully aligning dominoes than a political plan, Smith reminds skeptics that medical marijuana had a similar origin; state laws were amended long before the Controlled Substances Act.

“Waiting for explicit permission from the federal government in cannabis has never been a winning strategy. We would still be waiting for medical sales,” Smith says. “Understand when I say that we can do this with explicit federal permission, but all we really need is acquiescence, which is a much lower bar.”

 

Who’s Buying?

On top of the tremendous roadblocks Oregon would need to overcome in order to make cannabis exports a reality, many wonder exactly who will be buying it.

Greg Walters, a managing partner for Prohibition Gold, a maker of cannabis-infused products in Washington, says there have been times when an out-of-state source like Oregon could have really helped with demand. Walters says he’s open to anything that provides more channels to supply his business.

“As long as quality, price and testing were there then I don’t really care where it comes from,” Walter says. “But first and foremost, it has to be legal.”

Ramsey Hamide is open to the idea, but fears exports could be disruptive to Washington’s local industry. As the co-owner of Main Street Marijuana, Washington’s top-selling retail store, which operates just miles from the Oregon border, Hamide says he could pick up some of the more prominent brands that draw some of his Washington customers across the Columbia River and into Portland stores. But the positives stop there for Hamide who says the idea of “a one-way train with an overabundance of Oregon marijuana flooding an already flooded Washington market” would be “bad for everyone except the customer.”

It’s a similar story along Oregon’s southern border.

“Will California be a net importer? No, definitely not,” says Erich Pearson, the founder and CEO of Sparc, a chain of four cannabis retail stores, and multiple grow operations in Northern California. “California is going to grow more cannabis than it can consume too.”

Sparc founder and CEO, Erich Pearson, doesn’t believe California will become a big importer of cannabis, but he remains hopeful that Oregon’s proposed legislation will lead to new laws in California where he would be able to ship his Sonoma County flower to states like New York or New Jersey. Photo by Joseph Guillory/courtesy of Sparc.

Pearson says as an organization, Sparc is willing to look at any cannabis that is grown organically and sustainably, but it would also have to weigh the legal risk of breaking a federal law without protection from the state.

Interstate commerce would be easiest between the three recreational states bordering Oregon, but Washington is already a saturated market. By the time Oregon’s legislation would go into effect, California could feasibly have the same glut as Oregon. Nevada could be the best option, provided that the state’s retailers are interested and the two respective agencies overseeing the programs come to terms on an export deal.

“I think it’s way more interesting to think about New York City and who they are going to buy cannabis from,” Pearson says.

Smith completely agrees. He knows all too well that Washington has been in a similar position to Oregon and that California isn’t going to make a dent in the state’s nearly eight-year surplus of pot. Although Senate Bill 582 prohibits transporting cannabis through navigable airspace and across states that are not party to the agreement, Smith hopes Oregon’s cannabis can be there at the launch of recreational sales.

“New York is going to have to create a production industry about five times the size of Oregon’s production industry from scratch,” Smith says, adding that the East Coast growing facilities will cost billions to build and will eventually have to be cost and quality competitive with West Coast cannabis.

But getting product into bordering state markets, let alone those on the East Coast, is going to be difficult, figuratively and literally.

 

Hypothetically Huge

Without the desired blind eye from the attorney general, Oregon’s export legislation would be largely symbolic. Yet symbolism can be a powerful force in times of change. Smith believes nothing is set in stone and the industry can make great strides toward legalization through passing this type of legislation.

Many operators inside the industry agree.

“I think it’s a progressive change in the law and it’s exciting to hear that a state is doing that,” Pearson says, adding that California’s new, cannabis-friendly governor, Gavin Newsom, is also expected to make progressive changes to that state’s system.

Smith believes that, if allowed, Oregon cannabis could be among the state’s largest exports. Oregon’s hazelnut industry, for example, contributes roughly $100 million annually to the state’s economy, mainly through exports, while the state’s cannabis economy is in danger of collapsing under its own weight.

“If we could cross borders like any other product, we would not only need every ounce of cannabis that the current licensees could produce, we would need to expand our licensing,” Smith says. “We don’t have an oversupply problem, we have a market access problem.”

Milestones such as passing legislation, organizing potential framework for exports and getting different regulatory agencies to connect are all part of creating a wave large enough to push down federal barriers.

“Once this barrier collapses, and we can move product between legal states, basically we have given states the ability to turn off federal prohibition,” Smith says, calling the measure “the next step in tearing down prohibition.”

For many, Oregon’s legislation to export cannabis, although potentially just symbolic of the changing times, is a specific, if impractical step the industry needs to move forward.

“A lot of these laws are tricky … but we’ve got to create them,” Pearson says. “And if the laws are wrong, we’ve got to break them first.”

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