By Amy T.. Margolis
With the passage of Ballot Measure of 91 in Oregon, almost every call we receive consists of the same question: “How do I get prepared for what’s next?” Because of Oregon’s unusual existing legal landscape, and our ability for dispensaries to be licensed under House Bill 3460, we are positioned differently than either Colorado or Washington going into the next legislative session and rule-making process.
Add on to that our flourishing outdoor growing region and ahead-of-the-game industrial grows and the rule-makers will be facing the challenge of how to create an inclusive legal market. The next 12-16 months will involve an intense legislative session, a long administrative rule-making process, and legislative changes to the Oregon Medical Marijuana Program.
Although it’s a long read, Ballot Measure 91 is relatively simple. It creates four licenses meant to capture the various roles in the cannabis industry: producer, processor, wholesaler and retail. The measure gives the Oregon Liquor Control Commission the ability to license and regulate those four licenses. The measure also sets a taxation structure: $35 per ounce on flower, $10 per ounce on leaves and $5 per immature plant. It also affirmatively prohibits local jurisdictions from imposing additional taxes. Local jurisdictions may opt out, but only through a general election.
The measure does allow local jurisdictions to independently regulate time, place and manner for cannabis businesses, but only to address potential issues around nuisance law. The measure is silent on zoning, number of licenses, canopy size, how licenses will actually be issued and many more of the substantive matters. This was done on purpose to give the Oregon Liquor Control Commission the most latitude during the rule-making process.
In many ways this is the best-drafted legalization measure we have seen. It is clean and simple with a taxation and regulation structure that makes sense. Expecting it to stay this way is probably an unreasonable expectation.
In February, the Oregon Legislature will begin meeting. This provides the opportunity for true statutory changes to be made to the measure. With more than 50 bills addressing cannabis, this session will be filled with the possibility of changes to the measure, both expected and unexpected. We know the following proposed changes are coming:
– Local jurisdictions, cities and counties, will be asking to impose their own layer of taxation on top of the existing tax structure.
– Local jurisdictions will be asking for the ability to alter the opt-out structure in a significant way to allow for bans or moratoriums.
– There will be issues around extracts, and edibles are surely in the works as Oregon law is almost completely silent on this topic.
– There will be specific changes addressing driving under the influence of cannabis.
– Potential bills concerning quantity of licenses issued.
– Bills addressing the size of cannabis grows.
This is an extremely short list of what is coming during the session. It is hard to predict at this time what will move and what will not. There will be many groups down in Salem advocating on behalf of the industry, and the cohesiveness of those groups may very well determine their success in having as few changes as possible made to the measure.
At the same time the Legislature is addressing Measure 91, lawmakers will also be looking at the medical licensing program. While Measure 91 specifically states that medical is not affected by its passage, many people in the industry are hoping to see some substantive changes to the program.
When House Bill 3460 was passed, Oregon Health Authority was given the ability to license and regulate medical marijuana dispensaries. What 3460 did not do was give Oregon Health Authority the ability to regulate or license any other part of the industry. This has left growers, processors and even testing labs operating in an impossible place, relying only on the Oregon Medical Marijuana Program for protection from prosecution. It has also left the medical consumer unsure of the safety, consistency and quality of product being sold at storefront locations. The Oregon Health Authority almost certainly will be going to the Legislature and asking to expand its regulatory ability to include the remaining pieces of the industry. The practical result of this request is that while the OLCC is crafting its rules, Oregon Health Authority will also be involved in its own rule-making process.
At this point, how the OLCC will draft the rules around Measure 91 is still a mystery. We know that they will be holding a series of listening tours in the early part of the year to better understand the concerns of the people. The industry will most certainly need to be ready to respond to those concerns in a professional and organized fashion.
After that tour, we anticipate — but are not certain — that there will be an umbrella rules committee with several sub-committees. OLCC has been silent on its position concerning number of licenses, the possibility of a lottery, how they will determine the size of grow operations and much more. It is extremely unlikely that we will know more about this process until, at the earliest, February.
Understanding that so many changes, at all levels, are in the works makes it difficult for those in the cannabis industry, or hoping to invest in cannabis, to make real-time decisions. This leaves almost everyone invested in this process wondering how to move forward.
The most important thing we tell clients is to stay informed. By following the legislative session and rule-making process you can understand what is happening in real time. Make your bets carefully. While things like real estate acquisition makes significant sense, understand the risks.
Changes to the opt-out provisions or intense local zoning restrictions might have a negative impact on a large investment. Build your industry relationships if you don’t already have them now. This costs no money and will most certainly pay off in the long run.
As we saw in Colorado and Washington, there will likely be winners and losers. Smart, informed decisions will certainly carry the day.
Amy Margolis is a shareholder with Emerge Law Group, an Oregon cannabis law firm. She has been representing people charged with marijuana-related offenses for 13 years and expanded her practice to represent clients in all aspects of the cannabis industry in 2012. In addition, she founded the Oregon Growers PAC and Oregon Growers Association.