Cannabis Production

So you’ve set your sights on joining the next generation of Oregon cannabis producers. Congratulations! You’ve identified talented growers, you’ve resolved the intractable indoor vs. outdoor cannabis growing dilemma, you’ve saved up some money, and now you are eager to get your cannabis operation up and running.

But what’s next? Your first question is a classic: Where will I grow?

When you apply for an Oregon Liquor Control Commission license, you will need to prove you have a deed or lease to an eligible property. A letter of intent to lease or to purchase will also suffice, but the OLCC will not actually issue the license until you close the lease or sale. You should work with a realtor with experience in the cannabis industry to identify a few possible locations. As you begin your search, remember the following:

Not all counties and cities are alikeOn the most basic level, you need to be aware of the various cities or counties that have banned recreational producers outright. The OLCC maintains a list of these hostile local governments and you may be sad to hear that Grass Valley, Oregon is still off-limits!

Even the cannabis friendly local governments vary significantly in their local requirements, with some counties going to great efforts to be cannabis friendly, and others putting up an unfortunate amount of red tape. An exhaustive county-by-county or city-by-city analysis is beyond the scope of this post and we recommend you speak with cannabis entrepreneurs and professionals who have worked with your top choices for county or city to get a sense of potential local government roadblocks.

Distribution Channels. Though rural land is likely cheaper, your best markets will likely be in the cities. It is never too early to begin cultivating relationships with wholesalers, processors and even retailers to help bridge this gap. Proximity to testing labs is also a plus.

Perform Your Due DiligenceOnce you find a location in a friendly area with room for your operation, you need to ensure that the property complies with all state, county, and municipal requirements and regulations. This can be done by thoroughly reviewing county codes, city comprehensive plans, land use regulations, relevant zoning ordinances, and CC&Rs and, in some cases, talking with the appropriate government officials. You also need to be sure your property has access to adequate water as you will be required to show proof of “water rights,” and adequate power.

Failing to do due diligence on a property can have disastrous consequences. We recently had a cannabis client come to my law firm ready to close on a perfect piece of real estate in a location with a cannabis-friendly local government. This company had even paid for certain improvements to the property, and it was just days away from closing on the property transaction. Fortunately, as soon as we were provided the counties’ records on the property, we noted a provision from the 1980s that prohibited their business. We identified this issue just in time to prevent the purchase and free up our client to move on to greener pastures.

Once you’ve acquired rights to your perfect cannabis property, you are ready to apply for a Land Use Compatibility Statement (LUCS) from the local jurisdiction and to begin preparing the property for the OLCC licensing/inspection process. Check back soon for part 2 of this series.

I recently had the pleasure of attending the Cultivation Classic 2017, the “world’s only cannabis competition exclusively for ethically-grown product free of pesticides, defining craft and celebrating community.” Producers from around Oregon, including several of our clients, came together in a friendly competition to celebrate Oregon’s unique cannabis culture and ethos. Alongside the competition, the organizers put together a series of panels discussing a range of social, political, and legal issues facing the Oregon cannabis industry. The first panel featured the launch of a new industry group devoted to defining and supporting Oregon’s craft cannabis community.

This Craft Cannabis Alliance is an association of cannabis and cannabis-related businesses dedicated to creating an Oregon craft cannabis industry to rival Oregon’s renowned craft beer industry. Alliance Executive Director Adam Smith, a founder of Students for Sensible Drug Policy, took the stage to explain what “craft” means to these industry leaders:

Pictured left to right: Adam Smith, Cannabis Craft Alliance; Ashley Preece, Ethical Cannabis Alliance; Jodi Haines, Alter Farms
Pictured left to right: Adam Smith, Craft Cannabis Alliance; Ashley Preece, Ethical Cannabis Alliance; Jodi Haines, Alter Farms

These industry leaders are working to ensure that sustainable, ethical craft cannabis growers retain a seat at the table as Oregon’s cannabis industry matures. Gabriel Cross, CEO of Odyssey Distribution, LLC, expressed a sentiment shared by many of his fellow founding members.

“As a values-driven company, how we do things is as important to us as the bottom line. The CCA shares many of our values, and more importantly will bring together values-driven cannabis companies under one roof. We have a rare opportunity right now to define how an entire industry operates.”

One of the thorniest issues the CCA will face is the task of defining what “local control” means within the context of Oregon’s craft cannabis culture. Long-time readers of this blog will recall that Oregon originally implemented strict and confusing control and ownership residency requirements on recreational cannabis businesses. This created a host of problems, and the Oregon legislature responded by swinging the pendulum in the other direction, opening Oregon’s cannabis industry to unrestricted foreign investment and control. Over the coming months, the CCA will be working to find a balance its members believe will allow Oregonians to share in the profits of the state’s newest state-sanctioned “crop” without choking off the supply of vital capital that residents from other states can bring.

CBD

We previously discussed the two-tier industrial hemp registration system Oregon adopted last year. In brief, the Oregon Department of Agriculture allows registration as either a grower (producer of industrial hemp), or a handler (processor of industrial hemp into commodities, products or agricultural hemp seed). Currently, only registered hemp handlers can process industrial hemp or sell industrial hemp products. However, a bill winding its way through the Oregon legislature could significantly upend the status quo for CBD concentrates and extracts.

Oregon’s hemp advocates should keep a close eye on Senate Bill 1015. When it comes to CBD concentrates and extracts, the bill would open up industrial hemp processing to Oregon Liquor Control Commission (OLCC) licensed recreational marijuana processors. The processed CBD concentrates and extracts could then be delivered to recreational marijuana retailers for sale in OLCC licensed dispensaries.

Of course, the bill places some restrictions on OLCC processors:

  • The recreational processor must be registered with OLCC for the express purpose of processing industrial hemp into CBD concentrates and extracts. Presumably, the OLCC would create a new registration process for this purpose;
  • The grower must provide the recreational processor with all test results on the hemp and the recreational processor must retain the test results in its records; and
  • The industrial hemp must still be tracked as outlined in ORS 475B.150.

The bill would also allow the processed CBD products to be delivered to an industrial hemp handler for resale provided that:

  • The CBD products were produced “independently” of any marijuana products. This might require separate processing facilities to prevent cross-contamination;
  • The products have been properly tested;
  • The products are tracked as required by ORS 475B.150; and
  • The THC concentration in the products are below a threshold to be set by the OLCC (probably .3 percent if the OLCC follows the Department of Agriculture’s lead).

The bill is now before the Joint Committee on Marijuana Regulation, which will hold a public meeting on Senate Bill 1015 today (May 9), at the Oregon Capitol Building. If you want to get involved in the future of Oregon’s hemp industry, arrive at Room HR B before 5:00pm. Also, take note that the Committee will be considering this classic “gut-and-stuff” amendment, so you can safely ignore the text of the bill as originally introduced.

Cannabis scienceLast week we dropped some science about the current state of cannabis research with a focus on a recent study reviewing all research to date on the positive and negative health effects of cannabis. The “overwhelming takeaway” was that additional research was needed.

We wanted to highlight another study from early April that was published in the Journal of Psychopharmacology. The study doubles down on the potential political ramifications of cutting-edge cannabis research. The team, inspired by earlier studies suggesting that medical cannabis leads to a reduction in opioid overdose deaths, decided to determine whether cannabis’ “substitution effect” applies to other medications. Among New England dispensary members, the results of medical cannabis are stark:

  • 76.7% of respondents reported that they reduced their opioid use since starting medical cannabis.
  • 71.8% reported reductions in anti-anxiety medications.
  • 66.7% reported reductions in migraine medications.
  • 65.2% reported reductions in sleep medications.
  • 42% reported reductions in alcohol consumption.
  • 37.6% reported reductions in antidepressants.

These results reconfirm that medical cannabis reduces opioid use, and now we also know that medical cannabis reduces use of alcohol, antidepressants, and a field of other medications. The team is quick to caution that these results were based on self-reporting and then repeated a far too common refrain, “Additional research is needed.”

Perhaps we could expect to see that research soon, if only the current political climate were not so vehemently anti-science. President Trump recently said: “Drug overdoses are now the leading cause of accidental death in our country. And opioid overdose deaths have nearly quadrupled since 1999 . . . Our Attorney General, Jeff Sessions, is working very hard on this problem. It takes a lot of his time, because this causes so much of the problem that you have to solve – that problem.”

Roughly translated, the President and his staff have recognized that opioid abuse has reached epidemic proportions that require immediate action. The science clearly gives us one piece of the solution: decriminalize cannabis. But with an administration willing to make the insultingly anti-scientific claim that cannabis is “only slight less awful” than heroin, we the people (and Trump’s supporters in particular) will likely be left waiting for a rational administration.

 

Oregon marijuana lawyer

Oregon Senator Floyd Prozanski’s bill to prohibit Oregon employers from restricting or penalizing off duty marijuana consumption will not pass this session. As originally introduced, Senate Bill 301 would have prevented employers in Oregon from banning marijuana consumption by their employees during nonworking hours, provided that the consumption did not lead to on duty impairment. Additionally, collective bargaining agreements could still have prohibited off-duty use of marijuana without running afoul of the new law.

The bill ultimately died because of strong opposition from industry on two general grounds relating to worksite safety and federal law. In written testimony before the Judiciary Committee, representatives from the Oregon Association of Hospitals and Health Systems and the Oregon Columbia Chapter of Associated General Contractors, focused on federal law preemption and more specifically on the federal Drug-Free Workplace Act. These representatives argued that SB 301 would force employers that either contract with or receive grants from the federal government to choose between violating federal law or violating Oregon state law.

These representatives also testified that the impairment exception was meaningless, noting that there are no available technologies for reliably testing for marijuana impairment. Since marijuana remains present in the body long after use, employers contend it is simply not possible to determine whether employees are under the influence of cannabis while on their jobs.

Supporters of the bill dismissed these concerns, arguing that the various exceptions would still have permitted employers to restrict marijuana use by employees working on federal contracts and pursuant to collectively bargaining agreements. Beth Creighton, of the Oregon Affiliate of the National Employment Lawyers Association, testified that “[t]hese exceptions create a balance between the rights of Oregonians as individuals to engage in legal activities and the rights of employers to provide a safe workplace.“

Senator Prozanski sought to salvage the bill by amending it to cover only medical marijuana cardholders. This watered-down version managed to squeak through the Senate Committee on Judiciary, but Oregon’s Senate Democrats ultimately decided it would not be able to pass the full Senate and they pulled it from consideration.

We will have to wait until next session to see if Senator Prozanski, or someone else, takes up this cause once again. In the meantime, in Oregon, as in most states, employees can relatively easily be terminated for consuming cannabis during off-hours.

Oregon cannabis laws

We recently discussed proposed legislation to prevent Oregon marijuana retailers from recording, retaining, or transferring any information “that may be used to identify a consumer,” such as a consumer’s name, birthday or address. Some marijuana retailers had been collecting and storing this information for marketing purposes, often without their customers’ knowledge. The Oregon legislature was concerned that this practice would create a paper trail the federal government could use against cannabis consumers in a federal crackdown on recreational marijuana.

As we predicted, the legislature moved quickly. Yesterday, Oregon Governor Kate Brown signed SB 863 into law less than two months after the bill was introduced. In a strong signal to Oregon’s marijuana businesses and consumers, the bill enjoyed broad bipartisan support and passed the Oregon Senate by a vote of 21-6 and the Oregon House by a margin of 53-5. The bill requires all Oregon recreational marijuana retailers to destroy existing customer personal information within 30 days and it prevents cannabis retailers from collecting personal information in the future without the customers’ informed consent.

The bill is an explicit response to the Trump administration’s recent comments calling for a crackdown on the recreational marijuana industry and it is widely viewed as part of Governor Brown’s commitment to protect Oregon’s marijuana consumers from federal intervention or harm. SB 863’s streamlined journey from bill to law was helped by Section 4 of the bill, which declared that the Trump administration’s regressive statements regarding marijuana legalization have created a state of emergency requiring immediate action to preserve the public peace, health and safety.

Oregon’s consumers can now rest a bit easier, knowing their local retailer will not be maintaining a database of personal information to which an unfriendly federal government may someday have access.