Bye Bye
     “GOODBYE TO ALL THAT”

On Tuesday, Enrolled Senate Bill 1057 was signed by the President of the Oregon Senate and the Speaker of its House. The bill now sits on Governor Kate Brown’s desk, where it awaits signature. Anyone who has followed the Oregon cannabis story for the past few years knows Governor Kate Brown has never not signed a cannabis bill that made it to her desk — and, to be very clear, even if an Oregon bill goes unsigned and unvetoed for 30 days, it still becomes law. As to SB 1057, we fully expect its approval in the next 30 days, which is a big deal. That is because SB 1057 makes some sweeping changes, especially to Oregon’s medical marijuana program.

Below is a bullet point list of the bill’s key provisions, cribbed from one of the Staff Measure Summaries for the Joint Committee on Marijuana Regulation. I have highlighted provisions of emphasis in bold, and points of superior emphasis in bold + italics.

  • Allows Oregon Liquor Control Commission (OLCC) authority to prevent the illegal transfer or diversion of marijuana from OLCC licensees.
  • Allows an OLCC marijuana licensee to be designated by the OLCC as an exclusively medical licensee.
  • Increases the number of commissioners on the Oregon Liquor Control Commission from five to seven.
  • Specifies one of the additional commissioners must be from western Oregon and the other new commissioner from eastern Oregon.
  • Limits the number of commissioners from one political party to four.
  • Allows specified OLCC licensed marijuana producers an additional 10 percent of their existing canopy square footage to produce marijuana for medical use.
  • Requires marijuana producers who do utilize this additional canopy square footage to donate for free 75 percent of the marijuana produced, and allows the remaining 25 percent to be sold to OLCC licensed marijuana businesses.
  • Prohibits an OLCC regulatory specialist from carrying a gun, conducting inspections of primary residences not licensed by OLCC, or ensuring compliance with Oregon Medical Marijuana Program (OMMP) registrants.
  • Allows OLCC to issue a letter of reprimand or to proceed with an investigation of a former OLCC marijuana licensee.
  • Allows an OLCC marijuana licensee to transport marijuana items to, and exhibit at, trade shows or the 2017 Oregon State Fair under certain conditions.
  • Allows OLCC to require persons with a financial interest in a business with an OLCC marijuana license to submit specified information to the OLCC.
  • Adds an identification card from a federally recognized Indian tribe to the list of allowable documents verifying age when purchasing marijuana.
  • Requires marijuana produced and transferred within the OMMP system be tracked by the OLCC tracking system.
  • Specifies funding for the tracking system to be paid from the Oregon Marijuana Account prior to any other distribution.
  • Requires Oregon Health Authority (OHA) to impose an additional fee on marijuana grow sites, processing sites, and dispensaries to pay costs incurred by the tracking system.
  • Specifies timelines for tracking system phase in.
  • Directs OHA to create a database sharing OMMP registrant information with OLCC and the Department of Revenue.
  • Specifies information in the database is not eligible for public disclosure.
  • Moves marijuana labeling authority from the OHA to OLCC.
  • Clarifies that an OMMP cardholder may jointly possess six medical marijuana plants under OMMP in addition to four marijuana plants allowed under Measure 91.
  • Limits the allowable number of immature marijuana plants in possession of an OMMP cardholder to 12 unless their address is a registered medical marijuana grow site.
  • Limits the allowed number of immature medical marijuana plants at registered medical marijuana grow site to twice the number of allowed mature marijuana plants.
  • Allows the Oregon State Department of Agriculture to possess, test, and dispose of marijuana.

The fundamental current running through this bill is the continued transfer of Oregon medical marijuana to OLCC purview, something we have been writing about and predicting for quite a long time. (See our articles here, here, here, here and here.) In this legislative session, Oregon is making a conscious choice to regulate marijuana less like a public health issue (medicine) and more like a revenue commodity (alcohol). In speaking with OLCC and reviewing a few of the other bills in committee, we only expect this trend to continue. I note that this trend is happening not just in Oregon, but in Washington State too, and — like it or not — we expect most other states will follow this trend as well.

Because Oregon’s medical marijuana program continues to be a major source of grey and black market activity, the state is also making a concerted effort at controlling diversion through SB 1057. By requiring medical growers and processors to track their output in the OLCC system or forfeit their registrations, the state is attempting to put an end to 20 years of growers stacking patient cards for profit. As with moonshine stills in the 1930s, these growers will have to decide whether to: (1) meander into the bona fide regulatory fold; (2) continue making medicine for patients at a very small scale; or (3) recede to the illegal market and attempt to evade ramped-up enforcement.

As for compliance dates, each medical grow site, processing site and dispensary (if any OHA dispensaries still exist) must notify OHA prior to December 1, 2017 whether it has elected to remain in the medical program—subject to increased costs and OLCC tracking—or whether it will apply for an OLCC license outright. If the person or entity stays in the OHA program, seed-to-sale tracking must begin on or before July 1, 2018, or OHA will revoke the registration. There is some nuance to all of that (see bill Section 44) but that is the general concept.

Like the notion of taxing medical marijuana sales, eradicating the Oregon Medical Marijuana Program seems to be a third rail down in Salem. So expect the legislature to continue to chip away at the program with bills like SB 1057. At this point, entrepreneurs should be thinking about, and engaging in, the OLCC program exclusively. As we said in October, the OHA regime will soon recede to strictly limited, patient-caregiver relationships. The money there is gone.