New Rules and Regulations

By Matt Walstatter

When Oregon voters passed Measure 91 last Fall, we began a process that would lead not just to legal marijuana for all adults, but to the creation of a new, lawful industry built around the production, processing, and distribution of cannabis.

Implementation of Measure 91 will require both laws and rules. As the 2015 legislative session draws to a close in Salem, we now know what the laws guiding implementation will look like.

It seems like a natural time to recap a busy session for the world of cannabis.

As a member of the Oregon Cannabis PAC, I have been actively involved this session. We had a team of four lobbyists working in Salem. My wife Meghan and I participated in lobby days, met with legislators and staffers, and testified on multiple occasions. Our community won some big victories and took a few hits.

The main piece of legislation affecting both the medical and recreational sectors was HB 3400. This omnibus bill, with dozens of amendments, weighs in at about 200 pages. It lays out the framework for the recreational system, which will be run by the Oregon Liquor Control Commission (OLCC). It also made some changes to the Oregon Medical Marijuana Program (OMMP).

4 categories of licenses

91 created four categories of licenses:

1. Producer;
2. Processor;
3. Wholesaler; and,
4. Retailer.

HB 3400 lays out some basic requirements for licensing and instructs the OLCC to flesh out the details in the rule making process. Anyone may hold as many of each type of license as they want as long as they meet the requirements for that type of license.

As of now, the state will not place a cap on the number of licenses issued, although some restrictions do exist. For example, retail shops must be 1,000 feet away from a school, although if a school moves in after a retail store has begun operations, the store will be able to stay.

The size of individual grows will also be subject to limits. These limits will be based on square footage of flowering canopy, rather than plant counts, a huge victory for growers. The limits will increase over time as the industry matures.

The Legislature required that any applicant for a license be an Oregon resident for at least two years. The law allows for out of state investment as long as the license applicant meets the residency requirement. The term applicant was left undefined and will be a topic for rule making. As a result, only after rule making will we know what kind of teeth the residency requirement will really have.

No cannabis commerce in eastern Washington

The Oregon cannabis community took a hit this session is in the area of local control. Measure 91 allowed localities to ban cannabis businesses only through a vote of the people. HB 3400 takes a different approach, allowing city and county governments to ban cannabis businesses in areas where Measure 91 received less than 45 percent of the vote.

This unfortunate compromise will likely mean the banning of all cannabis commerce everywhere east of the Cascades, prompting some to dub this region “Western Idaho.”

HB 3400 also made some significant changes to the OMMP, some for the better, some for the worse. The OMMP allows patients to grow for themselves or designate a grower. Each patient is allowed six flowering plants and 18 immature plants. A grower can grow for up to four cards (24 flowering plants). Currently, no limit exists on how many growers can share an address, essentially allowing unlimited plants at a site provided you have enough patients and growers.

The new law puts a hard cap of 48 plants per address for new growers. Current growers with more than 48 plants can get an additional 48 grandfathered in, creating a max of 96 plants per address. The requirements are tighter in residential zoning, where new growers may have 12 plants and current growers can get an additional 12 grandfathered in.

In the “gray” zone

Processors in the Oregon medical system are not currently licensed, leaving them in an even grayer zone than others in the legal Cannabis Industry. In addition to the new recreational processor’s license, HB 3400 creates a medical processors license. Like recreational processors, medical processors will not be subject to possession limits — they may possess as much material as they choose.

Growers also saw their possession limits raised, from 1.5 pounds per card to 3 pounds per plant for indoor plants (18 pounds per card) and nine pounds per plant for outdoor plants (54 pounds per card). Growers also notched a win in the form of a new definition of immature plants. An immature plant used to be defined as a plant that measure less than 12 inches high and less than 12 inches wide. Now an immature plant is any plant that is not flowering, allowing growers to veg larger plants with fewer cards.

The relationship between the medical and recreational systems remains a challenge. As it stands now, we will have medical stores supplied by medical card growers and medical processors. These stores will be supervised by the Oregon Health Authority. We will also have OLCC licensed recreational stores supplied by OLCC-licensed producers and processors. Medical growers may receive a limited exemption allowing them to sell some product into the OLCC recreational system.

Taxes can go as high as 20%

Medical stores will not charge tax. OLCC stores will collect a 17 percent sales tax for the state. Local governments may add their own tax of up to 3 percent. This makes a total sales tax of 20 percent, the lowest of any state that allows recreational cannabis.

We fought very hard for a system that would allow medical patients to purchase tax free in OLCC-licensed recreational shops. This would give patients more options and make it easier for the industry to serve both medical patients and recreational customers. So far we have not been successful in this endeavor, but we can still address it in rule making.

The Oregon Legislature convenes again next winter, a few months before we begin recreational sales. This will give us another opportunity to address the tax piece and anything else that falls through the cracks.

In the meantime, we will be focused on the rule making process. I’ll let you know what happens with that.