Oregon Cannabis: What to Expect from OLCC This Fall

Fall is always eventful in Oregon cannabis. Croptober is an Oregon cannabis tradition— hopefully the crops come in lee of any wildfires. We also have administrative rulemaking annually once summer winds down, typically with public input via multiple rules advisory committees (RACs). That’s what I’m here to discuss.

This year, the Oregon Liquor and Cannabis Commission (OLCC) likely will look at, to start: temporary rules it had adopted under the Governor’s clumsy tax compliance mandate; the 2023 legislative session’s new cannabis laws; leftover business from the 2022 session, and certain COVID-era policies. I say “likely” because the Commission’s call for participation was vague, soliciting only “varied perspectives, backgrounds and expertise.” It did not identify topics for rulemaking.

All of this will take place while new Commission leadership awaits the “audit of the audit” commissioned by the Oregon Department of Justice, and conducted by a Sacramento law firm. Whether and when DOJ will release those findings — on potential corruption in the Secretary of State’s recent review of Oregon’s cannabis program– is anyone’s guess. Fallout from the La Mota scandal continues unabated in any case.

But life must go on. Below are a few of the rulemaking issues I am looking at this fall, following discussion with OLCC.

Tax compliance rules

On June 15, the OLCC approved temporary rules requiring licensed marijuana retailers to obtain a Certificate of Tax (“Certificate”) from the Oregon Department of Revenue (“DOR”), as a condition for acquiring or renewing a marijuana retailer license. A Certificate is also needed for changes of ownership, and for adding someone to a license.

We’re midstream on a couple of business sales where Certificates are required. Believe me when I say the rule can be far-reaching. To the positive, DOR is quick to enlist delinquent taxpayers (on any industry) for payment plans. They want the money after all. But this is all very new to the cannabis space.

An interesting issue to parse in “permanent” rulemaking will be whether OLCC makes tax compliance an annual criterion, or whether licensees will be monitored for noncompliance throughout the year. The former seems more likely. I don’t believe OLCC wants to deal with tax compliance intermittently, especially given the prospect of people falling in and out of compliance with DOR plans. I also don’t expect to see a significant number of license cancellations for noncompliance in this rule’s first year.

Whether or how the temporary rule will be updated is anyone’s guess. I don’t like the rule as it stands today. It was an awkward overreach at a terrible time, and I hope to see things reined in via permanent rulemaking. Once again, the request would simply be for cannabis businesses to be treated similarly to businesses in other industries.

“Basic bill and technical”

Basic bill and technical is a general term for rules needed to implement new cannabis laws passed by the legislature in any given year. At the close of the session in June, I explained that there were three such bills in 2023. Of those three, only HB 2931 should spur RAC activity.

HB 2931 creates a “cannabis reference laboratory to support enforcement of cannabis regulation.” I won’t rehash everything I wrote last month; however, suffice it to say that testing has been in the news a lot lately. This is because of the newish aspergillus testing rules and last week’s petition by various parties at the Oregon Court of Appeal to halt their implementation. Due to this aspergillus saga, I expect the state cannabis lab RAC to garner more attention than it may have.

License reassignment program (social equity)

This one is not being publicized, but I’m told it will happen. This rulemaking will arise from Oregon’s mealy-mouthed HB 4016— a foray into cannabis social equity which doesn’t mention “social equity” or any similar concept. For backstory on this, I would direct you to read Jesse Mondry’s helpful blog post from March of 2022, covering HB 4016 and what it means for OLCC.

I’m advised that OLCC personnel have been in touch with other states recently on cannabis social equity. A big difference between Oregon and many of those states is the Beaver State never got funding. That makes for a heavier lift; but the idea right now is to use criteria from another bill passed in the 2022 legislative session– HB 1579, to implement HB 4016. The former bill, titled the Equity Investment Act, set out “equity risk factors” that conveniently have been vetted by state Department of Justice.

Business Oregon already has distributed money to grantees pursuant to 1579. Using such criteria for OLCC license reassignment under HB 4016 rules would certainly shortcut things. It could also insulate the Commission from litigation and, most importantly, diversify the pool of licensees. That’s the theory anyway.

Drive-up windows; on-site delivery

During COVID, OLCC allowed both walk-up and drive-thru cannabis purchases from licensed retailers. The Commission also relaxed rules around on-site delivery. Eventually, the drive-thru allowance was rescinded, although people still buy and sell cannabis in that manner and OLCC admittedly is not enforcing the drive-thru prohibition. Related to this, OLCC noted last year that was “obvious… that a separate rulemaking process focusing solely on drive-up and delivery rules is needed.”

It’s about that time. I’m hopeful the Commission adopts a permanent rule allowing drive-thru pickup of cannabis, similar to what is allowed with alcohol. The arguments put forth by law enforcement to prohibit drive-thru cannabis purchase simply aren’t convincing. If intoxicated driving isn’t a concern for alcohol pick-up, it shouldn’t be for cannabis.

Miscellaneous topics

I’m setting this out as a category, though I’m not sure what, if anything, will materialize. I’d personally like to see OLCC rulemaking around “temporary authority” for incoming licensees in purchase and sale transactions, similar to what happens on the alcohol side. There is some debate in the Commission about whether this could be done through rulemaking or whether a statutory change is required. Rulemaking here could help deal with the problematic services agreement protocol still utilized in many sales, and OLCC’s disinterest in enforcing any “financial interest” rules related to those agreements— especially for expanding legacy operators.

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If you’re interested in any of the topics covered above, or anything related to Oregon cannabis regulation, consider volunteering your time for one of the OLCC RACs. The application link is here. Note that submissions received before August 8 will receive “priority consideration.” So get ‘em in soon– and enjoy the rest of your summer!

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