Oregon Cannabis: New Rules, Part 1

04 Jan Oregon Cannabis: New Rules, Part 1

The coming New Year heralded new administrative regulations for marijuana in the State of Oregon. These changes came through the Oregon Liquor and Cannabis Commission (OLCC) rulemaking process. That process, in turn, stems from cannabis laws passed by the Oregon legislature earlier this year.

We gave a brief overview of the new rules last week. With the volume of changes, we expect to write a few posts analyzing those changes. Today I will focus on “common ownership” issues. Following posts will focus on regulation of hemp, artificial cannabinoids, and CBN.

New rules: “common ownership” definition

Oregon allows verticality in its regulated cannabis program. Some of the new rules resulted from the reality that licenses are often commonly owned as between producers, retailers, and so forth. The Oregon legislature addressed this in SB 408, which provides:

As used in this section, “commonly owned” means, as further defined by the Oregon Liquor Control Commission by rule, that a person included on an application for a license under ORS 475B.070 has an interest in or authority over the management of another entity for which a license has been issued under ORS 475B.070.

This statutory change resulted in the OLCC revising the definition of common ownership in OAR 845-025-1015. to the following:

(21) “Common Ownership” (a) Means any commonality between individuals or legal entities named as applicants or persons with a financial interest in a license or business proposed to be licensed that have a financial interest or management responsibilities for an additional license or licenses.

(new language in italics). The business reality of common ownership between licenses of the same and different types led the OLCC to revise several other rules, discussed below.

New rules: transfer privileges

Among the significant changes were those to transfer privileges between the four different types of licenses: producer, processor, wholesaler, and retailer.

For years the rules have restricted to whom marijuana growers may sell, transfer, transport and deliver their product. Among the significant restrictions were prohibitions on producer-to-producer transfers. Those restrictions have been lifted, in large part:

1. Marijuana growers may now engage in producer-to-producer sales, transfers, transports and deliveries of usable marijuana where the producers are under common ownership.
2. Marijuana producers may also transfer whole, non-living marijuana plants removed from a growing medium to the licensed premises of another producer under common ownership. Previously such transfers were only permitted to processors, wholesalers, nonprofit dispensaries and research certificate holders.
3. Marijuana producers may also move transfer kief between producers with common ownership.

In addition, a marijuana producer may now purchase and receive:

1. marijuana and marijuana plants from a producer under common ownership;
2. marijuana produced by the licensee that was not processed by a processor;
3. cannabinoid products, cannabinoid extracts and cannabinoid concentrates from a marijuana processor that were made using only marijuana produced by the receiving producer;
4. up to 200 marijuana seeds in total per month from any sources within the State of Oregon other than a licensee, laboratory licensee, or research certificate holder; and
5. marijuana seeds from a retailer.

The OLCC also simplified the language retailer-to-retailer purchases by simply permitting a retailer to purchase, possess, or receive “marijuana items from a retailer under common ownership.” Previously, the rule described the class of persons eligible for such transactions as being those owned by “the same or substantially the same persons.”

How (and whom) the new rules help

The principal benefits of these change will be for business structures have a horizontal component at the marijuana growing level, as well as those that have a vertical organizational structure.

The changes to producer transfers in particular should reduce internal transaction costs, since many operations were forced to obtain a wholesale license to engage in producer-to-producer transactions with the wholesale license acting as the “man-in-the-middle” for these kind of deals.

Another benefit may accrue to multi-license operations that are engaged in the sale of one entity and who desire to transfer inventory between other commonly held assets.

Stay tuned for additional analysis and commentary, including around the work OLCC did on cannabinoid definitions. For other pertinent reading, see also: