Oregon Cannabis 2022: Legislative Forecast and Report

01 Feb Oregon Cannabis 2022: Legislative Forecast and Report

The 2022 Oregon legislative session kicks off today. It’s a short session this year, with fewer cannabis bills than usual crowding the docket. In 2021, for example, we had 28 enrolled bills to start; eventually, 10 became law. This year we start with only five enrolled bills. Those five submissions overlap some cases, but they also cover a fair bit of ground, with the biggest topic being cannabis producer license applications.

Before diving into this, I should note that most introduced or enrolled bills do not pass. Occasionally, a bill is introduced midstream and sails through, but that is rare in short sessions and rarer still with cannabis. In the cannabis world, we typically see an omnibus or “Christmas tree” bill go through every session. Then, the legislature does some work around the edges with discrete issues that are broken out for various reasons.

HB 4016 – Marijuana and Hemp Producer License Moratoria; Etc.

HB 4016 is sucking up most of the oxygen right now, and rightfully so– the “moratoria” on producer license applications could affect the industry greatly. Section 1(5) of this bill contains the most controversial bit on this controversial subject. It provides: “[OLCC] shall inactivate an application for a production license under ORS 475C.065 that was received after January 1, 2022.” Yes, you read it right: under this enrolled bill any party who has applied for a license after January 1, 2022 would have their application inactivated retroactively– even if they had spent significant time and money preparing for licensure.

Some of the leading cannabis law firms in Oregon have drafted an open letter to the OLCC on this provision, asking OLCC to work with the legislature to strike this retroactive language. My law firm has agreed to sign on, and by the time you are reading this the letter will have issued. I plan to publish it here on the blog shortly.

For now, I’ll say the most confusing thing is why OLCC and the legislature didn’t address this issue last year. Everyone knew the SB 218 moratorium on producer license applications would sunset prior to the 2022 session kicking off. In August of last year, for example, I wrote:

The big question when SB 218 passed was: How long is OLCC going to “refuse to issue production licenses?” Today, the answer seems clear that it will be at least until January 2, 2022, when SB 218 sunsets.

The next question is what happens on January 2, 2022. In our conversations with OLCC staff, they generally acknowledge the Commission will be compelled to accept new producer applications as of January 2, 2022. Whether OLCC processes those applications anytime in the near future, however, is the million dollar [question].

For much of the past year, aspiring producer applicants were lead to believe they would be able to apply for licensure this January, and many planned accordingly. Let’s hope the powers that be walk back this retroactive provision.

As to the greater moratoria provisions, HB 4016 proposes giving OLCC broad discretion “based upon supply and demand for marijuana… [to] refuse to issue production licenses under ORS 475C.065 for an amount of time that the commission determines necessary.” This power has been advocated by industry licensees for a while, including formally through a registered lobbyist at the recent Legislative Days hearing. The HB 4016 provisions also prohibit applicants who applied for these licenses prior to January 1, 2022, from making various changes and effectively monetizing them on the secondary market.

On the hemp side, HB 4016 similarly gives the Oregon Department of Agriculture (ODA) broad discretion “based upon supply and demand for industrial hemp… [to] refuse to issue production licenses under ORS 475C.065 for an amount of time that the department determines necessary.” This would grant ODA market intervention powers similar to OLCC. Whether or not that is a good idea is beyond the scope of this blog post. For now, suffice it to say that it hasn’t gone particularly well with marijuana.

Note that both the OLCC and the ODA moratoria would expire on March 31, 2024.

Other HB 4016 odds and ends include: 1) a creative nod to social equity, which would allow OLCC to establish a program to “assign expired, relinquished or otherwise suspended licenses … to qualified applicants”; 2) a provision allowing liens against industrial hemp land or buildings used unlawfully; and 3) a provision requiring mandatory reporting by OLCC employees where a “reasonable belief” exists that sex trafficking or human trafficking, or employment of minors, is underway at a licensed premises. This portion of the bill creates a safe harbor for “good faith” reporting, for what it’s worth. Finally, it directs OLCC to “establish a human trafficking coordinator position within the commission”, too.

HB 4061 – Water Theft, Recordkeeping and Enforcement

This is a short and simple bill, designed to address the problem of water diversion by unlicensed operators. It confers a sort of “peace officer” status on the Water Resources Director, allowing that administrator to “petition the circuit court…. for a warrant authorizing the director to enter onto the land or conduct an inspection.” This conferred status would be similar to the authority that OLCC agents received in the last session, for the inspections which lead to Operation Table Rock.

HB 4061 also provides that operators who haul water must keep records for at least 12 months, and provide those to the Water Resources Department upon request. There are fines and penalties for soliciting or accepting hauled water from illegal sources, and making false statements related thereto.

Unlike with HB 4016, it seems that HB 4061 could pass with little fanfare. I can’t imagine these proposals will create much controversy, and I also can’t imagine HB 4061 would “create a fiscal”, routing it to the dreaded Ways and Means Committee. My guess is this one will sail through if it’s not otherwise pulled into a larger bill.

HB 4074 – Human Trafficking; Hemp Flower Re-Testing; Etc.

This is another fairly basic bill. Like HB 4016, it requires OLCC employees to report sex and human trafficking, and unlawful employment of minors. It extends the safe harbor for good faith reporting, and again designates the human trafficking coordinator position. So, nothing new on these points. Without understanding the scope of the problem, though, it’s hard to say whether and how all of this makes sense; we expect testimony and findings to bear this out.

HB 4074 contains some other odds and ends, including: 1) a provision where OLCC may allow a retail licensee to relocate to an area that is more than 1,000 feet from a school, if OLCC discovers it had incorrectly issued a license within that perimeter (I’m guessing this is a fix for a specific occurrence or two); 2) a welcome provision that allows additional testing to rebut a presumption that hemp has tested “hot” (although the additional testing would take place in a laboratory operated by ODA); and 3) another $2 million grant for the Illegal Market Enforcement Grant Program. It won’t be enough.

HB 1564 – Hemp Moratorium

This bill overlaps with HB 4016 in that it allows ODA to instate a hemp producer license application moratorium, and uses identical language to boot. The sunset here is also March 31, 2024. HB 1564 also requires ODA to study the effects of any moratoria, and to report back to the legislature.

In addition, HB 1564 tackles some other odds and ends, like renaming the “Task Force on Cannabis-Derived Intoxicants” as the “Task Force on Cannabis-Derived Intoxicants and Illegal Cannabis Production.” It expands task force personnel and its scope of work, all consistent with the legislature’s push the last few sessions to combat unlawful cannabis production. Much of this activity occurs under cover of ODA hemp licensure, down in Southern Oregon.

SB 1587 – Hemp Liens; Etc.

Again, not much in this short bill that isn’t covered in the proposals above. SB 1587 contains another provision allowing liens on industrial hemp buildings and properties used unlawfully. It also contains the “relocation for an OLCC dispensary near a school” provision, and it provides that every marijuana testing laboratory employee must obtain an OLCC worker permit. All in all, a few of these bills simply need to be reconciled.

What happens next

Stay tuned to the Canna Law Blog for updates on all of this. We plan to report any big developments during this short session, including on producer license applications and further moratoria. We’ll also write our annual “wrap up” summary shortly after March 8, which is Filing Day this year.

Finally, for those following the sausage-making on an even closer basis, the first “all hands” cannabis meeting is tomorrow, February 2 at 8:05 am. Expect these bills and more to be discussed in that public session.

UPDATE:  Shortly after this post was published, two amendments to HB 4016 were introduced. Under these amendments, retroactive application of the producer moratorium would be preserved, and the moratoria would expand retroactively to all license types. You can find those proposed amendments here and here.