Oregon Cannabis: Social Equity and “Qualified Applicants”

24 Mar Oregon Cannabis: Social Equity and “Qualified Applicants”

Who is a “qualified applicant” under Oregon’s new marijuana license reassignment program?

First, some context. House Bill 4016, which introduced the reassignment concept, represents a sea change for Oregon’s licensed marijuana industry. The bill presently awaits signature by the Governor, and no one is betting it won’t become law. Our take on all of Oregon’s new cannabis laws is here and our take on HB 4016 is here.

Those posts briefly discuss Section 4 of HB 4016, which industry watchers have read to address social equity issues in Oregon’s marijuana licensing regime. But does it? Will it? This post takes a closer look at Section 4, which gives the Oregon Liquor & Cannabis Commission (OLCC), the power to adopt rules to assign licenses to qualified applicants under Oregon’s new marijuana license assignment program.

OLCC and social equity

The social equity component of marijuana licensing is important because communities most impacted by the War on Drugs often find themselves unable to enter regulated markets. Access to those markets increasingly depends on access to capital and political connections.

We are aware of at least one individual in Oregon who would qualify as a social equity application under any definition, and who sunk their life savings into securing a license from the OLCC after receiving multiple written assurances from the OLCC that their application would be processed, only to have the rug pulled out from under them as a result of HB 4016.

The OLCC is culpable here. And not just because of the representations it made to this individual. It is no secret the OLCC lobbied for the continued moratorium on producer licenses and its extension to other license types. Without a doubt the moratorium increases barriers to entering the Oregon cannabis market. Now the only way to enter the Oregon marijuana market is to buy a license. This favors those with existing licenses and monied interests over social equity applicants.

As explained below, I believe Section 4 will prove a failure for social equity unless the OLCC starts taking equity seriously. Let’s examine the text of Section 4, which will become operative on July 1, 2022.

MARIJUANA LICENSE ASSIGNMENT PROGRAM

SECTION 4.

(1) The Oregon Liquor and Cannabis Commission may adopt rules to establish a program to assign expired, relinquished or otherwise suspended licenses issued under ORS 475C.005 to 475C.525 to qualified applicants.

(2) In establishing and operating the program described in subsection (1) of this section, the commission may consult with other state agencies, including the Governor’s office, as the commission determines is necessary.

(3) The commission may adopt other rules as necessary to carry out this section.

Section 4 does not actually require the OLCC to do anything

Section 4 says only that the OLCC “may” establish a program to assign licenses to qualified applicants. Nothing compels the OLCC to do so. And Section 4 does not impose any timeline on the OLCC to establish a program for qualified applicants to receive a license under a new assignment program.

Although we expect the OLCC to work to establish a license assignment program for qualified applicants, we doubt a program will spring into assistance in the near term. (Let’s hope we’re wrong.)

Delay in doing so will leave social equity applicants, ostensibly whom Section 4 is to benefit, in the lurch for an undetermined amount of time. Many of these persons are paying commercial leases or mortgages with little to no prospect of obtaining a license absent an assignment program. So delay by the OLCC in establishing an assignment program for licensed applicants works to the detriment of social equity applicants.

Section 4 does not define “qualified applicant” whatsoever

Conspicuously absent from Section 4 is any legislative guidance to the OLCC on who is eligible as a qualified applicant in the license assignment program, or upon what criteria the OLCC may assign a license.  The legislature has given the OLCC carte blanche; the lack of statutory guidance means challenges to rules and decisions by the OLCC are likely doomed. And since Section 4 says nothing about social equity, the extent to which the OLCC actually includes that concept in its license assignment program for qualified applicants is entirely unclear.

Whether and when the license assignment program actually benefits qualified social equity applicants is an open question

Look, the point of this post is not to castigate the Legislature or the OLCC. (Ok, it kind of is.) It is just that many of us in the industry have serious concerns about the long-term impacts of the moratorium on the Oregon recreational marijuana program.

By rushing HB 4016 into law the Legislature has done a disservice to many Oregonians who seek to enter a $1 billion marketplace—whether as social applicants or otherwise. Meanwhile the OLCC has been given broad authority to award people licenses to enter this market under the assignment program with few, if any, restrictions on the exercise of its discretion.

In conclusion, we strongly believe the OLCC should direct resources and attention to addressing equity issues within the Oregon marijuana industry. The new license assignment program for qualified applicants ought to be place on the front burner. And it ought to happen immediately.