As discussed in our October 23 post, the Oregon Liquor Control Commission has proposed rule amendments to revise OAR Chapter 845, Division 25.

The proposed rules have moved out of the Rules Advisory Committee (RAC) and the Commission will hold a public hearing on Friday, November 16, 2018, at 10:00 a.m. at the Commission’s office at 90739 SE McLoughlin Blvd. Written comments may also be submitted to the Commission until November 30, 2018, at 5:00 p.m.

The November 1 version of the proposed rules is not a mirror image of the October 18 version presented to the RAC. There are housekeeping edits to reorganize the proposed changes and clarify terminology and grammar. There are substantive changes, too. Noteworthy changes include, for example:

  • Instead of limiting production canopies to rectangles, applicants can propose quadrilateral canopies or propose canopies with other shapes if the applicant provides the Commission with a survey by an Oregon-licensed Professional Land Surveyor that confirms the canopies are within the size limits.
  • The definition for “common ownership” (important for restrictions for multiple licensees on land under common ownership) will exclude “the leasing of the property to another licensee at a commercially reasonable rate if there is no other financial interest in the other licensed business.”
  • The 10/18 version proposed amending the medical producer transfer program under 845-025-2130 (allowing transfers to licensed processors or wholesalers under a permit system) to allow the Commission to temporarily limit or suspend transfers if the Commission determined that the supply of marijuana items exceeded consumer demand and that the market would not self-correct. The 11/01 version proposed amendment would give the Commission, under those market conditions, the additional authority to outright deny a transfer application or to suspend or revoke an outstanding registration.

The proposed rules packet includes an explanation of the reasoning and the expected financial impacts, if any, for each of the proposed changes. As expected, many of the reasons for the changes reflect the OLCC’s attempt to clarify certain standards (e.g., how to challenge a denial of an application) and its attempt to address pressing concerns for enforcement and diversion of cannabis out of the Oregon regulated market. As stated by the OLCC:

  • The amendments to OAR 845-025-1015 and 845-025-1115 enable an applicant for a license to show good cause to overcome a prior criminal conviction that is a basis for license denial. The Commission forecasts that this will have a positive impact upon applicants, as they will have more clarity on how the Commission evaluates licensees ability based on prior criminal convictions.
  • The amendments to OAR 845-025-2060 reinstate the deadline of July 1, 2018, for producer applicants to qualify for the ability to bring marijuana genetics (i.e. plants, seeds, tissue cultures) into the regulated market, so long as they have submitted an application by the deadline. This concept was appropriate for the start of the market but essentially is a loophole in the seed-to-sale tracking system. The Commission forecasts that the continued allowance to bring genetics into the system will have a positive impact for applicants, as they will be able to bring new strains into the industry.
  • The amendments to OAR 845-025-2800 limit sales of medical marijuana in OLCC licensed retail stores to 4 oz. a day for patients or designated primary caregivers with a total allowance of 24 oz. in a month. In summer 2018, Commission became aware of large daily purchases of medical marijuana and enacted limits to curb the behavior it foresaw as a possible diversion. The Commission forecasts that the proposed changes will have a positive impact upon both patients and retail stores; however, the Commission has heard significant comment on this issue and will take comments on the amounts into consideration.
  • The amendments to OAR 845-025-3255 sunset the shared kitchen allowance for edible makers on January 1, 2019. The Commission has found the concept to be particularly burdensome for compliance. Specifically, licensees implementing this business model have had difficulty maintaining schedules which in turn has caused trouble for OLCC enforcement staff. The Commission will allow current licensees to continue to operate and renew their licenses. The Commission does foresee that repealing this license operation type will have a potential negative impact to future applicants but deems it necessary from a compliance standpoint to repeal the concept.

The OLCC also addressed the expected impacts on licensees to comply with the new rules:

In order to comply with ORS 475B and subsequent legislation passed by the 2018 Oregon Legislature, licensees will incur costs relating to reporting, recordkeeping and other administrative activities required for compliance. The Commission has continued to listen and work with various interests to create rules that meet the legal requirements while sensibly establishing compliance standards.

Finally, the OLCC’s explanations also note where the Commission has already received a significant level of comments, possibly signaling rules that may be further revised during the rule-adoption process, such as the 4 oz. daily limit and 24 oz. monthly limit for medical marijuana purchases under proposed OAR 845-025-2800.

The agenda and proposed rules in redline form may be found here.