Major Changes Coming to Cannabis Industry – Most of Them Are Good

August 3, 2021

By Danica Hibpshman and Paul Balmer

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Oregon

The 2021 Oregon legislative session—mostly virtual in the midst of a global pandemic—saw legislators and draft bills largely focused on economic recovery issues. Most relevant to our narrow focus, the cannabis industry won some industry-specific economic recovery in the form of relief from overregulation, thanks to the passage of SB 408.

SB 408—a joint effort by various cannabis trade associations and advocacy groups, legislators, and OLCC regulatory staff—opens doors to many growth opportunities for the state’s burgeoning cannabis industry.

What does SB 408 do?

Simply put, a lot. SB 480 is what is known as an omnibus bill. It covers a wide array of cannabis topics, from violations, to seeds, possession limits, and plastic usage in the cannabis industry. The full text of the bill can be found here, but here is a brief summary:

Right-Sizing Regulatory Enforcement

SB 408 limits the types of violations for which the OLCC may cancel a license to major offenses, such as diversion of product to the illicit market, intentionally selling to minors, or other activities that create a “significant risk of harm to public health and safety.” The law further prohibits the OLCC from pausing or delaying a license application due to pending compliance actions unless the offenses are serious enough to warrant outright cancellation. This licensing delay has historically been a barrier for licensees seeking to grow their businesses when they have minor infractions pending. Now, these minor violations will no longer hold up licensees when purchasing new licenses or making changes to current ones.

SB 408 also expressly gives the OLCC the discretion to charge individual permittees with violations rather than the businesses for whom they work. Although the OLCC arguably had discretion to make this distinction prior to passage, this is a significant change to write into the statute, given that many violations charged against cannabis licensees stem from the conduct of rogue or negligent employees, not the business entities themselves.

For the first time, SB 408 includes three mitigating factors that the OLCC must consider when determining sanctions for violations: self-reporting of a violation, evidence that the conduct is not persistent or serious, and the ability to demonstrate willingness and ability to control the premises. While the OLCC rules already included potential mitigating circumstances that may be considered, historically the Commission has not done so. With SB 408, OLCC will now be required to consider at least these three mitigation factors, giving licensees some ability to reduce sanctions by taking the proper steps both before and after violations are committed.

Finally, SB 408 makes two changes to OLCC rulemaking: requiring the OLCC to report on rulemaking efforts and—most significantly—mandating rulemaking to re-categorize violations to clearly define what offenses can lead to license cancellation. The implementation of new regulations regarding specific violations will be important to watch over the coming months.

Eliminating Red Tape

SB 408 makes other changes in current law that should hopefully provide cannabis businesses with additional operational flexibility, increasing potential for growth within the market:

• Producers and processors that are “commonly owned” will be allowed to transfer and store products at each other’s premises, helping multi-license operators move product through their operations
• Transfer manifests will no longer be required to include detailed route summaries, except where an overnight stay is part of the transportation route
• Producers will now be able to obtain up to 200 marijuana seeds per month from any source within Oregon, at any time after licensure
• The legal limit for individual possession of flowers will be increased from one ounce to two ounces (and the OLCC will follow with a rule amendment allowing purchases of up to two ounces of flower)
• The bill transfers rulemaking authority over THC serving size per package limits from the Oregon Health Authority to the OLCC and requires the OLCC to adopt rules allowing for a maximum serving size of 100 mg/package (up from the current 50 mg maximum).

 

When is SB 408 effective?

​Most of the provisions of SB 408 go into effect in January 2022. Many changes also require OLCC rulemaking before they will be in effect. The OLCC has indicated that it plans to begin the rulemaking process for these changes soon so that permanent rules can be in place around January 1, 2022.

If your business plans to take advantage of any of these important changes, consult with your legal counsel to ensure that you are interpreting and implementing the new rules in full compliance with the law. Please contact Danica Hibpshman (danica.hibpshman@tonkon.com or 503.802.2160), Paul Balmer (paul.balmer@tonkon.com or 503.802.5745), or one of Tonkon Torp’s experienced cannabis legal team for further assistance.

About Tonkon Torp
Tonkon Torp LLP is a leading business and litigation law firm serving public companies, substantial private enterprises, entrepreneurial businesses, and individuals throughout the Northwest. For more information, visit tonkon.com.