On April 10, the Oregon Senate failed to pass Senate Bill 218, and instead referred it to the Rules Committee. As proposed, the bill would amend current law and delegate rulemaking authority to the Oregon Liquor Control Commission (OLCC). If the bill passes as written, the OLCC would obtain the authority to refuse to issue production licenses for an amount of time the OLCC deems “necessary.” The OLCC’s authority under the bill would not extend to a current licensee’s request for a change of location or to a “new” license application triggered by an ownership change.
Senate Minority Leader Herman Baertschiger Jr. decried the bill as “socialism” and “a stab at capitalism in pure form” to the Associated Press, and said that the state “should let the free market dictate prices.” Cannabis sits in a liminal space between its countercultural roots and its new incarnation as an agricultural commodity. The 17 “Nay” votes included 12 Republicans, Mr. Baertschiger among them, underscoring the strange bedfellows that this transition can sometimes create.
You might recall that during the spring of 2018, the OLCC announced it would “pause” review of new license applications starting June 15, 2018. This announcement created a rush for many would-be industry participants to submit applications prior to the OLCC’s deadline. Further, the pause applied to all license types — not just production license applications. The proposed bill, however, would only apply to production licenses and not extend other license types.
Executive Director of the OLCC, Steven Marks, claimed that a pause was necessary “to ensure that the OLCC is fulfilling its regulatory duties and providing timely responses to businesses in the industry.” Another argument for the pause was that “it takes significant staff time and resources to complete marijuana license renewals.” Unstated, but commonly understood, is that the OLCC recognized the misalignment of supply and demand in the Oregon cannabis market, and “paused” licensing to slow down the growth of new production canopy without exceeding their statutory authority. The intent of SB 218 is to give the OLCC this authority.
If SB 218 fails to become law, then we anticipate the OLCC will either reverse its prior decision to pause the processing of new applications or face legal challenges. The current statutory regime prohibits the OLCC from unreasonably delaying license review. ORS 475B.060(1). As noted above, the OLCC has no explicit statutory authority to cap the number of licensees. Current authority is limited to regulating aggregate canopy size under ORS 475B.085. If the bill fails, the OLCC could potentially grant new licenses, grandfather all existing licensees’ canopy size, and restrict all new licensees to a nominal (or zero) size.
The OLCC could also increase licensing fees or establish new fees to regulate supply. Nationally, the annual fee for a cannabis business license ranges from several thousand dollars to several hundred thousand dollars. Oregon’s licensing fees are among the lowest in the country. While new or increased fees would likely face similar pushback as SB 218 from both industry stakeholders and Republican legislators, the OLCC is within its authority to do so. As noted above, both Executive Director Marks and the Oregon Secretary of State auditors are on record about the problems created by the OLCC having insufficient resources to effectively administer and oversee Oregon’s cannabis market.