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2019 Oregon Legislative Session Update

EARLY SEASON LEGISLATIVE UPDATE

In other future news . . .the 2019 Oregon Legislative Session opened last Tuesday and already there is at least one proposed cannabis bill that deserves a brief discussion. In what looks like the death knell for both free market marijuana and anyone who wants to enter the Oregon recreational marijuana production market, Senate Bill 218, introduced at the request of Governor Kate Brown, seeks to essentially codify the pause on the processing of new recreational marijuana production license applications put into effect by the Oregon Liquor Control Commission in June of 2018. SB 218, however, proposes to take that “pause” a step further, specifically authorizing the OLCC to “refuse” to issue recreational marijuana production licenses for any amount of time based on the agency’s perception of “market demand and other factors that the commission determines relevant.” The measure also specifically authorizes OLCC to make its own decision about whether or not to accept applications for producer licenses during any period of time during which it is refusing to issue those licenses. In just a few short paragraphs, SB 218 would confer a substantial amount of new power upon the OLCC to control the recreational marijuana market with only the slightest amount guidance or standards as to how the agency may exercise that power.

Needless to say, this smells like a recipe for disaster. As I have written here before, the simple regulatory act of moving from an open supply market to a regulated supply market at this stage of market development is going to have some clearly inequitable consequences. But more importantly, SB 218 provides exactly zero guidance as to what methodologies the OLCC may or may not use to calculate market demand, and unfettered discretion to determine what other factors are “relevant” to the analysis of whether or not to limit marijuana production in Oregon. For those who do not regularly practice administrative law, this is a pretty drastic departure from the way agencies are typically empowered to take action that can potentially impact this many individuals and businesses. Rather, in most instances government agencies are provided with some measure of standards on its exercise of legislatively conferred power, often laid out as factors that it must consider when enacting regulations. Those factors are glaringly absent from SB 218.

It is difficult to explain SB 218 as anything other than a direct attempt to appease the U.S. Department of Justice’s loud complaints about what it calls “overproduction and diversion,” a euphemism for illegal marijuana trafficking. Of course, neither the OLCC nor the DOJ can really point to much evidence that recreational marijuana production licensees are responsible for the movement of marijuana out of Oregon, and increasing the agency’s power in not likely to have the intended effect of constricting that movement. With that in mind, SB 218 looks like just another example of the marijuana industry being treated differently than other industries. Consider, for example, if the Department of Motor Vehicles were empowered to refuse to issue driver’s licenses based on any factors that it considers “relevant.” The DMV could then refuse to issue driver’s licenses as a way to combat climate change because there is some relationship between the number of driver’s licenses and the number of cars on the road, which in turn impacts carbon emissions. While that policy might not be the worst idea, it would almost certainly be met with fierce opposition from a diverse range of political constituencies who would all complain that not only is it outside any reasonable interpretation of the scope of that agency’s powers, it effects too many individuals and businesses to be considered a reasonable exercise of power by any government agency.

Fortunately, legislative measures usually go through several rounds of amendments before they become law, so we remain hopeful that at least some constraints will be placed upon the OLCC’s ability to unilaterally effect the price of marijuana by restricting market supply. Of course, the OLCC is used to setting prices for alcohol, so I assume they will fight to have power over the price of marijuana just as it controls the prices for alcohol. We will be sure to keep you posted as SB 218 makes its way through the legislative process.