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The Oregon Liquor and Cannabis Commission Announces New Rules and Initiates Additional Rulemaking

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The Oregon Liquor and Cannabis Commission (OLCC) at its April 21, 2022, Commission meeting approved two temporary rule actions and five actions to institute additional rulemaking. The temporary and initial rule actions include the marijuana license moratorium (pursuant to HB 4016) and new reporting requirements for employees working at licensed marijuana premises (pursuant to HB 4074). This blog post will discuss the new rules that are currently in effect, give a sneak preview of OLCC rulemaking, and provide commentary on what the industry should push and be on the lookout for as OLCC conducts future rulemaking.

Marijuana License Moratorium

HB 4016 requires OLCC to deactivate any marijuana producer, processor, wholesaler, or retail license application received after January 1, 2022. The license moratorium was effective on passage, and required OLCC to institute their temporary rule action deactivating license applications (OAR 845-025-1131) and disallowing changes of ownership structure and premises location in applications received on or prior to January 1, 2022 (OAR 845-025-1132). Both temporary rules are effective through October 21, 2022. Under Oregon law, temporary rules are only effective for 180 days, but agencies frequently initiate permanent rulemaking to replace the temporary rules so that permanent (but largely identical) rules will be in place before the temporary rules expire.

While OLCC was given no leeway in deactivating license applications received after January 1, 2022, HB 4016 gave OLCC the discretion to institute the license moratorium based on the supply and demand for marijuana, which suggests that OLCC could re-open applications for one or more license types prior to the HB 4016’s sunset on March 31, 2024. In addition, HB 4016 tasked OLCC with creating a program to assign expired and relinquished producer, processing, wholesaler, and retail licenses to “qualified applicants.” HB 4016 did not define who is a qualified applicant and left that determination up to OLCC. While many activists see this as an opportunity for OLCC to create a social equity program by rule, the agency is providing little information as to how the program will function.

Implementation of the moratorium means the only way to acquire a marijuana license in Oregon is to (1) buy one on the open market, which is becoming increasingly cost prohibitive given the now imposed cap on licenses, or (2) win OLCC’s yet to be developed license assignment lottery. OLCC will solicit industry opinion as it develops the license assignment program, and it is essential that the industry advocate for an assignment program that benefits small and minority owned companies, rather than large multistate conglomerates that possess the capital and technical expertise that the OLCC may find makes them “qualified applicants” for license assignment.

Required Reporting of Sex & Human Trafficking and Unlawful Employment of Minors

HB 4074 placed new reporting requirements on workers employed at licensed marijuana premises. Under OAR 845-025-5585, the OLCC rule promulgated pursuant to HB 4074, employees and licensee representatives must report to law enforcement and the OLCC when

there is “reasonable belief” that sex or human trafficking is occurring at a licensed marijuana premises. The rule does provide definitions for human and sex trafficking, which were absent from HB 4074. “Human trafficking” is defined under the rule to mean “recruitment, harboring, transportation, provision, or obtaining of a person for the purpose of subjecting the person to involuntary servitude.” “Sex trafficking” is defined as “the recruitment, harboring, transportation, provision, or obtaining of a person for the purpose of a commercial sex act.”

A possible shortfall of the new human trafficking reporting requirement is that most of the stories coming out of southern Oregon related to trafficking occur at unlicensed marijuana grows. The new reporting requirements only attach to employees at licensed marijuana premises. It will be interesting to see if the new policy does anything to curb human trafficking, or, if the legislature and OLCC passed the burden onto workers to solve larger problems stemming from the illicit market that can only be solved by ending federal prohibition.

The temporary rule action also creates a reporting requirement when there is a reasonable belief a minor is employed or contracted at a licensed marijuana premises “in a matter that violates Commission rules.” The quoted language comes directly from section (3) of the rule, and it is possible many workers will unnecessarily report the presence of minors as OAR 845-025-1230(7) allows the presence of minors in certain situations. Since employees can lose their worker permit for failing to report, OLCC may receive a lot of unnecessary reporting.

Initial Action on Other Future Rule Making

In addition to initiating rulemaking on the upcoming license assignment program, the Commissioners voted to initiate several other rulemaking packages.

The first is the 2022 marijuana legislative and technical changes package. The technical rule change package occurs every year and will amend the administrative rules to comply with passage of HB 4016 and 4074. The most important substantive rule changes OLCC will address are requirements for laboratory employees to obtain marijuana worker permits and allowing for the relocation of a marijuana retailer license if OLCC becomes aware a school is located within 1000 feet of the retailer.

OLCC initiated separate rulemaking to amend METRC batch tagging requirements. Currently under OAR 845-025-7520(1)(c) producers must assign and affix a UID tag to each individual marijuana plant no later than when each plant reaches a height of 36 inches or when the individual plant is flowering, whichever is sooner. The current requirements for individual tagging are costly to producers, and OLCC is responding to industry concern by instituting this rulemaking to amend the tagging requirements. There is little detail as to what these rule amendments will look like, but OLCC representatives expressed a goal of balancing detailed product tracking with undue costs currently placed on producers.

Lastly, the Commissioners voted to initiate a rule making package titled “Contested Case Discovery Rules.” When marijuana licensees are accused of violating OLCC rules and regulations, the agency must go through an administrative process before punishing a licensee. These administrative processes are designed to provide due process to the licensees, as is required by the Fourteenth Amendment to the United States Constitution Oregon agencies are however free to limit some, or all the discovery methods set forth in OAR 137-003-0566. Discovery tools are essential for attorneys defending licensees accused by OLCC of violating the rules and statutes regulating the cannabis industry. OLCC initiated this rulemaking with the stated purpose to “avoid unduly complicating the hearing process and to account for the volume of OLCC’s caseload.” Essentially, OLCC is looking to limit the tools licensees have in defending themselves against accusations coming from the OLCC itself.

While OLCC is undoubtedly free by statute to choose which discovery methods are the most appropriate for its own administrative cases, the agency’s stated motivation of ameliorating the backlog of outstanding cases is disingenuous. At the February Commission hearing, OLCC Senior Director of Licensing and Compliance Rich Evans discussed how the backlog of cases in OLCC’s administrative caseload went down from nearly 500 cases in 2021 to only about 40 that are pending to be charged. There is a pattern developing of OLCC actively attempting to circumvent marijuana licensees’ administrative rights (which is, in essence, an attack on marijuana licensees’ due process rights). As addressed in our Operation Table Rock post, OLCC Senior Director Rich Evans explained that in the context of hemp enforcement, “if we refer to law enforcement and they go out and seize it they will destroy it through a court order… [I]f it goes through the ODA process, they have administrative hearing rights just like we do here at OLCC. They will issue… an embargo on the crop and then go through a legal process that takes sometimes six, eight, to twelve weeks.” While changes to discovery rules may seem technical, this appears to be part of a larger pattern of OLCC limiting marijuana licensees’ administrative and due process rights.

Conclusion

The 2022 legislative session forever changed the direction of Oregon’s cannabis industry. Many of the reforms are already codified by statute, but future rulemaking provides an opportunity for the industry and activists to make their voices heard and shape policy development. Readers interested in expressing their thoughts should apply to become rules advisory committee members (if invited by the agency to apply) and submit public comment once The Oregon Liquor and Cannabis Commission releases its proposed regulations.

You can contact Brett Mulligan at  info@gl-lg.com  or 503-488-5424.

Brett Bio Block