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Oregon Cannabis Legislative Preview: Producer Moratorium, Equity, State Banking and More

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House Bill 4016 - Mortarium on Cannabis & Hemp Producer Licenses

HB 4016 authorizes the Oregon Liquor and Cannabis Commission (OLCC) and Oregon State Department of Agriculture (ODA) to unilaterally issue moratoriums on the issuance of new marijuana and hemp producer licenses. If this bill passes, the OLCC and ODA will INACTIVATE all marijuana producer and hemp grower applications received after January 1, 2022.

Under the proposed marijuana moratorium, the OLCC will process applications for producer licenses received on or before January 1, 2022, if the application includes a valid land use compatibility statement. Applications that did not include a land use compatibility statement must submit a land use compatibility statement within 21 days of HB 4016 enactment (this is a short session, so if the bill passes you better hurry!) An application for a production license submitted on or before January 1, 2022, cannot change the location for which the application was submitted, and cannot change 51% or more of the ownership interest in the production facility listed in the application.

On the surface, the marijuana producer moratorium appears to provide an opportunity for the issuance of new producer licenses, but this will not be the case if the bill passes as written. The OLCC has not accepted producer applications since June 15, 2018, and the previous producer moratorium expired on January 3 of this year; so it is unclear whether there are producer licenses in the agency application queue that were filed on or before January 1, 2022. The OLCC did, however, release a bulletin on November 8, 2021, announcing that the agency would no longer inactivate new producer applications beginning on January 2, 2022. OLCC officials also told many prospective production licensees that new applications filed after January 2 would be processed. It now appears the agency made those statements knowing that HB 4016 would establish a new January 1 cut off. Unless the legislature amends HB 4016 to provide some relief to the applicants who reasonably relied on OLCC’s statements, litigation will more than likely result.

HB 4016 also tasks the OLCC with adopting rules to establish a program to assign expired, relinquished or otherwise suspended producer licenses to qualified applicants. Equity advocates hoped this program would focus on giving licenses to entrepreneurs from communities most impacted by the War on Drugs; however, HB 4016 includes no such equity provisions.

The proposed hemp production moratorium would require the ODA to process a grower license application received on or before January 1, 2022, but an applicant may not change the address of the industrial hemp operation. The other major implication for hemp in HB 4016 relates to liens on buildings and premises that illegally produce hemp. If the owner of a building or premises knowingly used or allowed their property to be used for illegally growing hemp, the building or premises is subject to a lien and may be sold to pay for all fines and costs including but not limited to any costs of cleanup and removal of industrial hemp. That provision would not go into effect until January 1, 2023, but the bill is silent as to whether it might apply retroactively.

Senate Bill 1579 – The Oregon Equity Investment Act

SB 1579 allocates $50 million from the state’s general fund for grants to culturally-responsive, community-based organizations that provide job training and other wealth building services to historically underserved communities. This bill arose from the ashes of Oregon’s failed attempt in 2021 to create a cannabis equity program (HB 3112 (2021)). The bill aims to provide reparations to communities most often targeted by law enforcement, by giving grants to local organizations that provide wealth building services for targeted communities.

The legislation is currently sponsored by nearly 30 state legislators and has staunch support from the cannabis industry. The advocacy work behind the bill was largely funded by a fundraiser hosted by Green Light Law Group in December 2021, which raised around $20,000 for the Oregon Equity Investment PAC. Industry support made this bill possible, and it is beautiful to see cannabis advocates support legislation that is repairing Black and brown communities most impacted by the War on Drugs.

House Bill 4056 – Adjustment to Oregon Marijuana Account

HB 4056 makes a slight change to how Oregon would spend its marijuana tax revenue. For background, in 2020 Oregon voters passed Ballot Measure 110, which decriminalizes simple possession of drugs and requires that all growing marijuana tax revenue goes toward drug treatment centers. This capped the marijuana tax allocations that were going to Oregon’s common school fund, state police account, and cities and counties. Under HB 4056, the entities that won’t receive growing cannabis tax revenue due to the cap imposed by Measure 110 will receive an annual adjustment for inflation before the rest of the additional tax revenue is distributed to the state’s drug treatment program pursuant to Measure 110.

HB 4061 – Water Theft Enforcement & Penalties

Marijuana enforcement and organized crime in southern Oregon is a growing talking point, and one of the central concerns relates to reported instances of water theft. HB 4061 provides new penalties for water theft involving cannabis production, with penalties set at no more than $20,000 per day for each day of the violation, or the economic value of the entire cannabis crop, whichever is greater. Given that many illicit grows are worth millions of dollars, the latter penalty would apply in most cases.

House Bill 4074 – Human Trafficking, Hemp Enforcement, and Victim Services for Migrant Workers

Another recurring narrative arising out of southern Oregon is reports of human trafficking conducted by organized crime operations that are also illegally growing marijuana. HB 4074 would require employees and workers at licensed marijuana businesses to report instances of sex trafficking or other human trafficking whenever an employee reasonably believes such activity is occurring at the licensed premises they are employed. Additionally, if HB 4074 passes, the OLCC would establish a human trafficking coordinator position to handle reports of human trafficking. The bill does not include any definition of the terms “human trafficking” or “sex trafficking,” thereby placing a new and ambiguous reporting requirement on workers.

An important side note, HB 4074 provides a new requirement that workers at marijuana laboratories would need to obtain a valid worker permit from the OLCC.

While HB 4074 is marketed as a human trafficking bill, the legislation includes other major reforms that the industry should track. The first reform relates to hemp enforcement, which we covered in our Operation Table Rock I and Operation Table Rock II posts. In short, the OLCC and ODA are working in tandem to increase hemp enforcement and create processes for testing hemp plants to determine if they are actually marijuana (our Operation Table Rock posts describe the questionable tactics used by the agencies). This process includes testing hemp crops in the field using portable testing equipment, and if the sampled plants test as marijuana, the entire crop is presumptively deemed marijuana and detained. HB 4074 creates an opportunity to rebut presumptive testing by allowing growers to test their crop in a laboratory operated by ODA. Crops that pass lab testing would be released from detainment, and crops that fail would be destroyed.

The other major policy piece included in HB 4074 relates to the Oregon Criminal Justice Commission Illegal Marijuana Market Enforcement Grant Program Fund. In some unexpectedly promising news, $2 million in grant funding would be appropriated to community-based organizations to provide victim rights services for individuals at illegal marijuana grows. When law enforcement raids illegal marijuana grows, migrant farm workers are often stuck in a difficult situation where they must either go to law enforcement officers who the workers reasonably fear may report them to immigration officials if they are undocumented, or face going back to their illicit employer. This $2 million should help migrant workers, though it is worth noting the proposed fund is tiny in comparison to the $25 million given to Oregon law enforcement this past December to expand marijuana enforcement operations in southern Oregon.

Senate Bill 1564 – Separate Hemp Moratorium Bill

SB 1564 is a hemp grower moratorium that is slightly different from the hemp moratorium provided for in HB 4016. If passed, the bill would require the ODA to inactivate all applications for grower licenses that were received after June 15, 2021 (HB 4016 places the deadline on January 1, 2022). Legislators behind this bill appear to believe HB 4016 may not pass, and are hedging their bets by introducing this separate, more draconian moratorium bill.

The other major implication of SB 1564 is expanding the scope of the Task Force on Cannabis-Derived Intoxicants (whose title will include “and Illegal Cannabis Production” if SB 1564 passes). This task force currently studies and recommends polices related to cannabis enforcement and prosecuting unlawful marijuana cultivation. Under SB 1564, the task force would expand its focus to include labor trafficking, water theft, funding sources for law enforcement, and changes to state law relating to the processing of search warrants “in order to increase efficiency.”

Senate Bill 1587 – Separate Hemp Lien Bill

SB 1587 is a copy of the lien process in HB 4016. For refresher, the lien proposal provides that if an owner of a building or premises knowingly uses their site for illegally growing hemp or allows the site to be used for illegal hemp production, the building or premises is to subject to a lien and may be sold to pay all fines and costs including but not limited to any costs of cleanup and removal of industrial hemp. Legislators again appear worried HB 4016 will not pass and filed SB 1587 as a backup.

House Joint Resolution 205 – State Banking

HJR 205 proposes a Ballot Initiative to amend the Oregon Constitution and allow for the creation of a state bank that, in addition to traditional banking services, could provide financial services for marijuana companies. Due to continued federal marijuana prohibition, most financial institutions won’t give loans or even allow cannabis businesses to open accounts with them. The few financial institutions who are willing to work with cannabis companies often charge outrageous fees and service charges. A state bank run by the State of Oregon could provide these financial services. If HJR 205 passes, it will still need approval from voters at the ballot during the 2022 midterm elections to become effective.

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

Brett Bio Block