No New Cannabis Licenses: Oregon Pulls the Plug

The Oregon Senate passed HB 4016 yesterday afternoon, enacting a sweeping moratorium on new cannabis licenses in the state. The law will take effect on an “emergency” basis following Governor Brown’s signature, or 30 days from now if she doesn’t veto (and she won’t). Industry got what it wanted here; the walls are going up.

HB 4016 has evolved since I previewed the bill at the start of this short session last month. Much of the original text was struck or wrapped into other bills, but today I want to focus on the additions. The two most important of those include:

Until March 31, 2024, the law gives OLCC discretion to refuse to issue new processor, wholesaler and retailer licenses, while extending the Senate Bill 218 moratorium on producer licenses. It seems certain OLCC will exercise that discretion and refuse to accept all of these applications, or issue new licenses, for the foreseeable future.
The law culls applications submitted on or after January 1, 2022, retroactively, and OLCC has no discretion here. Section 1(5) flatly provides that OLCC “shall inactivate an application for a license… that was received after January 1, 2022.”

Yes, there will be litigation. Hundreds of new license applications have been submitted since January 1, 2022, and people have invested time and money into these applications under the reasonable expectation that their applications would be processed. What a mess.

We have already had a few nervous clients ask us if the new moratoria will affect change of ownership locations, or change of location applications. The answers are “no” and “no”: all applications submitted before January 2, 2022 will be processed, provided an approved Land Use Compatibility Statement (LUCS) is timely submitted. However, Section 1(4) provides that such applicants may not change: (a) the location for which the application was submitted, or (b) “51 percent or more of the ownership.” This is an effort to limit the secondary market to issued licenses, essentially.

If the bill stopped there, I’d call it another failure for social equity in the Oregon cannabis industry. These moratoria make it that much more expensive to get in, limiting access to the secondary market. However, Section 4 contains an interesting provision on “qualified applicants.” It provides that OLCC can assign “expired, relinquished or otherwise suspended” licenses to these applicants. Our understanding is that “qualified applicants” means social equity applicants, but the term is not defined. OLCC has a lot of leeway here, it seems.

Finally, OLCC now has the ability to allow a licensed retailer to relocate if OLCC discovers the retailer is within 1000 feet of a pre-existing school. That uncontroversial provision migrated over from HB 4074, which will also pass this session.

I’ll be back next week after the session ends with a full report on everything cannabis coming from Salem, including the fate of the proposed hemp license moratorium and the controversial marijuana sales tax increases. Stay tuned.

For previous posts on HB 4016 and the session at large, check out the following:

Update: Oregon Proposed Cannabis License Moratoria
Oregon Cannabis 2022: Legislative Forecast and Report

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