WHAT ARE WE to make of the new rules for Oregon's recreational marijuana program?
THERE ARE A LOT of proposed rules. They seem reasonable. But it's complicated.
I've written here before about how it's tough to be a cannabis business for a whole bunch of reasons, including regulatory uncertainty. The fact that the Oregon Liquor Control Commission (OLCC) just sent out draft rules on October 6 is a good example of that. Pot entrepreneurs can apply for licenses less than three months from today, but some very basic information is still unknown.
Because these rules are only draft rules, the OLCC has cautioned that "draft rule language is subject to change and should NOT be used as basis for making business decisions." So there is that. However, people are making business decisions every day in this industry as we ramp up for licensure. It's sort of impossible not to. The feeling is that anyone not in the game early will suffer a serious competitive disadvantage, and there's probably some truth to that.
The draft rules are a good indication of where things are headed, but they have some conspicuous gaps in key areas. For instance, the maximum canopy size allowed for marijuana crops is currently stated as "__[blank]__." That's a big deal! Will cultivators be able to grow 60,000 square feet of cannabis canopy, or 30,000, or 10,000? Some counties have expressed interest in having a few big farms and not so many small ones. Others have said the opposite.
Without regulatory certainty, if you are a cannabis entrepreneur three months from the application date and a favorably zoned parcel of land with water rights becomes available, do you close on that property? There's no way of knowing to what extent you will be able to use the land, but someone else will surely snatch it up if you don't. Right now, nobody wants to sit on unproductive assets, yet nobody wants to miss the boat, either.
There are other blanks in the draft rules at present. Specifically, there is no guidance for marijuana wholesalers, and no indication as to the cost of licensing fees. We do know a lot about the planned application process, and the proposed requirements (residency and otherwise) for owners and investors in Oregon pot. Unfortunately, those provisions seem more likely than anything to be tweaked before applications are due, or at the next legislative session.
There is a lot of good stuff in the draft rules, specifically related to security, health and safety (testing), packaging and labeling, seed-to-sale tracking, transportation and delivery, waste management, and even advertising. Within a month or so, something that looks a lot like these rules will be adopted. Whatever we end up with will be designed to bring as much of the black market into the fold as possible and to govern a brand-new economy. That's something you don't see every day.