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California Releases Draft Medicinal and Adult-Use Regulations

On Thursday, November 16, the three (3) California cannabis-licensing agencies released draft emergency regulations implementing the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). The agencies – the Bureau of Cannabis Control (within the Department of Consumer Affairs), the Department of Food and Agriculture, and the Department of Public Health – are legally obligated to begin issuing state licenses to cannabis businesses starting January 1, 2018. They issued these proposed regulations pursuant to an expedited, emergency rulemaking procedure in order to meet that statutory deadline.

The full text of the proposed regulations spans nearly 300 pages and details the agencies’ proposed plans to implement state licensure and regulation of the industry. Here are a few of the highlights.

Additional License Types

In the proposed regulations, the Bureau of Cannabis Control (BCC), which regulates retailers, microbusinesses, distributors, and testing labs, added four (4) license types to the list established by MAUCRSA: Type 9 (delivery-only retailer); Type 13 (transport-only distributor), essentially reviving the Transporter license from the now-defunct Medical Cannabis Regulation and Safety Act (MCRSA); Type 14 (cannabis-event organizer); and temporary event licenses.

The Department of Food and Agriculture (DFA), which regulates cultivation and the statewide track-and-trace program, added a processor license for trimming, drying, curing, grading, storing, packaging, and labeling cannabis. A licensed processor that does not also hold a cultivation license may not commercially cultivate cannabis.

The Department of Public Health (DPH), which regulates manufacturing, added two (2) license types: Type N (infusion – non-extraction manufacturer, such as for topicals and edibles) and Type P (packaging and labeling). The resulting total of four (4) DPH licenses are hierarchical – a Type 7 (volatile manufacturer) licensee may conduct all manufacturing activities; a Type 6 (nonvolatile manufacturer) may conduct all but volatile manufacturing; a Type N may infuse, package, and label; and a Type P may only package and label cannabis products.[i] DPH also announced a fifth license type in development: Type S (shared manufacturing facility), for manufacturers to share facility space.[ii]

No acreage cap for cultivation sites

Under MAUCRSA, licenses for unlimited-size cultivators (Type 5) are theoretically prohibited until 2023, and those for medium-size cultivators (Type 3)[iii] are to be limited in number. In its proposed regulations, DFA limits each licensee to a single Type 3 license but does not cap the size of cultivation sites.[iv] The result is that a single licensee may apply for multiple “small” cultivation licenses (Type 2) and combine them to create one large cultivation site that exceeds an acre.[v]

Transition Period

From January 1 to July 1, 2018, licensees may conduct business with any other licensee, regardless of their license designation as adult-use (A-license) or medicinal (M-license).[vi] After July 1, licensees may only do businesses with other licensees with the same A- or M- designation, although each licensee may hold both types of licenses.

During the transition period, retailers may also sell items in inventory that do not meet new requirements, subject to some additional labeling and packaging requirements for certain products.

CO2 and Ethanol are Nonvolatile

DPH’s proposed rules define carbon dioxide and ethanol as nonvolatile solvents for the purposes of manufacturing licensure, despite the definition of volatile solvent (which remains unchanged) as “any solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.”

Once these proposed emergency regulations are filed with the Office of Administrative Law (OAL), there will be a 5-calendar-day public comment period and OAL will have 10 calendar days to approve or disapprove the regulations. The promulgating agencies (BCC, DPH, and DFA) are not required to respond to public comment in the emergency rulemaking process, but they may do so within 8 calendar days of submitting the regulations to OAL.

Since these emergency rules are being promulgated on an expedited timeline,[vii] we can expect the licensing authorities to follow this emergency rulemaking with a standard rulemaking process (likely in early 2018) to clean up, modify, or add to the emergency regulations.

[i] The difference between a DPH Type P manufacturer and a DFA processor is the type of product being packaged and labeled.

[ii] This would seem to contravene MAUCRSA’s definition of “premises,” which expressly prohibits a single premises from being occupied by multiple licensees.

[iii] “Medium” cultivators can cultivate up to an acre outdoors or up to 22,000 indoors or with mixed light.

[iv] This omission has already met with significant opposition and may change.

[v] Type 1 “specialty cottage” licensees are prohibited by definition in MAUCRSA from cultivating more than 5,000 square feet on one premises or on contiguous plots.

[vi] This does not change the prohibition on business transactions between licensees and unlicensed entities, including collectives currently exempt from the state-licensure requirement, starting January 1, 2018.

[vii] MAUCRSA was just passed in late June and amended in early September of 2017, and the licensing authorities are under mandate to begin licensure on January 1, 2018.

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Just days before the end of the 2017 session, the Oregon legislature passed a major cannabis-related bill.  Surviving a relatively close Senate vote last Thursday, HB 2198 now awaits the Governor’s signature.

Please see the bill’s key provisions below:

Oregon Cannabis Commission

The Oregon Cannabis Commission (OCC) within the Oregon Health Authority (OHA), will consist of a Public Health Officer and eight other commissioners appointed by the Governor.  The OCC will provide guidance and oversight on a broad range of issues impacting the medical marijuana industry, including recommending a governance framework for the future of the Oregon Medical Marijuana Program (OMMP).  Additionally, the Commission will develop a long-term strategic plan to maintain the medical marijuana program’s viability as more medical growers move into the recreational system.

Limited Transfer of Medical Marijuana into OLCC System

A medical marijuana grow site with more than twelve plants may transfer up to twenty pounds of marijuana a year to licensed recreational marijuana processors and wholesalers.  However, the medical grower must have registered their grow site with OHA prior to the date the Governor signs the bill into law.  These transfers must be tracked in OLCC’s tracking system.  The OLCC will also assess whether the amount of marijuana transferred from medical grow sites to wholesalers and processors per year can be increased without adversely affecting the market.

If the OLCC determines that the supply of marijuana exceeds consumer demand, it may issue a temporary order to limit the sale of marijuana items into the recreational system. These temporary orders may only be issued if the OLCC determines that the saturation of the market will not self-correct.

Mature Plant Limits

The mature plant limits previously in place under SB 1057 have been slightly increased. Now, the maximum amount of mature plants allowed at a property not registered as a marijuana grow site (such as private residences where patients are growing their own marijuana) is twelve plants.  These are limited to up to six plants per patient.

Also, if there is only one patient and at least one more person above the age of twenty-one living at the address, the mature plant limit for the entire household is ten plants.  That cap is based on a patient’s six plant limit under the OMMP program, in addition to up to four plants permitted for a non-patient adult living at the household. This provision clarifies questions related to “stacking” both medical and personal-use recreational marijuana plants at the same residence.

Immature Plant Limits

The new bill also replaced SB 1057’s immature plant restrictions for medical grow sites.  A medical grow site may now have an unlimited number of immature plants under twenty-four inches.  Two immature plants taller than twenty-four inches will be allowed for every mature marijuana plant on the grow site.  For example, if a grow site has twelve mature plants, up to twenty-four (24) immature plants over twenty-four (24) inches would be permitted.

Caregiver Privileges

Designated primary caregivers are now clearly allowed to help patients with all things related to medical-use, including the production and processing of marijuana into concentrates or products (but not extracts).  This clarifies the legal relationship between cardholders and their designated primary caregivers and will hopefully allow for patients less familiar with production and processing to fully benefit from their caregiver’s skills and knowledge.

Security System Exemption

OHA and OLCC may not require a medical marijuana grow site to use a security system, video surveillance, alarms, and sensors or physical barriers. This should ease concerns that medical patients and their caregivers might be forced to bear the high cost of installing the types of security systems required of recreational licensees.  However, anyone growing marijuana plants at home must still keep all plants out of the public’s view.

OHA Grow Site Registration

For the purposes of verifying the address of a marijuana grow site, OHA shall accept tax lot numbers, assessor’s maps, or exact locations using latitude/longitude coordinates, GPS, or township coordinates.  This gives patients and caregivers more options with respect to the documents they can provide to satisfy grow site verification requirements and will hopefully simplify the process of grow site registration.

Distance to Schools

If the OLCC determines there is a physical or geographic barrier preventing children from traveling to a marijuana retail location, a marijuana retailer premises may be located within 500-1000 feet of a school.  Until now, local governments decided whether to grant exceptions to the distance requirement.  HB 2198 delegates that authority to the OLCC exclusively.

Because this bill contains an emergency clause, it will take effect on the date the governor signs it. Absent a veto, this will likely be early next week.  If you have any questions about the changes included in this bill or any other compliance-related issues, please contact one of our compliance attorneys.

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The Oregon Legislative Assembly adjourned on Friday, July 7, 2017.   As the dust from this session settles, the State of Oregon will begin implementing several substantial changes to its marijuana regulations.  SB 1057, SB 56, HB 2198 and SB 1015 are the main bills passed during the legislative session.  We will be posting a three-part series this week summarizing the bills.

SB 1057, is the most comprehensive measure the legislature enacted related to cannabis.  Among other things, this measure expands the Oregon Liquor Control Commission’s (“OLCC”) authority to regulate parts of the Oregon Medical Marijuana Program (“OMMP”), creates marijuana promotional events, and revamps the existing “bump-up” canopy option for recreational producers who elect to serve medical patients.

Please see a summary of the key provisions below:

Tracking Requirements for OMMP Patients

The new law requires certain OMMP registrants to track the production, transfer, and processing of medical marijuana with OLCC’s existing tracking system.  Registered grow sites with more than twelve plants, processing sites, and dispensaries (“Registrants”) must use the tracking system. To cover extra costs incurred by the tracking system, the Oregon Health Authority (“OHA”) will impose an additional fee on Registrants.  OHA must deposit the money collected from the fees into the Marijuana Control and Regulation Fund.

Registrants will have the option to choose to remain OHA Registrants subject to tracking or to convert to OLCC (recreational) licensees.  Each Registrant must notify OHA whether they are electing to apply for OLCC licensure or remain under the medical system by December 1, 2017.  If the Registrant elects to apply for OLCC licensure, they must do so on or before January 1, 2018, or it will not be able to renew its OHA registration.

If the Registrant elects to remain within the medical system, the law requires them to submit to the OLCC tracking system on or before July 1, 2018.  Failure to comply with the tracking requirements by this deadline will bar OHA registration renewal.

Immature Plant Limits

SB 1057 provides that medical cardholders and designated primary caregivers may jointly possess up to twelve immature plants and up to six mature plants at a residence.  The law also allows for two immature plants for every one mature plant allowed at a designated marijuana grow site.  If a designated medical grow site is located within the city limits of an area zoned for residential use, the law allows growing up to twelve mature plants and twenty-four immature plants.  However, HB 2198, currently awaiting the Governor’s signature alters these limits.

*Note: Under subsequently passed SB 56, if a designated medical grower submitted an OLCC producer application on or before June 24, 2017, they will not be subjected to the immature plant limits established under SB 1057.

Exclusively Medical Licenses

In response to indications that potential changes in federal marijuana policy are less likely to affect medical marijuana programs, SB 1057 allows the OLCC to designate licensees as “exclusively medical licensees.”  Licensees may register with the OLCC as exclusively medical licensees if certain conditions are met, such as attesting to transfer products only between other licensees with “medical purpose” registrations.

Bump-Up Canopies

This provision modifies the OLCC’s current bump-up canopy program (which allows OLCC-licensed producers to enter into agreements with patients to provide them medical marijuana from separately designated medical canopy space).  Under the new provision, OLCC-licensed marijuana producers may apply to designate up to an additional 10 percent of the total size of their medical and recreational canopy square footage to produce marijuana for medical patients. Marijuana producers who elect this option must provide seventy-five percent of the marijuana produced from the additional canopy space to OHA-registered patients for free.  Also, the OLCC will no longer require patient/producer agreements. As an incentive to add medical canopy, the OLCC will allow producers to sell the remaining twenty-five percent to other licensees.  As the recreational system continues to attract medical growers, this option is designed to ensure that medical patients continue to receive medication free of charge.

Marijuana Promotional Events

Under certain conditions, SB 1057 allows OLCC licensees to exhibit marijuana items at trade shows (such as the Oregon State Fair and similar events).  Although live immature plants were already displayed at the 2016 Oregon State Fair, this provision allows participating licensees to exhibit all types of marijuana items.

The OLCC has already adopted a temporary rule implementing this provision.  The rule, effective until at least December 27, 2017, dictates the specific conditions under which organizers may conduct these events.  These conditions include the following:

  • The designation of an “event organizer,” who is responsible for ensuring that all licensee participants adhere to OLCC’s rules and restrictions regarding the event.
  • Promotional event applications must be submitted by event organizers in writing at least twenty-eight days before the event date.
  • All the marijuana items transported and displayed must be tracked in OLCC’s cannabis tracking system (“CTS”) and immediately returned to the licensed premises following the event.
  • Each marijuana item is required to have the item’s associated Universal Identification (“UID”) tag affixed to the item or its package.
  • Participants and organizers must prevent minors from accessing the marijuana items during these events.
  • Events may not be held at a licensed premises or in a city/county that has prohibited recreational marijuana businesses.

*Note: Industrial hemp products may not be displayed at these events.

Increased Authority for OLCC Regulatory Specialists

In addition to OLCC personnel’s existing right to conduct inspections and investigations, the law grants OLCC regulatory specialists additional powers to make seizures and aid in the criminal prosecution of licensees. This broader authority is intended to prevent marijuana diversion into the black market. The OLCC may also proceed with investigations or disciplinary actions against licensees regardless of whether their licenses have lapsed, been revoked, or suspended.  Applicants who withdraw their application or renewals may also be subjected to these disciplinary actions.

There are limitations to OLCC’s authority, however. OLCC may not inspect/investigate medical cardholders, primary caregivers, or the residences and locations where cardholders and their caregivers produce marijuana.  The law prohibits OLCC regulatory specialists from acting in the capacity of a federal official, carrying a gun, and from conducting inspections of unlicensed primary residences.  These provisions bring the state regulatory program further in line with the Cole Memo’s federal enforcement priorities.

Financial Disclosure

OLCC may now require persons with a “financial interest” in a licensed recreational marijuana business to submit sworn statements to the OLCC that show the person’s name and address, as well as the nature and extent of their financial interest.  OLCC has already released application forms that require persons with a financial interest to disclose their home addresses. We previously discussed the nuances of this requirement and how it affects applicants and licensees in our April 4, 2017 blog post found here.

Labeling Duties Transferred to OLCC

On January 1, 2018, OLCC will assume responsibility for adopting and enforcing labeling requirements formerly under OHA’s purview.  Until OLCC creates new rules, the labeling and packaging requirements remain as is under OAR 845-025-7000 to 845-025-7060 and OAR 333-007-0010 to 333-007-0100.

OHA Database

SB 1057 requires OHA to establish, maintain, and operate an electronic database for storing certain patient and marijuana grow site registry information to increase efficiency between agencies responsible for administering the OMMP. While OLCC and the Department of Revenue will be allowed to access the database, the stored information is confidential and may not be publicly disclosed.  The law does not require OHA to store information related to patients’ debilitating conditions.  Patients’ and Registrants’ contact information will also be confidential unless the information is related to a designated grow site’s location.

We are carefully monitoring developments as the OLCC implements these changes.  In the meantime, remember to always stay tuned to our Facebook and blog updates!

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Today, Oregon Governor Kate Brown signed SB 56 into law. This law is effective immediately and contains several anticipated fixes to the current cannabis regulatory scheme.

On May 30, 2017, SB 1057 was signed into law by the Governor and became effective immediately.  SB 1057 made significant changes to the Oregon Medical Marijuana Program (OMMP), including limiting the number of plants to six mature plants and twelve or fewer immature plants per patient.  Previous plant limits were six mature plants per patient and an unlimited number of immature plants. The timing of SB 1057 created a significant timing issue for medical growers, particularly outdoor growers, currently operating under the OMMP and in the process of applying for recreational production licenses with the Oregon Liquor Control Commission (OLCC). Among other things, SB 56 provides relief from the newly implemented immature plant limits under SB 1057 for medical growers who have applied for their OLCC producer license.  Specifically the bill expressly states that the new plant limits do not apply, except as provided by OLCC rule, to a premises for which an OLCC application has been made on or before the effective date of SB 56, June 23, 2017.

We previously summarized this and some of the other key changes made by SB 56 in our post from June 21, 2017.

If you have any questions regarding SB 56 or any other compliance issue, don’t hesitate to contact one of our compliance attorneys and remember to stay tuned to our blog updates for more up-to-date information on changes to Oregon cannabis laws!

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Today, the Oregon legislature passed Senate Bill (SB) 56, which contains several of the anticipated “fixes” to the cannabis regulatory scheme currently in place.

SB 56, carried by Representative Fahey (D – District 14 – West Eugene and Junction City), includes the “Dash 39” amendments adopted by the Joint Committee on Marijuana Regulation which provides, among other things, relief from the newly implemented immature plant limits for those who submit a producer license application to the OLCC on or before the effective date.

Although SB 56 currently awaits the governor’s signature to take effect, here are some of the key changes you can expect to occur:

Immature marijuana plant limits. The bill exempts OMMP growers who submit their OLCC producer applications on or before the measure’s effective date from OMMP immature plant limits. Current law sets OMMP immature plant limits at twelve (12) plants. This is an important fix for growers intending to transfer their medical plants into the OLCC program.

Immediate suspension of license for suspected diversion. OLCC may restrict, suspend, or refuse to renew a license if the OLCC has probable cause to conclude the licensee has sold, stored, or transferred marijuana in a manner not permitted by its license.

Processing by small producers. OLCC-licensed Micro Tier I and Micro Tier II recreational marijuana producers may process marijuana into cannabinoid concentrates using two specified methods: (1) a mechanical process (i.e., keif sieves, silk screens, etc.) and (2) an extraction process using water as the solvent (i.e., ice water hash, bubble bags, etc.).

Transfer of product between retail locations. SB 56 allows a licensed marijuana retailer to transfer product from one retail location to another if the destination retail location is “owned by the same or substantially the same persons.” Although “substantially the same” is not defined in the bill, we expect the OLCC will provide further guidance on the matter.  Note: these transfers are subject to OLCC rules governing transportation of marijuana items.

Verification of lawful activity hotline. Until now, it was difficult for government officials to determine whether a farm was a registered marijuana grow site or OLCC licensed producer premises. This provision requires that the OLCC and OHA create a telephone hotline to inform inquiring city, county, and Water Resources Department representatives, or a district water-master, as to whether a farm is a registered medical grow site, an OLCC licensed producer premises, or a site for which a registration or license has been applied for.

Exclusively medical licensees. Previous legislation enacted this session (SB 1057) created an “exclusively medical” license designation for OLCC applicants. Under SB 56, city and county governments that currently allow or prohibit OHA processing sites or dispensaries may unilaterally prohibit or allow exclusively medical licensees. This would empower local municipalities to refine the cannabis regulatory structure within their limited jurisdictions as their constituents prefer.

Restricted licenses. At its discretion, the OLCC may issue a restricted license to an applicant if the OLCC makes a finding that the applicant meets the denial criteria found in OAR 845-025-1115 (2). This fix allows an applicants to obtain restricted licenses when they otherwise may have been simply denied.

Remember to always stay tuned to our blog updates for more information on changes to Oregon cannabis laws!

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Yesterday, the California legislature passed Senate Bill 94, known as the “2017-18 Budget Trailer Bill” (BTB). The BTB reconciles the Medical Cannabis Regulation and Safety Act (MCRSA), which regulates medical cannabis, with the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), which legalizes and regulates adult-use (a.k.a. “recreational”) cannabis. Although MRCSA largely supplied the framework for AUMA, the laws contain significant differences that many anticipated would cause complications in the licensing and regulatory process, both for industry and state regulators.

BTB repeals the bulk of MCRSA, though certain provisions survive in the resultant combined medical (now termed “medicinal”) and adult-use regulatory scheme – the cumbersomely named Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Through this reconciliation, the laws governing adult-use cannabis also received a slight makeover.

Here are some of the key changes the BTB will make once it takes effect:

No Residency.  There will no longer be a residency requirement to own or operate an adult-use cannabis business. AUMA had required that adult-use license-holders and owners demonstrate continuous California residency since January 1, 2015. BTB lifted this restriction, meaning that out-of-staters will now be able to participate in both the medicinal and adult-use markets.

Vertical Integration.  “Vertical integration” will be permitted, except for testing laboratories and, to a narrower extent, for large cultivators. Thus, both medicinal and adult-use licensees will be able to hold multiple license types. Licenses for large cultivation operations (larger than ½ acre indoors or 1 acre outdoors) will still be unavailable until 2023.

License Types. License types will be the same for medicinal and adult-use cannabis. The BTB eliminates the “producing dispensary” (MCRSA Type 10A) and transporter (MCRSA Type 12) license categories but retains all others, including specialty cottage cultivation and microbusinesses (small retailers with farms not exceeding 10,000 sq. ft.).

Separation of Medicinal and Adult-Use.  Medicinal and adult-use cannabis activity must be separate. With some exceptions, including for testing labs, medicinal and adult-use cannabis businesses may not operate on the same premises.

Advertising Rules.  The advertising, marketing, adulteration, and misbranding restrictions and prohibitions from MCRSA and AUMA will apply to both medicinal and adult-use activity.

Industrial Hemp.  Industrial hemp will be regulated solely by the Department of Food and Agriculture, per the California Industrial Hemp Farming Act. This regulatory authority was formerly shared with the Bureau of Cannabis Control under the AUMA.

The BTB currently awaits the governor’s signature to take effect. Although the state is still taking public comment on the draft regulations implementing MCRSA, these regulations will likely be substantially rewritten to incorporate the BTB’s changes.  Stay tuned to our blog for more information on changes to California marijuana laws.

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Yesterday’s election was historic in many ways.  The imminent change in federal administration may have repercussions for state-run legal marijuana regimes.  Until now, states with legal marijuana regimes have been functioning under the protection of what’s called the “Cole Memo” – a document issued by the US Department of Justice, which directs federal prosecutors to use discretion in prosecuting marijuana-related crimes per eight enforcement priorities.  While many believe that Hillary Clinton would have most likely maintained the status quo regarding the Cole Memo, President-Elect Donald Trump’s position is less clear.  Look for future blog posts for more comprehensive analyses on this issue.

Yesterday’s election was a watershed moment for marijuana legalization among the states.  Please see our summary of the results of marijuana initiatives.

Adult-Use Marijuana

Four states have legalized marijuana for adult-use, joining Alaska, Colorado, Oregon and Washington.

  • Arizona (Failed) – The state electorate defeated Proposition 205 with a 52.1 percent “no” vote.  It would have allowed adults to carry up to one ounce, grow up to six plants (12 total per household), and consume marijuana in private spaces.  Retail marijuana sales were set to have a 15 percent tax imposed.  Some Arizona residents expressed concern that decriminalization would not keep up with the new law.  They pointed out that any possession of plants in excess of the limit could still have been charged as a felony.
  • California (Passed) – Proposition 64 makes recreational marijuana legal all along the West Coast and many people argue will mark a path to federal legalization.  Also known as the Adult Use of Marijuana Act, the law allows for adults to possess up to an ounce of cannabis and purchase dried flower and cannabis products from licensed retailers as well as grow six plants for personal use.  Initial taxes imposed include a 15 percent excise tax on retail sales plus a cultivation tax per volume.  Proponents estimate that the Act could result in $1 billion annually in state tax revenue.  One major concern, however, is that large, well-funded investors will swallow up smaller family farmers formerly engaged in the state’s medical marijuana program.  One LA-based private equity fund plans to deploy $75 -$100 million over the next few years to acquire property and build out cultivation centers and dispensaries in Southern California.
  • Massachusetts (Passed) – Question 4 provides for adults to possess up to one ounce of marijuana, keep up to 10 ounces at home, and grow up to six plants.  Marijuana sold by licensed retailers is subject to an excise tax of 3.75 percent in addition to the state’s 6.25 percent state sales tax.  Some concern exists regarding the timetable to get the legal regime up and running.  It took about 3 years for the first medical marijuana dispensary to open after passage of Massachusetts’ medical marijuana law.  Some have also expressed worries that the 3.75 percent tax will fall short of the funds necessary to launch the state’s regulatory scheme which includes the creation of a cannabis control commission.
  • Maine (Passed) –  Question 1 allows people 21 years of age and older to use marijuana recreationally.  The measure would permit each adult to grow up to six plants for personal use and would levy a 10 percent sales tax on retail marijuana and marijuana products while restricting use to private residences.  Under the measure, municipalities could regulate the number of retail stores or ban them entirely.  One concern voiced by legalization proponents is the state-wide cap on canopy space and language which designates 60 percent of licenses for large growers and only 40 percent for small growers.
  • Nevada (Passed) – Question 2, also known as The Regulation and Taxation of Marijuana Act, expands moves already made by some Nevada counties to adopt medical marijuana regulations.  The Act makes it legal for adults age 21 and over to purchase marijuana for recreational use, possess up to an ounce of marijuana, and grow up to six plants at home (if that residence is more than 25 miles from a licensed dispensary).  Wholesale marijuana is subject to a 15 percent excise tax.  Unlike Oregon, the Act limits the number of retail licenses by each county’s population.  Counties with fewer than 55,000 residents could only have 2 retail establishments.

Medical Marijuana

Four states have joined the ranks of 25 states and the District of Columbia in passing or expanding some form of medical marijuana law (not including CBD-only laws):

  • Arkansas  (Passed)  – Issue 6, also known as the Arkansas Medical Marijuana Amendment, is a constitutional amendment that allows an independent commission to grant licenses for up to eight grow facilities and 40 for-profit dispensaries statewide.  It does not provide for home growing.  A second measure, Issue 7, was disqualified by the Arkansas Supreme Court due to lack of compliance with registration and reporting laws for paid canvassers.  This measure would have allowed for some home growing for patients who live more than 20 miles from a cannabis care center.
  • Florida  (Passed) – Amendment 2 provides for the state Department of Health to register and regulate dispensaries and issue ID cards to marijuana patients and caregivers.  Individuals with medical conditions such as HIV/AIDS, epilepsy, multiple sclerosis, PTSD, and Crohn’s disease would be eligible for a card with approval from a licensed Florida physician.  Because Florida’s demographics include 20 million residents, many of whom are seniors, baby boomers, and veterans, many see the passage of Amendment 2 as a lucrative business opportunity.  One newly-formed venture capital firm is currently raising $15 million to fund various medical marijuana-related ventures.
  •  Montana  (Passed) – Ballot Issue 14, also known as I-182, expands legal access to medical marijuana.  It repeals the three-patient limit and other requirements like unannounced inspections and review for physicians who provide certifications.  Newly added qualifying conditions include chronic pain and PTSD.  The implementation of the law could be delayed for months because of an error written into the measure.  The initiative aims to immediately repeal the three-patient limit, but the measure’s language indicates that the limit would not be lifted until June 30, 2017.
  • North Dakota  (Passed) – Initiated Statutory Measure No. 5 or The North Dakota Compassionate Care Act allows for the possession of up to 3 ounces of marijuana for conditions such as HIV/AIDS, cancer, epilepsy, and glaucoma.  It also provides for patients who live more than 40 miles from a licensed dispensary to grow up to eight plants.  The most vocal opponent to this measure was the North Dakota Medical Association.  It claimed that the petition “would be very difficult to implement in a safe and cost-effective manner.”

While these results undeniably illustrate a broad movement by states across the nation to legalize marijuana use in some form, our experience in watching what it takes for an initiative to go from “passed” to fully-implemented suggests that there is a lot that can happen, and there may be more uncertainty regarding what will be required of the industry in each of the states (at least in the short term).  We look forward to assisting our existing clients (as well as new ones) as they navigate the waters in these new markets.

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On September 30, we blogged about the OLCC and OHA’s emergency rulemaking in the face of the October 1 labeling, packaging, and testing deadline. One of the rule changes reduced the OLCC’s requirement for pesticide testing for usable marijuana.  The new rule calls for OLCC staff to assess pesticide testing capacity for the limited number of licensed labs approved for such testing.  After making the assessment, the rule requires the OLCC to issue an order dictating the percentage of usable marijuana a producer must test for pesticides.  Last week, the OLCC issued its first order.  The order states that each producer must submit 33% of its harvest lot batches to pesticide testing.  The entire text of the order can be found here.

The OLCC will most likely issue future orders which increase the percentage of pesticide testing required. We will post future blog entries as each order is published.

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The Oregon Health Authority (OHA) has announced that it will engage in temporary emergency rulemaking this week to address two key issues which may affect current medical marijuana businesses preparing for October 1, 2016.

1. Pending OHA Processor Registrations

The OHA has confirmed that it intends to adopt a temporary emergency rule that would allow applicants who have applied for a medical marijuana processor registration to continue operating without interruption under a pending registration status.  The expectation is that OHA dispensaries will be able to accept products from processors that are included on the list of Pending Processor Applications.  Under current rules, processors are required to complete their registration on or before October 1, which involves an OHA readiness inspection.  However, with less than a month until October 1, no processors have yet completed a full registration.

In order to get on the list of Pending Processor Applications, a processor must submit a “complete” application to the OHA.  If the OHA has deemed a processor application “complete,” it will place the applicant on the list. Beginning October 1, OHA dispensaries must only accept edibles, concentrates, and extracts from processors on the list.

In a previous blog post we summarized the processor registration requirements.  The OHA reviews applications for completeness once per week, in the order they are received. To avoid any business interruption, processors should still submit their applications as soon as possible.

2. Extended Deadline for Dispensary ODA Certification

OHA also announced that it intends to push back the date by which registered dispensaries must have a food establishment license from the Oregon Department of Agriculture (ODA), from October 1, 2016 to January 1, 2017.  Stay tuned for an upcoming blog post on working with ODA.  Also, in case you missed it, we posted our Top 5 tips for Oregon dispensaries gearing up for October 1.

We will also continue to publish blog posts to update you on key issues and changes affecting Oregon’s marijuana industry.

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Number-5

There are significant changes to the Oregon Medical Marijuana Program that will take effect on October 1, 2016.  In recent blogs we have covered:  (1) labeling; (2) packaging; and (3) processor registration. What do these changes mean for Oregon dispensaries?  Below are a few tips for dispensaries preparing for the upcoming rule changes.

1. Identify your top-selling products.                      

If you own or run a dispensary, evaluate your sales history and identify your top-selling products. By focusing on your main sources of revenue, you can hopefully prevent significant disruption to your inventory supply and cash flow.

2. Evaluate whether your top-selling products currently comply with October 1 labeling and packaging requirements.

Once you identify your top-selling products, evaluate whether those products meet the new packaging and labeling requirements. The sale of marijuana flowers and other items in exit packaging may not be affected.  However, the sale of concentrates, extracts, edibles, and other infused products that are generally delivered to dispensaries pre-packaged and labeled will most likely be impacted.

Current Inventory

On and after October 1, if a dispensary has a product in inventory that does not meet the new labeling  requirements, under OAR 333-007-0010(5) the dispensary will be required to:

  • transfer/return the non-compliant item; or
  • if the item cannot be returned – for example, if the vendor cannot be located – dispose of the item in a manner specified by the OHA.

Future Inventory

On and after October 1, a dispensary may not accept any products that do not meet the new labeling and packaging requirements. Ask your vendors that supply pre-packaged and labeled products whether their products comply with the new labeling and packaging requirements. The OLCC has told us that relatively few labels have been submitted for pre-approval. With only one exception (which is explained below), all labels must be pre-approved by the OLCC. If you anticipate a potential disruption in inventory supply, try locating vendors who will likely be compliant by October 1.

Generic Labels

A label that provides only the necessary information required by the rules – and no graphics, photographs, or logos – is considered a “generic” label and requires no pre-approval by the OLCC. You are not required to provide notice to OLCC that you will use a generic label. Consider whether use of generic labels could be a temporary solution.

3. Talk to your extract, concentrate, and edible suppliers about the status of their OHA registration.

On and after October 1, a registered dispensary may accept only a transfer of edibles, concentrates, or extracts from an OHA-registered medical marijuana processing site. Ask your processor vendors about the status of their OHA registration. You can also continue to check the OHA Pending Processor list.

The rules do not prohibit sales of edibles and concentrates that were taken into inventory from a non-registered processor prior to October 1, or extracts that were taken into inventory from a non-registered processor prior to March 1, 2016. Dispensaries may consider purchasing edibles and concentrates from non-registered processors prior to October 1. In contrast, at this time all extracts must come from processors on the OHA Pending Processor list. Regardless of how this rule affects you, if a product in your inventory does not meet the new labeling and packaging requirements, you may not sell it to a consumer (see above).

4. Testing

Beginning October 1, a dispensary may not accept or sell a marijuana product that has not been tested by a laboratory accredited by ORELAP and licensed by OLCC (with one exception explained below). A list of accredited and licensed laboratories will be made available on the OMMP laboratories web page. Currently, no such labs are listed but the OLCC announced today that the first two labs have been certified and licensed.

With respect to inventory accepted by a dispensary prior to October 1, a dispensary may transfer such marijuana items to a patient or caregiver until January 1, 2017 if the item is labeled with the words “DOES NOT MEET NEW TESTING REQUIREMENTS.” These words must be bold, in all capital letters, and at least 12 point font, and the label must be easily seen by the patient or caregiver. We also read this mean that recreational customers may only be sold items tested under the new rules, but we to confirm this with OHA.

Given the current number of accredited and licensed labs, dispensaries should plan their inventory purchases accordingly.  In addition, we recommend affixing the necessary disclaimer labels well before October 1.

5. Do You Need an ODA License?

On and after October 1, a dispensary that sells or handles edibles must be licensed by the Oregon Department of Agriculture (ODA). Check our blog later this week for more information on the ODA’s licensing process.

If you have any questions or concerns about what to do with marijuana items that do not comply with packaging or labeling requirements or about our tips, please do not hesitate to contact a compliance attorney. We are here to help.

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