Cannabis Under Pressure: How California and Oregon are addressing their unique issues with cannabis

Apr 19, 2019

Cannabis businesses are under more scrutiny than ever. Those in Oregon and California especially are feeling the pressure. Between license expirations, compliance issues, and an overproduction issue in Oregon, American cannabis business owners are dealing with uniquely bureaucratic issues that only seem to be getting worse.

California’s temporary cannabis licenses set to expire

Not only is California struggling to find proper cultivation sites, but many California cannabis operations could also lose their licenses due to a backlog in the state’s application process. The Monterey County Weekly reports that only seven cannabis businesses are fully licensed in the county while another 100 businesses are operating with pending license applications.

[California legislation hopes to address lag in approvals for cannabis business licenses]

What happens to these businesses with pending licenses? They can continue to operate “in good standing”, according to the report, as long as they pay taxes. But with more than 10,000 temporary licenses issued in the state, all set to expire within 200 days of issue, it is unclear whether these businesses can or will remain open.

“I have heard concerns about the state’s process . . . It hasn’t caused any of our business to halt operations—yet,” Dino Pick, City Manager of Del Rey Oaks, California, told the Monterey County paper yesterday. “We intervene on a case by case basis with the state when the approval of a state permit is the impediment or potential impediment to a business operating.”

Stepping in on a case-by-case basis is exhausting when there are 10,000 temporary licenses floating around. The State Senate is scheduled to vote on a bill that would extend the temporary deadline another 365 days, but that simply tacks more time onto an extenuating problem. State officials are doing their best to mediate the problem, but it is cannabis business owners and operators who will take on the brunt of the stress.

Overproduction and strict standards for Oregon cannabis

After temporarily postponing licensing applications in Oregon, the Oregon Liquor Control Commission came back in full force, inspecting over half of the state’s cannabis operations last fall. They found 27 percent of them failing to meet the state’s compliance qualifications.

Nearly 41 cultivators faced license revocation last December for compliance issues with cannabis tracking, surveillance coverage, and security issues. The OLCC intentionally set inspections during harvest season, anticipating that they would indeed find more discrepancies during that time than any other.

When it comes to the OLCC, cannabis operations are held to higher standards than any company with a liquor license. For example, if a dispensary employee violates a rule, such as selling recreational marijuana to a minor, the entire business is held responsible. Their cannabis licenses could be suspended or revoked while alcohol establishments face only a monetary fine and a few days suspension for the same violation.

[Why does Oregon have such a massive cannabis glut?]

Rather than address this discrepancy, the state is working to address its overproduction issue. Since the state had no limit to how many licenses they could issue, it created a surplus of growers and cultivators. The OLCC published a legislative report in January with the intention of creating a public policy approach to address their growing supply of marijuana. Ideally, the state wishes to export marijuana when and if cannabis becomes federally legal in the United States.

How will this play out if cannabis cultivators and operators are already failing to maintain compliance regulations? Will these regulations change if and when exporting American cannabis becomes a reality? It took nearly a year for the state to establish its regulatory framework after recreational marijuana was legalized, and many in the cannabis industry wish to avoid that kind of red tape in the future.

“That’s what the [legislation] is all about,” Donald Morse, Chairman of the Oregon Cannabis Business Council, said in an interview with FreightWaves. “It allows rules and regulations to be written, so that, when they have the federal government's blessing, they can move at the blink of the eye. It allows us to be proactive.”

[Floridians introduce legislation, joint resolution, and petitions to legalize recreational marijuana]

Nearly 150 cannabis operations have closed in Oregon due to the supply glut in the state. The new pending legislation addresses that issue but does nothing to address the compliance issues and standard discrepancies in the state. Threatening 41 cannabis producers with revocation makes it very clear how serious the state is taking their cannabis production. But while state officials are focused on overproduction, cannabis cultivators and business owners are left scrambling to maintain legitimate businesses under increased scrutiny.

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