Oregon Introduces Legislation to Limit the Number of Cannabis Grow Licenses

The Oregon Legislature introduced a bill, SB218, to authorize the Oregon Liquor Control Commission (OLCC) to limit the number of cannabis grow licenses in the state. The bill provides the OLCC with broad discretion in establishing the number of licenses in the state based on market demand and other factors. The OLCC may also adopt regulations to implement this process, and notify the public when the state is not issuing grow licenses.

The legislation addresses the glut of cannabis inventory in Oregon that the OLCC highlighted in the 2019 Recreational Marijuana Supply and Demand Legislative Report. The legislatively mandated report indicates that the recreational marijuana inventory as of January 1, 2019 will last the state for 6.5 years with the current level of demand. Oregon’s recreational marijuana growers produced 300,000 pounds in January 2017 and 900,000 pounds in January 2019 while wholesale prices for recreational marijuana has decreased significantly. Despite the bleak forecast for the cannabis industry, regulators are not concerned about marijuana being diverted to black market in surrounding states. The OLCC believes that most cannabis growers will continue to abide by the law in hopes of bigger gains when marijuana is legalized at the federal level and interstate sales of marijuana can occur. Marijuana market participants can access capital to help them through these tough times. However, the OLCC does not believe this will always be the case. The report states that the state faces policy considerations in order to create equilibrium in the recreational marijuana market such as limiting the amount of marijuana produced or placing a moratorium on the number of recreational licenses.