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OLCC's drawn out application process a burden to the industry

If you're intent upon breaking into the Oregon cannabis industry right now, you'll find the regulatory sledding to be somewhere between tough and impossible.

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Upon the passage of Oregon Senate Bill 218, signed into law by Gov. Kate Brown on June 17, 2019, the Oregon Liquor Control Commission instituted a moratorium on all new marijuana producer (farming) applications that will last until at least Jan. 2, 2022. As such, those who submitted a new producer application anytime within the past six months, are guaranteed to be waiting for at least two years, and likely much longer. In fact, if an application was submitted within the past 18 months, for all intents and purposes they're in the same boat as those who applied last week.

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The OLCC forewarned anyone applying after June 15, 2018, that their application wouldn't be considered for months. Implicit in this announcement, however, was that those who beat the June 15, 2018, deadline would see their applications reviewed in a timely manner.

This has not been the case. Corvallis attorney Jay Flint, of Evashevski Elliott PC, said his clients who filed a marijuana retailer application prior to the June 15, 2018, deadline have not yet been assigned an investigator, and therefore cannot yet legally operate.

"Their frustrations are that they are now six figures into a lease they cannot use, plus the build-out costs," Flint said. "And [there is] no end in sight."

In order for any producer/retailer/processor applicant to get into the "queue" for review by an OLCC investigator, there must be proof of legal rights to use a premise for the proposed cannabis operation. That means these entrepreneurs must have an executed lease—and remain in compliance with the lease terms—while waiting for the OLCC to sign off on an application. For farmers or retailers shelling out $5,000 to $20,000 in monthly rent, an 18-month delay can be positively backbreaking.

Still, it's possible to acquire a marijuana producer license from an existing licensee in the state through a "change of ownership" application. Essentially, this calls for jumping through the same background checks, site-plan approvals and application fees as would be required if you were seeking a new producer license. With the change-of-ownership application, however, the premises have already been licensed, and already include most of the legally required infrastructure (high-definition video surveillance, security systems, commercial doors and locks, etc.).

A couple of years ago, when my cannabis law practice began pivoting from new producer licenses to assisting in change-of-ownership applications, the OLCC frequently informed clients the timeline for final inspection and approval would be about three to six weeks. From a time and expense standpoint, it was a no-brainer for our firm to steer clients to acquire an existing marijuana business, rather than to start from scratch. Yet now, even that strategy seems fraught with peril, all thanks to a bogged-down OLCC.

"I have a change-of-ownership [application] that has taken since early August, and it's still not complete," Flint said. "Things that used to take one to two months, now take six months-plus."

To a certain degree, it is understandable that the OLCC has been so slow to process applications. According to the OLCC's 2019-2021 Budget Narrative, the agency had anticipated some 1,200 marijuana applications, and received nearly four times that amount—4,422 as of mid-2018, when the first "pause" on applications was enacted.

The agency also initially estimated only 800 licensees, far less than half the current total of licensees. In addition to reviewing new applications, the OLCC investigates renewal applications, and requests to alter a licensed premise. Accordingly, every new applicant poses an immense amount of future workload for agency employees, creating something of a snowball effect that grinds the review of new applications to a halt.

When I contacted the OLCC, they directed me to the marijuana licensing website, which indicates they're working producer change-of-ownership applications submitted by Sept. 20, 2019, and retail change-of-ownership applications submitted by July 19, 2019. New retail applications, however, are only being processed if they were submitted by June 15, 2018.

"All of this OLCC slowdown ... costs millions of wasted dollars for the applicants and licensees, disrupts the flow of business in the industry, and as a result, the state loses out on millions of dollars in tax revenue," Flint said.

Not only that, but many aspiring cannapreneurs—and even their attorneys— are blindsided by delays.

"I would like for them to be more transparent about the rationale [for the delays] and be more collaborative in their approach," said Flint. "This is still an emerging industry."

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