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Oregon, awash in cannabis, looks to curb production

Lawmakers move to give state leeway to deny new licenses based on supply, demand

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A budtender shows a top cannabis strain on Feb. 7 at Serra, a dispensary in Portland.
A budtender shows a top cannabis strain on Feb. 7 at Serra, a dispensary in Portland. Richard Vogel/Associated Press files Photo Gallery

SALEM, Ore. — Oregon is awash in cannabis, glutted with so much legal weed that if growing were to stop today, it could take more than six years by one estimate to smoke or eat it all.

Now, the state is looking to curb production.

Five years after voters legalized recreational cannabis, lawmakers are moving to give the Oregon Liquor Control Commission more leeway to deny new cannabis-growing licenses based on supply and demand.

The bill, which passed the Senate and is now before the House, is aimed not just at reducing the huge surplus but at preventing diversion of unsold legal cannabis into the black market and forestalling a crackdown by federal prosecutors.

“The harsh reality is we have too much product on the market,” said Democratic Gov. Kate Brown, who intends to sign the bill if it wins final passage as expected.

Supply is running twice as high as demand, meaning that the surplus from last year’s harvest alone could amount to roughly 2.3 million pounds of cannabis, by the liquor commission’s figures. That’s the equivalent of more than 1 billion joints.

Oregon has one of the highest such imbalances among the 10 states that have legalized recreational cannabis since 2012, in part because it had a big head start in the cannabis business.

With its moist climate and rich soil, Oregon has a long history of cannabis growing. When it became legal, many outlaw growers went legitimate, and others jumped into the business, too.

They are now all cultivating cannabis in a multitude of fields, greenhouses and converted factories, with 1,123 active producer licenses issued by the OLCC over the past three years.

Bill likely to boost prices

The legislation could be a lifeline to some cannabis businesses that are being squeezed by market forces.

Retail prices in Oregon for legal cannabis have plummeted from more than $10 per gram in October 2016 to less than $5 last December. At the same time, smaller cannabis businesses are feeling competition from bigger, richer players, some from out of state.

Officials worry that some license holders will become so desperate they will divert their product into the black market rather than see it go unsold.

“We’re a very young industry,” said Margo Lucas, a cannabis grower and vendor in the Willamette Valley who is hoping the measure will give her business breathing room.

She noted that growers can’t seek federal bankruptcy protection — cannabis is still illegal under federal law, and banks avoid the industry — and that many owners have taken out personal loans to finance their businesses.

“So when we go out of business, we’re going to go down hard,” Lucas said. “Many of us will lose our homes. … You’re going to have a lot of entrepreneurs in this state that are pretty unhappy with the way that this ends if we don’t get some support with this bill.”

Opponents say the proposed law will drive growers who are denied licenses into the illegal market, if they’re not there already.

“This current track seems like a giant step backward toward prohibition, which has always been a disaster,” Blake Runckel, of Portland, told lawmakers in written testimony.

As of January, Oregon’s recreational cannabis market had an estimated 6 1/2 years’ worth of supply, according to an OLCC study .

To prevent excess cannabis that is still in leaf form from spoiling, processors are converting some into concentrates and edible products, which have longer shelf life, OLCC spokesman Mark Pettinger said.

U.S. Justice Department officials have said they won’t interfere in states’ legal cannabis businesses as long as the cannabis isn’t smuggled into other states and other standards are met. Oregon officials want to let federal authorities know they’re doing everything they can to accomplish that.

The bill to curtail production could “keep the feds off our back,” Rob Bovett, legal counsel for the Association of Oregon Counties, told lawmakers.

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