Yesterday afternoon, the Oregon Liquor Control Commission (“OLCC”) published a news release titled “OLCC Will Pause Acceptance of Marijuana License Applications.” This “pause” takes effect Friday, June 15th. The agency’s sudden announcement was a big surprise to almost everyone, and we received a flood of emails and phone calls throughout the afternoon.
Personally, I cannot remember receiving so many urgent calls and emails related to an administrative or political development at any point in the past seven years of working with cannabis businesses. That includes industry shakeout after recent seismic events like the election of Donald Trump, the appointment of Jeff Sessions as U.S. Attorney General, and Mr. Sessions’ rescission of the Cole Memo. In all, the OLCC announcement caused a major stir.
This post will address questions along the lines of those we received yesterday afternoon, in an attempt to give some consolidated thoughts as to what is going on with Oregon marijuana licensing.
The OLCC announcement says it will “temporarily shift licensing staff to exclusively process recreational marijuana license renewals and applications…”. Does the word “applications” refer to new applications, as well as change in ownership applications? What about “applications” for changes in financial interest?
We have confirmed with OLCC that the announcement refers only to new applications. We also have confirmed that the agency will continue to accept new applications after June 15th cut-off. However, OLCC will not move those applications forward in the queue or begin to process them. The focus will shift entirely on applications submitted prior to June 15th, changes within existing licenses, and renewals.
How long is the pause?
We don’t know. And OLCC probably doesn’t even know at this point. Conceivably, it could last through the next legislative session, beginning in early 2019, when the OLCC may look to the legislature to set some parameters on new license issuances. At a minimum, it seems likely that the pause will extend into the fall, given the application backlog and given the fact that the announcement states OLCC’s intent to put “additional resources into the field for compliance activity, with a focus on targeting Oregon’s 2018 fall outdoor harvest.”
Can the pause go on indefinitely?
Probably not, unless the legislature changes something. In our discussions with OLCC over the past few years, the agency has always acknowledged that the current statutory structure prevents it from capping the number of licenses it awards. Thus, under current law, the only way OLCC can limit the amount of marijuana being produced in Oregon is through controlling canopy sizes (which it has not sought to do).
Is OLCC going to ask the legislature for further statutory controls for licensing in 2019?
It seems likely, yes.
I am closing a large real estate transaction next week! There is no way I can get a LUCS and everything else I need to apply by June 15th. Am I screwed?
You might be. If you aren’t willing to forfeit your earnest money and walk away, the best you can do is close the deal and apply for a license, and wait and hope for OLCC to re-start its conveyor belt.
Is there any chance OLCC will extend this abrupt deadline?
Anything is possible but that seems unlikely. It’s also possible that we could see a carve-out for prospective applicants who can somehow prove compelling circumstances or financial hardship due to the abrupt deadline. But that also seems unlikely, and it’s hard to know how those parameters would even be set.
Why are they really doing this?
The reasons stated in the news release are compelling. Given all of the mergers and acquisitions going on in the Oregon industry, our Portland office processes a large amount of change-in-ownership, loan clearance, and other types of transactions with OLCC. We can confirm that the process has become painstakingly slow for businesses and investors, despite OLCC’s best efforts. Applications for new businesses are also very slow. In addition, the announcement references the need to “put additional resources into compliance activity” as stated above. That’s a good idea generally, but there is doubtless some political pressure behind this objective, too.
What do we do next?