Market Overview

Oregon Aims To Create An Export Market For Marijuana

Oregon Aims To Create An Export Market For Marijuana

What a difference a state makes. Last week cannabis industry watchers had their eyes on Idaho, where news broke about the Idaho State Police arresting a truck driver for transporting hemp across the border.  

That same week the state of Oregon held a hearing on a Senate bill that would eliminate the prohibition on interstate transportation of marijuana – and create the possibility for the state to export the product to other states where the product is legal.

The twin goals of the legislation are to address rampant oversupply in Oregon's pot marketplace and pave the way for immediate adoption of interstate commerce once marijuana becomes legal at the federal level.

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It took more than a year after Oregon legalized pot to create a regulatory structure necessary to actually get the market off the ground, said Donald Morse, a Portland-based consultant for the cannabis industry. Advocates don't want to be mired in the same kind of bureaucracy once pot becomes legal nationwide.

"That's what the Senate bill is all about," Morse said. "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."

Many advocates think federal legalization of marijuana could come as soon as 2020, fueled by a Democrat-controlled House of Representatives and the recent legalization of hemp under the Agriculture Improvement Act of 2018.

Creating an export market for Oregon-grown pot would address another big problem, one that few anticipated in the months leading up to legalization in this state – there is way too much pot in Oregon and not nearly enough people to buy it.

Unlike some other states, Oregon did not put a cap on the number of businesses that could obtain a marijuana business license. As a result, thousands of entrepreneurs opened up dispensaries and farm operations, creating a green gold rush and a glut of legal weed.

The problem was exacerbated by the fact that officials failed to understand that most of the illegal pot grown in Oregon was flowing out of state, said Adam Smith, founder of the Craft Cannabis Alliance, a business association in Portland.

"They didn't fully consider that the industry we had was primarily an export industry," he said. After legalization, all the pot that had been exported had to stay in state, creating an oversupply and depressing prices, from as much as $2,000 per pound in the early days to just $600 today, The Daily Beast reported.

Over the past two years, at least 150 cannabis businesses have closed in Oregon, where farmers grew three times more weed than the state could consume, according to data from the Oregon Liquor Control Commission, the agency that oversees recreational marijuana.

A surplus of marijuana is also fueling the illicit market, Smith said.

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An export market would mitigate all these problems. But a lot of details have yet to be worked out. The Senate hearing last week created a working group that will focus on three areas: how to give the state authority for out-of-state transfers; identify partner states; and wrap in some level of federal permission.

The latter could happen either via federal legislation or by wrapping interstate commerce into a new version of the Cole Memo, said Smith.

The Cole Memorandum was written in 2013 by the U.S. Attorney General at the time, James Cole. The memo urged all U.S. attorneys to focus on specific aspects when it came to legalized marijuana operations within their states.

Specifically, U.S. attorneys were urged to focus mainly on preventing cannabis from getting in the hands of minors, and from the substance escalating gang activity.

Some argue that the Cole memo can be used as a tool to decriminalize cannabis at the federal level.

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As Smith pointed out, Oregon is recognized nationally for a climate and geography that is uniquely hospitable to growing cannabis. States like Nevada, with scarce water resources, or regions that lack Oregon's deep industry expertise, would be among the ready legal buyers of Oregon pot, he said.

Morse did note that hemp legalization is expected to alleviate some of the oversupply, as Oregon farmers convert marijuana fields to hemp.

But there is still too much pot, he said.

Smith echoed that sentiment. "We now have hundreds of millions of dollars of local capital that is in the process of being wiped out. It's an actual crisis."

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