CannabisNews420.com – Cannabis/Marijuana Industry News
Last week, I covered the Oregon Secretary of State’s audit report of Oregon marijuana regulation. On January 31, the same day the audit was released, the Oregon Liquor Control Commission (OLCC) submitted its 2019 Recreational Marijuana Supply and Demand Legislative Report (“Report”). The Report’s key finding is nothing new: supply exceeds demand within Oregon’s recreational market. The impressive part, however, is by how much. The Report specifies that “the recreational market has 6.5 years’ worth of theoretical supply in licensees’ inventory accounted for and contained within Oregon’s Cannabis Tracking System.” That’s a lot of weed.
The Report explores the whys and wherefores of this situation, presenting some interesting data and analysis. One fact glossed over in the Report, however, is that no one expected so many applicants for the OLCC system, and no one expected that Oregonians would consume more marijuana per capita than any other state. Looking back at the Estimate of Financial Impact for Measure 91, for example, tax revenues were forecast at “$17 to $40 million annually.” Tax revenues for FY 2018 more than doubled that estimate’s high end, surpassing $82 million. Data like these make the current level of oversupply even more astonishing.
Ultimately, the Report gives four potential policy choices for legislative consideration:
- Maintain the free market status quo and let the market self-correct towards equilibrium. (Fingers crossed!)
- Limit maximum producer capacity (something OLCC currently does not have the statutory authority to attempt).
- Increase license fees (something OLCC could do today).
- Place a cap or moratorium on the number of recreational licenses (something OLCC technically cannot do today, although it has paused intake of new applications).
Each of these options, or any combination of them, would have a significant impact on the Oregon industry. That impact will not be felt only by consumers and potential market entrants, but by current licensees and ancillary businesses. The Report acknowledges as much, noting that:
Due to the nature of the market in which supply already exceeds demand, any policies enacted with the purpose of creating equilibrium in the near term will inherently have an effect on incumbents within the market.
This means that everyone has some skin in the game, and everyone ought to be paying attention.
On the executive side, Governor Brown already has expressed her view on the issue, requesting a pre-session filing of Senate Bill 218. That bill would allow the OLCC to refuse to issue marijuana production licenses “based on market demand and other relevant factors.” Senate Bill 218 still has not had a public hearing, but it’s very possible that this bill gains traction and OLCC is given a wide berth on production licenses and other market-limiting issues. In our opinion, legislative deference to OLCC would make sense there.
I’ll cover SB 218 in a bit more detail next week, along with the myriad of other draft Oregon legislative bills on cannabis (both marijuana and hemp). We will also continue to track both legislative and administrative actions that deal with oversupply. In the meantime, check out the following blog posts for more on the issue:
- Oregon Cannabis: Black and White Markets
- Cannabis Oversupply Presents a Challenge to Regulators
- Dreaming of an Oregon-California Cannabis Exchange
- Oregon Marijuana, the Feds and the Williams Memo
- Is Oregon’s Cannabis Industry Really “Out of Control”?
- Oregon Taking a Hard Look at Interstate Marijuana Sales
- Oregon Cannabis: State of the State