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Oregon Considers Regulating Inter-State Sales, But It May Be Too Late For Some Local Businesses

Oregon Is Considering Legalizing Inter-State Imports

Oregon Is Considering Legalizing Inter-State Imports

Just last week, Oregon legislators passed groundbreaking legislation that has a massive effect on their booming cannabis industry with Senate Bill 582, a law allowing for Oregon-grown cannabis to be exported out of state to other legal cannabis states like Washington, California and Colorado.

That relatively low demand for cannabis stands in stark contrast to the amount of people the state was permitting to grow it.

Before the state decided to pause on handing out licenses, as many as 1863 licensed cannabis businesses and 1001 growers, along with the 847 assigned applications and 477 ready for assignment waiting to be licensed.

That’s a whole lot of excess weed just collecting dust. That’s a major problem for a few reasons.

First, that’s a lot of potential tax revenue for the state just sitting there waiting to be cashed in.

According to the Oregon Department of Revenue, the state of Oregon made about $70.2 million in sales taxes on cannabis in 2017 alone. SB 582 would provide a new, viable route for that cannabis to leave the state, letting in-state growers sell off their excess while the state benefits from the added tax dollars.

Secondly, allowing inter-state export of cannabis would play a major role in reducing the black market’s influence in Oregon’s cannabis industry.

According to Oregon-Idaho Drug Trafficking Area report, “only 31 percent of available cannabis inventory was distributed [in-state], leaving 69 percent unconsumed within the state-sanctioned recreational system.”

The report also said that between July 2015 and January 2018, nearly 15,000 pounds of Oregon-grown cannabis was seized while in-route to 37 other states. For scale, that’s about $48 million dollars worth of cannabis the state’s legal cannabis industry missed out on.

Law enforcement officials call the issue “diversion,” the funneling of legally grown cannabis out into surrounding states like Idaho to be sold on the black market.

That missing profit is hitting small business owners and small grow operations in the state most of all.

Cameron Yee, a founder of cannabis edibles company Lunchbox Alchemy, said he felt that the legal cannabis industry as a whole would benefit from changes in the law.

“I don’t have to tell you what exports could mean for your bottom line,” Yee said. “That’s particularly true for our locally owned business. We can’t wait — we have to go out and get it.”

Jason Schwartz, the owner of Cascade High farm, has seen a major dip on the prices he can get per pound for his yield due to the surplus.

“This time last year, I was getting $1,800 to $2,200 per pound for my flower,” Schwartz said. “Right now, I can get $500 to $800 per pound on average. Last year, I had 15 employees, and now I can only afford four. Most of us are on the verge of going out of business—we can’t afford to wait another five years.”

So What Can Be Done About It?

Well, this is a complicated question. While there’s clearly an issue here that needs to be resolved, the easiest way to solve the issue lies in the hands of the federal government.

Cannabis business advocates like Adam Smith, the founder and executive producer of the Craft Cannabis Alliance, say the easiest way to solve the diversion issue and lift the weight of the surplus off of Oregon’s cannabis business is to legalize at a federal level.

“We legalized cannabis, but the only people making a living in the cannabis industry are the ones who decided not to get licenses,” Smith said. “A licensed transfer into another legal state isn’t radical. There is no faster way to incentivize growers to transition from the black market to the legal, regulated market than legalizing export.”

Due to the continued federal illegality of cannabis and it’s outdated and inaccurate Schedule 1 classification, however, cannabis legal states like Oregon had to make legislation to dictate all cannabis grown in-state has to stay there. California and Nevada both of similar legislation on the books.

While SB 582 would remedy the issue, state officials would need to work out individual deals with each other state they were exporting to. That would likely involve that other state having to introduce and pass their own legislation to make trade possible in the first place.

If the federal government were to lift the ban on cannabis, states would immediately be able to sent their excess cannabis out of state and even to our Canadian neighbors. The global cannabis industry is worth nearly $15 billion and rising and nations all over the world are striking up deals to cash in on their excess cannabis.

As usual when it comes to cannabis in the modern age, the initiative would lie with the state due to federal inaction.

Slow Roll Out For Medical Marijuana Flower In Florida

The MUV Cannabis Dispensary In Tampa

The MUV Cannabis Dispensary In Tampa

We were excited when medical marijuana in Florida was legalized during March 2019.  The measure had swept through legislation fairly quickly and overnight, just like that, flower could be sold in stores.  Customers were buzzing that many different strains of flower would be on shelves in no time because the state-licensed cultivators had been growing cannabis for concentrates since medical cannabis was legalized in FL during November 2016.  Surely, it would be straightforward to flip the switch for a new product that didn’t need any processing.  We were in Tampa recently visiting a friend with a medical cannabis card and were looking forward to trying some of Florida’s finest flower.  As we would soon find out the reality was more nuanced than we had expected.

Our friend’s first call to the MUV Tampa dispensary took us to a centralized customer center that managed incoming calls for the 4 MUV dispensaries in the area.  He was told that there was plenty of Gorilla Glue (yes, our favorite strain!) and Rainmaker.  Awesome.  He arrived less than one hour later and it was all gone.  “We’ve still got some flower cups that you can use for your vaporizer” the polite attendant informed him.  Yeah, sweet.

Florida dispensaries have been surprisingly slow to roll out flower to its customers, and those that do offer it tend to sell out quickly.  The process is causing some confusion and frustration for patients who have been eager to move their flower purchases from the black market to the legal market.

The bumpy start to the new regulation is primarily due to the fact that a dispensary can only sell flower that it has grown itself.  This has led many dispensaries to scramble to expand their facilities to accommodate the sale of an additional product that most anticipate will have significantly more demand than the concentrated products being sold in dispensaries today.

MUV’s manager told us the best thing to do is to call Thursday since they typically receive new flower product at that time and we could place an order on hold.  When asked what kind of strains they expected to receive that week we were told he didn’t know (“they don’t tell us in advance what we’re getting, they just send us what they’ve got”).  We found it a little strange that there isn’t more communication between the stores and the growers since it is the same Company.  After all, the dispensaries interact with patients every day and should know what they want and what sells the best.

Instead of waiting until Friday for our flower we decided to try some other places.  Fluent Dispensary in Saint Petersburg (formerly known as Knox) had some absolutely killer Grandaddy Purple cartridges, but no flower.  “We’re hoping we get some flower by the end of the month,” the attendant said.  He wasn’t sure why they didn’t have any already.

Next we called Trulieve to see if they had any flower (at this point we weren’t going to just drive around given the dearth of places with flower).  We dialed into an automated message with about 5 different options based on the purpose of our call.  Pretty extensive for a small cannabis dispensary.  We chose option 2 (Place An Order).  We waited…..and waited…..and waited.  After about 7 minutes we just hung up.  Maybe they do have flower, but we’re not going to wait over 5 minutes on the phone to find out.

The bumpy rollout is primarily due to dispensaries racing to get approval from the Department of Health to sell loose flower, limited growing facilities in place, and a surge in demand from patients.  The process can take several months in some cases.  Fluent, for example, was held up due to the fact that they had just bought their dispensaries from previous owner Knox Dispensaries and were still in the transfer process of their licenses in general (a week after we visited they received approval and started selling loose flower, albeit in low supply).  At the same time that operators race to expand services, patients in FL are booming.  As of March 2019 there were about 3,000 new patients a week licensed in FL, a number we expect has grown since then given the legalization of flower in the state.  As of March 2019 there were just under 200,000 medical marijuana patients in FL.

Exacerbating this, dispensaries likely do not currently have grow rooms that can accommodate a surge in demand like the one seen after flower was legalized in Florida.  MUV’s grow house, based in Apollo Heights, is over 150,000 square feet, and serves the Company’s 4 dispensaries in the area.  That’s pretty large for a small city.  Surterra Therapeutics has about 400,000 square feet of warehouse space in Tallahassee, but this serves all 23 dispensaries in the state.  Trulieve’s two warehouses in Glasden County FL have about 100,000 square feet of cultivation space and serves all of its 27 dispensaries in the state.  Knox is in the process of expanding its facilities.

Eventually, we went back to MUV and called the call center to reserve an order from the Apollo Heights dispensary.  We bought ½ ounce of Gorilla Glue and ½ ounce of Rainmaker.  We had to drive 45 minutes from Saint Petersburg to get there, but we did eventually get our flower.

Prices are pretty reasonable in our opinion.  The ounce that we bought cost $400, all fees included.  Unlike many states where cannabis is legal either medically or recreationally there are no taxes charged for cannabis purchases in Florida.  Some places, like Liberty Health Sciences sell 1/8ths for as low as $25.