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.