Three years after its recreational cannabis law went into effect, Oregon is experiencing a growing glut in its marijuana supply, driving down prices and putting many of the industry’s licensed growers and retailers on precariously thin ice. While the state has raked in tens of millions of dollars in tax revenue, supply has far exceeded local demand, and Oregon’s legal industry is currently sitting on approximately 1.3 million pounds of perfectly good pot that state and federal laws prohibit them from selling outside state lines — for now, at least. According to the Statesman Journal, in 2019, Oregon lawmakers are considering proposed legislation that would be the first major step towards legalizing interstate exports of marijuana.
“Oregon has been growing cannabis for generations,” Adam Smith, founder and director of the Oregon small business association Craft Cannabis Alliance, tells Rolling Stone. “Since 1998, we’ve had a thriving above-ground medical marijuana industry. After all that time, we had thousands of mostly small artisan growers, both medical and illicit. So when the state legalized [recreational] cannabis, it did something very wise and very Oregon — we legalized the industry we had.”
Oregon legalized recreational weed in 2014, but the program didn’t go into full effect until the start of 2016, when the Oregon Liquor Control Commission began issuing licenses, many to existing growers, just months before cannabis retail locations were permitted to open for business — but unlike other states that have legalized weed, Oregon doesn’t have a cap on the number of available licenses. Initially, legal supply was low, demand was high and business boomed. When a particularly powerful extratropical cyclone hit the Pacific Northwest that fall, it “naturally constrained the supply, even though there were a lot of cultivators,” according to Beau Whitney, a senior economist with Washington, D.C.-based cannabis think tank New Frontier Data.
Then state lawmakers made the controversial decision to lift a restriction that barred out-of-state investors from owning a controlling stake in the state’s cannabis industry; with few barriers to entry and increased access to funding, the number of licenses being issued by the state exploded. The first big warning sign of the bust came in October 2017, when the fall harvest produced more than twice the amount of marijuana as the previous year, while demand hadn’t — and still hasn’t — changed.
“What we didn’t fully think through when we legalized the industry we had is the fact that it was also primarily an export industry,” Smith tells Rolling Stone, referring to the amount of marijuana Oregon growers were producing for the illegal, out-of-state black market, before going legit. “So suddenly you had one of the best and most prolific growing regions in the world was hemmed into a market of less than 4 million people.”
Smith has been working with lawmakers on proposed legislation that would allow Oregon to start exporting pot to other legal states by 2021, and hopefully save remaining local small businesses from imminent collapse. When the legislative session begins in a few weeks, Democratic Sen. Floyd Prozanski is planning to reintroduce provisions from Senate Bill 1042, proposed in 2017, which would have permitted interstate transfer with adjacent states like Washington and California, required all exported cannabis products to meet Oregon’s testing, packaging and labeling rules, and taxed out-of-state transactions at 17 percent.
“[Interstate exporting] would create more of a market in which quality and branding and other things would come into play more so than just pure price,” Whitney told the Statesman Journal. “It would either slow or stop the price declines, because there wouldn’t be any more excess.”
While the original bill failed to pass, a lot has changed since it was first proposed — especially the volume of unsold marijuana — and interstate exporting has seen a significant increase in support from lawmakers and the local media, including the Statesman Journal and the Bend Bulletin.
“We’re looking at hundreds of millions of dollars of local capital that is at imminent risk,” Smith tells Rolling Stone. “This is real money out of people’s pockets, in a state that can’t afford this kind of economic devastation over a short period of time. Many of these businesses are growing some of the best cannabis in the world, as efficiently as anyone anywhere. It matters that we understand that this is not an oversupply problem, it’s a political problem, a market access problem and a prohibition problem.”