PORTLAND, Ore. (KOIN) – Federal restrictions have been holding back Oregon’s cannabis industry, but an audit released Friday by the Oregon Secretary of State’s office said the state’s own laws are also hindering the economy.
The audit on the Oregon Liquor and Cannabis Commission’s regulation of the state’s cannabis industry had two goals: first, to identify business equity challenges in the state’s current cannabis regulatory framework and to find ways to address them; and second, to determine how the state can address social equity issues within the cannabis industry.
Findings from the audit show that Oregon regulations are based on federal guidance from 2018 that has since been replaced and that Oregon has not updated its regulations since then.
In January 2018, U.S. Attorney General Jeff Sessions rescinded the Cole Memo, which deprioritized federal enforcement of cannabis prohibition in states where cannabis was legal. However, in May 2018, Oregon U.S. Attorney Billy Williams issued five new priorities for enforcement of federal laws that the Oregon Secretary of State’s Office said closely mirrored those of the Cole Memo.
Since then, federal lawmakers have shown more leniency toward marijuana-related offenses, including President Joe Biden’s decision to pardon all prior federal offenses for simple possession of cannabis.
According to the audit, some requirements Oregon put in place when recreational cannabis became legal — which were meant to minimize the risk of federal intervention in the state’s system — have ended up increasing operating costs, decreasing competition and diversity, and have left many cannabis startups underserved.
Auditors concluded that the risk of federal intervention is increasingly unlikely and that it’s safe for Oregon to make some changes.
Oregon’s Secretary of State, Shemia Fagan recused herself from the state audit that was released Friday on the cannabis industry because she’s a paid consultant for La Mota Cannabis Company and its owners.
La Mota entrepreneurs Aaron Mitchell and Rosa Cazares are the property owners of a neglected house in the Hazelwood neighborhood that KOIN 6 investigated this year. The house, according to its neighbors, is a site for squatters, fires, drugs and shootings.
When KOIN 6 requested an interview with Fagan on Thursday, reporters received this response from her spokesperson.
“The Oregon Government Ethics Commission guidelines specifically allow public officials to maintain private employment.The practice is very common among legislators. When it comes to any potential conflict of interest with the agency’s work, Secretary Fagan chose to exceed what was required by the law and voluntarily recuse herself from the audit…”
The spokesperson also said that “Secretary Fagan prioritizes her public service and completes any work for her private contracts during her free time.”
The secretary of state position pays $77,000 dollars a year.
In comparing Oregon’s cannabis industry to its alcohol industry, auditors found that cannabis businesses face more requirements. Cannabis businesses are required by law to have steel-framed doors, start to finish product tracking, and a video surveillance system — all things liquor businesses are not required to have.
Between the current licensing moratorium and federal restrictions on interstate commerce, banking and taxation, auditors concluded Oregon’s cannabis industry experiences burdens the alcohol industry does not face.
“Oregon should adopt creative strategies to mitigate risks caused by existing federal cannabis laws and related barriers,” the audit stated.
Additionally, auditors found cannabis businesses face the difficulty of Business Oregon refusing to work with them. Business Oregon is the state’s economic development agency and it has refused to serve cannabis businesses over concerns over criminal liability and fears that it could lose its federal funding.
The audit said Oregon has not developed a clear directive on how state agencies should interact with cannabis businesses. It also did not find any instances of state economic development agencies refusing to work with cannabis businesses in other states where the drug is legal.
When it comes to equity, the audit found Oregon did not consider or include any targeted equity provisions when developing the recreational cannabis program.
“The lack of these provisions hinders efforts to mitigate the disproportionate impacts experienced in communities targeted by the War on Drugs and does nothing to provide equitable access to this multi-billion-dollar industry,” the Secretary of State’s office wrote in a press release about the audit.
In a letter responding to the final draft of the audit, Craig Prins, executive director of the OLCC, said that all points addressed in the Cole Memo remain in the Oregon state law that directs the agency’s work.
“The commission continues to engage licensees and other stakeholders in annual revisions to our rules and policies to better support licensees, their businesses and Oregonians,” Prins wrote. “Whether or not the current federal government administration considers the Cole Memo regulatory guidance a guiding light, it remains OLCC’s responsibility to maintain a regulated system.”
Prins said the OLCC will reevaluate the public purpose and economic impact of regulations like requiring cannabis businesses to have steel doors and 24-hour surveillance. He said the commission would ensure its replacement of the cannabis licensing system has the capacity to gather demographic data and generate reports.
He also said the OLCC will assess the impact the licensing moratorium has had on those most negatively impacted by the prohibition of cannabis.