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Why Non-Intoxicating Hemp Could Damage Oregon Marijuana Crops

Thursday, July 16, 2015

 

Containing very little of the psychoactive constituent THC, hemp, the less popular cousin of marijuana, is in fields in Oregon for the first time this summer- but just barely. The crop just getting its start was almost placed under a temporary moratorium due to its potential to dampen the intoxicating effect of marijuana crops, but the Oregon Legislature failed to pass the bill earlier this month.

Marijuana crops that cross-pollinate with hemp result in a less potent weed, according to Vote Hemp, the national advocacy organization for industrial hemp. Hemp farmers received licenses to grow in Oregon for the first time earlier this spring. 

“Hemp plants that are grown really close together for fiber could release clouds of pollen. If you wanted to actually grow seeds for medical or recreational cannabis, you would want to be at least five miles away,” said Richard Reames, a board member of the Oregon Sungrown Growers' Guild (OSGG). The OSGG, a group of farmers in Josephine County that grow outdoors for the medical marijuana program, supported the temporary moratorium on hemp.

“A hemp plant was bred to be long and straight and tall to make a nice plant that you use to make a rope or sail cloth out of,” said Reames. “If you’re looking for a drug strain, you breed to make a flower full of the drug you’re looking for.”

That said, both Reames and Lindsay Eng, director of marketing and certification services at the Oregon Department of Agriculture (ODA), agreed that there isn’t a whole lot of research out on cross-pollination possibilities. 

“This is completely new to Oregon and our farmers, our licensees, the department, our legislature, there’s a lot of unknown. The industry and the program will continue to evolve as we learn more,” said Eng. 

On the federal level, hemp has effectively been banned since 1937 under what was originally a tax law. Eventually, the law was replaced with the Controlled Substances Act of 1970, which listed cannabis as a schedule 1 drug. 

In 2009, Oregon passed a law legalizing hemp growing, though the ODA did not know how to implement it due to uncertainty over what federal regulators might do. But then in 2013 when Washington and Colorado legalized recreational marijuana, President Barack Obama issued a memo to states indicating that if they had robust rules for recreational marijuana that the federal government would respect state interests while still making some provisions for federal enforcement, such as preventing sale to minors and the financing of cartels.

The question then became: “Does this memo apply to industrial hemp?” said Eng. 

So, Rep. Earl Blumenauer pursued the question with Oregon’s U.S. attorney’s office, which replied that the same provisions would apply to hemp. “When we received that we began the rule making process,” said Eng.

Going further, in 2014, President Obama signed the Farm Bill, which removed hemp from the federal schedule for controlled substances if it is grown through a state department of agriculture or at a research university for the purpose of determining market feasibility. 

ODA’s rules were still a struggle, though since hemp doesn’t fit with other statutes and federal requirements about cannabis. For example, there are guidelines for preventing sales to minors, but hemp isn’t something that would be sold to minors. 

It will, however, be tested for THC and must contain less than .3 percent. 

This summer, the state only issued licenses to 13 farmers, so it’s not yet grown on a lot of acreage. However, successful industrial hemp will have to be a big acreage crop. Comparatively, medical marijuana growers, at least for now, can only legally grow plants for four patients, having potentially up to 24 plants and 18 seedlings. Under the recreational marijuana laws, a person can have up to four of their own plants, but rules for growing for the new retail market will not be set until Jan. 1. 

Since ODA doesn’t have the authority to track where medical marijuana is grown, and the recreational grower regulations are not yet set, aside from having neighbor-to-neighbor conversations, it isn’t public knowledge whether any hemp is being grown near a marijuana grower.

However, Reames says that he knows of a farmer near Grants Pass, who isn’t planning on keeping his male plants outdoors, which will prevent cross-pollination. At least this year, he’s planning on growing the crop to produce seeds, which means he’ll keep the males indoors. Marijuana growers want the unpollinated female buds for their high potency, so if only female hemp plants are outdoors, there shouldn’t be any issues. 

However a regular fiber crop of hemp would have both males and female plants outdoors, said Reames.

The ODA doesn’t have authority to regulate disputes over crop damages due to cross-pollination, though the state runs into this issue for a variety of crops, notably organic crops versus conventional or genetically modified crops. 

“We have great diversity of crops and ways of growing the crops so coexistence is a really important concept that we do promote, but we don’t have the authority to regulate at this time,” said Bruce Pokarney, spokesman for the ODA. 

For now, farmers are still exploring the potential of the hemp industry in the U.S., though it’s already a viable industry in Canada, Eastern Europe and China. Industrial hemp has been grown as a dietary supplement, like flax, and also sold as an oil, which can be used in personal care products like lotion or lip gloss. It can also be used to make building materials, such as hempcrete.

Because the product is legal in Oregon but not all states, it would have to be processed here, likely in a facility that could press oil from seed. Then the raw product could be imported. 

But one thing’s for sure: Growing marijuana is likely a lot more profitable.

Of course, that means hemp growers could attempt to find a loophole in the law, which is what Reames said is happening. Some farmers in southern Oregon plan to farm hemp for its low THC and sell it abroad as medical marijuana. “I think it’s just disingenuous to try to go about it like that,” said Reames. “We’ll see what happens with the law.” 

Ultimately, Reames is sure that hemp is going to come up again in the Legislature.

 

Related Slideshow: Everything You Need to Know About Marijuana In Oregon

The smoking of marijuana is a part of the fabric of Oregon - one of the first states in America to legalize usage.

See all the issues you need to know below.

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Things to learn from Washington

The following slides are things that Oregon can learn from the legalization of marijuana in the State of Washington. 

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Engage Medicinal Marijuana Industry Experts  



Washington has been criticized for not incorporating the medicinal marijuana industry or its experts, in its transition to legalization.

“Give all of the people who are legally in the medical marijuana system an easy path, keep people in place,” lobbyist Geoff Sugerman said. 

By being the first state to legalize medicinal marijuana in 1998, Oregon has the advantage of a fully functional supply chain of medicinal growers and retailers.

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Connect Growers and Retailers 

Washington Retailers say at first it was hard to find newly licensed marijuana growers. The state can help the fledgling industry by helping to better connect producers and retailers, Cannabis City in-store manager Amber McGowan said. 

Regulating wholesalers is another way to go between growers and retailers, McGowan said. 

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Phase in Retail and Production Permits together 

By proportionately phasing in retail and pot farming permits, Oregon can prevent both the short supply and flooded market that Washington experienced.  In July, retailers sold out in days, while the approved growers scrambled to meet the demand. According to McGowan,  there are too many growers and not enough retailers to sell to now. 

“There are too many farmers going out of business because there are not enough people to sell their product,” McGowan said. “To make it super successful, don’t over saturate the market with growers.”

Solstice Grown grower Alex Cooley advocates not putting a cap on the number of licenses issued at all. 

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Avoid Heavy Taxation 

In Washington, growers pay an excise tax of 25 percent tax between grower and processor, another 25 percent tax between processor and retailer, and another 25 percent between retailer and customer. 

This means a gram of marijuana, which goes for less than $10 on the black market, goes for $25 in retail stores, Cannabis City's Amber McGowan said. 

This price differential is driving customers to the black market, critics say. 

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Don't Use a Lottery System 

To limit the number of retail stores per county, would-be retailers entered a lottery through Washington's regulators to determine who was eligible to apply for a permit.

Critics say the lottery system cut out qualified retailers, some who had experience from the medical cannabis industry, while allowing unqualified people to set up shop. 

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Talk to Cities and Counties 

Taking into account the laws specific to counties and municipalities will be essential to Oregon’s success in implementation, William Simpson of Northwest Producers and Processors Association.

“The single largest mistake we could make is not talking to the attorney generals, cities and counties about moratoriums and what would be allowed,” Simpson said. In Washington, some license holders were unable to open due to county moratoriums and bans. 

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Treat the Industry like Agriculture 

Grower Alex Cooley argues that because marijuana is a plant, it should be regulated like an agricultural crop, taking into consideration harvest cycles. Washington suffered a short supply in July, and then a flooded market following the harvest of outdoor crops in the fall. 

Cooley urges Oregon regulators to allow crops on farm land, as some Washington cities are now banning grow operations within city limits. 

“It’s a plant, it should grow in the sun, not in a warehouse in Seattle,” he said.

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Things to Know

Next up are several things to know about the legalization of Marijuana right here in Oregon. 

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Drug testing will continue

Despite marijuana being as legally permissible as a pint of beer, many of the largest employers of Oregonians will continue to include marijuana in their employee drug screens. 

Fred Meyer, one of the largest employers across the state, said the company plans to continue drug testing its Oregon employees regardless of the new law. 

Melinda Merrill, Fred Meyer communications director, said the company employs truck drivers, heavy equipment operators and other positions that require drug screening. 

“We have to make our employees safe,” Merrill said.

Companies that employ heavy equipment operators are required to buy insurance. Companies that employ workers who operate machinery while simultaneously employing workers who do not are sometimes offered a lower monthly deductible if they test all of their employees across the board, as opposed to only testing a portion.

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Your neighborhood dealer may be able to stay in business

The average price for marijuana in Oregon is among the lowest in the nation at sightly over $9 per gram, according to data collected by priceofweed.com.

The economy for recreational pot in Washington failed to gain the footing that was expected by some experts. The notion of Seattle being crowned as the new Amsterdam went up in smoke after consumers saw how the state’s taxes increased the price of marijuana - three joints can run a Washington customer $75, while a gram of the plant’s dried flowers cost around $30.

While the taxation in Oregon isn’t expected to bump prices that high, customers who have grown accustomed to the state’s high quality, low-price buds and hash oils may turn their noses up at even the slightest increase.

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Taxes on pot will be different than Washington and Colorado laws

Marijuana sold from licensed vendors in Oregon will carry taxes of $35 per ounce on marijuana flowers, $10 per ounce on all marijuana leaves and trimmings and a $5 tax on all immature plants or clones. The tax rates will be reevaluated every two years and adjusted for inflation. The revenue will be allocated to support government services - 40 percent will support public schools, 20 percent will support law enforcement, 20 percent will support mental health and 5 percent will support the Oregon Health Authority.

State-licensed vendors may still face obstacles, however, when it comes to their federal income taxes. Internal Revenue Section code 280E denies any tax deductions and credits for businesses that traffic any controlled substances that are prohibited under federal law.

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You can’t smoke up wherever you please

The law stipulates that use of marijuana, including injection, ingestion and inhalation of the drug is prohibited in public places. In other words, you won't constanty be seeing (or smelling) people lining sidewalks lighting up a joint.

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There are also restrictions on growing

No one is permitted to have more than four marijuana plants at a time - considerably less than the 12 plants that Washington residents are allowed to grow. The law also restricts plants being grown in public view.

Sorry, window-sill gardeners.

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Marijuana DUIs may be addressed in future legislation

Unlike the Washington law, which included attached regulations concerning driving impairment, Oregon’s law has more room for interpretation. 

Driving under the influence of marijuana is classified as a class b traffic violation, which carries a presumptive fine of $260 and is not to exceed maximum fine of $2,000. The Oregon Liquor Control Commission has been tasked with researching the subject of drugged driving and presenting its finding to the Oregon Legislative Assembly no later than January 2017.

After reviewing the OLCC report, the state legislative assembly will decide whether passing more extensive driving regulations will be necessary.

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Legalization won't take effect until summer.

Anyone over 21 will be allowed to possess small amounts of marijuana for their personal use from July 1, 2015.

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Crossing the Columbia River with a state-licensed spliff will catch you a felony

Although marijuana is simultaneously legal in Oregon and Washington, it's illegal to transfer the drug between the two states.

Measure 91 is only applicable to Oregon and marijuana remains illegal under federal law. Even with a physician’s subscription, marijuana is classified as a Schedule I controlled substance - meaning that anyone transporting it across state lines is prosecutable by federal agencies. 

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Legalization could mean big money for financial service startups

It’s not just the vendors whose businesses will grow under legalization - companies like Greenpay are expected to expand rapidly once the new legal market gets its footing. Greenpay would allow consumers to instantly purchase marijuana using their smartphones.

Greenpay is a wholly-owned subsidiary of MyEcheck - a publicly traded company whose shares typically trade for less than ten cents on the New York Stock Exchange. With legalization efforts gaining momentum around the country, companies providing auxiliary services for the marijuana industry may create an economic boom.

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It’s spreading like the plague

In an interview with GoLocalPDX, proponents of Measure 91 said they’re focused on achieving legalization for other states, including California, in the 2016 election.

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Employers that will still test for Marijuana

The following slides are 20 companies that will continue to test their employees for marijuana. 

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Jeld-Wen

Industry: Manufacturing and distributing

Headquarters: Klamath Falls, Oregon

Number of Oregon Locations: 2

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Standard Insurance

Industry: Insurance and finance

Headquarters: Portland, Oregon

Number of Oregon Locations: 2

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Seven Feathers Casino

Industry: Hospitality

Headquarters: Canyonville, Oregon

Number of Oregon Locations: 1

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Intel

Industry: Semiconductors

Headquarters: Santa Clara, California

Number of Oregon Locations: 6

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Alaska Air Group

Industry: Transportation

Headquarters: SeaTac, Washington

Number of Oregon Locations: 4

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Fred Meyer

Industry: Retail

Headquarters: Portland, Oregon

Number of Oregon Locations: 50

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Market of Choice 

Industry: Grocery

Headquarters: Eugene, Oregon

Number of Oregon Locations: 9

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Willamette Pass Ski Area 

Industry: Recreation

Headquarters: Willamette Pass

Number of Oregon Locations: 1

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Bi-Mart

Industry: Retail

Headquarters: Eugene, Oregon

Number of Oregon Locations: 60

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Nordstrom

Industry: Retail

Headquarters: Seattle, Washington

Number of Oregon Locations: 10

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Safeway

Industry: Grocery

Headquarters: Pleasanton, California

Number of Oregon Locations: 97

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Bed, Bath, and Beyond

Industry: Retail

Headquarters: Union, New Jersey

Number of Oregon Locations: 9

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Jack in the Box

Industry: Restaurants

Headquarters: San Diego, California

Number of Oregon Locations: 54

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Costco

Industry: Retail

Headquarters: Issaquah, Washington

Number of Oregon Locations: 13

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Kaiser Permanente

Industry: Healthcare

Headquarters: Oakland, California

Number of Oregon Locations: 60

Prev Next

Dairy Queen

Industry: Restaurants

Headquarters: Edina, Minnesota

Number of Oregon Locations: 105

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United Rentals

Industry: Construction equipment suppliers 

Headquarters: Greenwich, Connecticut

Number of Oregon Locations: 10

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Papé Brothers, Inc.

Industry: Construction equipment suppliers 

Headquarters: Eugene, Oregon

Number of Oregon Locations: 24

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Best Buy

Industry: Retail

Headquarters: Richfield, Minnesota

Number of Oregon Locations: 15

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Sinclair Media

Industry: Broadcasting Media

Headquarters: Hunt Valley, Maryland

Number of Oregon Locations:  4

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Washington's Marijuana Legalization Mistakes Oregon Can Avoid

The next set of slides show the mistakes that Washington made that Oregon can avoid when they legalize marijuana. 

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Supply and demand 

An imbalance of supply and demand caused a slew of startup problems for Washington producers and retailers, Cooley said. Oregon can avoid these issues by simplifying and coordinating its permit process, Oregon lobbyist Geoff Sugerman said.  Additionally, he said the three separate taxes imposed in Washington drove prices too high, and sent consumers to the black market and elsewhere. 

“What we need to make sure of is that our taxing structure is low enough that it doesn’t increase prices so dramatically it drives users back to the black market,” Sugerman said. 

Because of those taxes, the going rate for a gram of marijuana at Cannabis City, Seattle’s first recreational pot retailer, is $25. 

“Drug dealers sell it for $8 or $9 a gram,” said Cannabis City in-store manager Amber McGowan. “The focus of legalization was to have people avoid the black market. Now we’ve allowed the black market to thrive.”

For this same reason, William Simpson, founder of the Northwest Producers Processors and Retailers group, advocates putting a proposed tax onto the end of the transaction. As it stands, Oregon growers will be taxed $35 per ounce for flowers, $10 per ounce on leaves, and $5 per premature plant. 

Because Washington legislators and regulators were afraid of letting too much product onto the market, prices were at a premium when pot retail shops first opened their doors, while a handful of licensed growers scrambled to keep up with demand. Within three days, most of Washington’s marijuana retailers were out of stock. But, by summer, Cooley said the market was flooded with outdoor grown marijuana, and those retailers were paying a fifth as much as they were in July. 

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Saturated market

“There’s a glut of product in Washington,” said Cooley. 

Oregon could spare the market turmoil, Cooley argues, by proportionately phasing in retail and pot farming permits, and not putting a cap on the number of licenses issued at all. According to McGowan,  there are too many growers and not enough retailers to sell to.  

“There are too many farmers going out of business because there are not enough people to sell their product,” McGowan said. “To make it super successful, don’t over saturate the market with growers.”

But prior, some businesses that applied for a license had to wait up to a year before knowing if they would get the permit. 

The same factors driving Washington users to the black market could send them to Oregon, Simpson said.  “Washington is worried about what will happen when there’s an inexpensive market in Oregon, that people will come over the bridge and purchase it here,” he said. 

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Keep medicinal experts in place 

By being one of the first states to legalize medicinal marijuana in 1998, Oregon has the advantage of a fully functional supply chain of medicinal growers and retailers, who Cooley said should be consulted. 

“Bring in the people who have already done it well, and hold up the people who are doing it right as an example,” he said. 

Washington has been criticized for not incorporating the medicinal marijuana industry or its experts, in its transition to legalization.  Medicinal cannabis was not legal or regulated in the state until after 2012. 

“Give all of the people who are legally in the medical marijuana system an easy path, keep people in place,” Sugerman said. 

House Bill 2676, introduced for the Feb. session by Rep. Peter Buckley, would give the Oregon Liquor Control Commission (OLCC) dual licensing powers for growers and processors, as well as dispensaries by transferring medicinal marijuana dispensary regulation from the Oregon Health Authority (OHA) to the commission. 

Prev Next

Sense of place 

Taking into account the laws specific to counties and municipalities will be essential to Oregon’s success in implementation, Simpson said. 

“The single largest mistake we could make is not talking to the attorney generals, cities and counties about  moratoriums and what would be allowed,” Simpson said. In Washington, some license holders were unable to open due to county moratoriums and bans. 

Prev Next

Treat it like agriculture 

Cooley argues that because marijuana is a plant, it should be regulated like an agricultural crop. He urges Oregon regulators to allow crops on farm land, as some Washington cities are now banning grow operations within city limits. 

“It’s a plant, it should grow in the sun, not in a warehouse in Seattle,” he said.

 
 

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