Oregon Liquor Control Commission Given Job of Regulating Recreational Marijuana

Following in the steps of Washington and Colorado, Oregon voters passed Ballot Measure 91 (PDF) on November 4, opening the door to legalized recreational marijuana in the state. Beginning July 1, 2015, the Control, Regulation and Taxation of Marijuana and Industrial Hemp Act allows Oregonians 21 years and older to possess up to eight ounces of dried marijuana and grow up to four plants per household. Each adult can possess up to one ounce of dried marijuana in public, but marijuana may not be consumed in public or while driving. Possession of infused products (such as drinks and lotions) will also be allowed.  The Oregonian’s FAQ addressing the measure is a good place to start to get the basics.

The Oregon Liquor Control Commission (“OLCC”) is responsible for drafting and adopting rules to regulate the use, licensing, and sales of recreational marijuana. Four types of marijuana businesses will be allowed under the Act:  (1) marijuana producers licensed to grow for wholesale; (2) marijuana processors licensed to produce extracts and products; (3) marijuana wholesalers licensed to purchase weed and weed products to sell to retailers and other non-consumers; and (4) marijuana retailers licensed to sell weed and related items at retail to consumers. The OLCC will begin accepting applications for these four business types on January 4, 2016.

The OLCC issued a statement (PDF) in response to the passage of Ballot Measure 91. OLCC chairman Rob Patridge plans to meet with members of the public across the state to draft rules that reflect “Oregon’s way” to regulate marijuana. The process will involve input from government, schools, law enforcement, growers, and medical marijuana business, and will result in rules that take account of some of the lessons Washington and Colorado have learned since legalization occurred in those jurisdiction. The public can send comments to marijuana@oregon.gov and can obtain basic information on the new law by calling (503) 872-6366.

Stoel Rives will continue to monitor the development of the new regulatory regime and will post periodic updates on this blog.  Please check in regularly and contact us if you have any questions.

For a perspective on what legalization means for Oregon employers, read What Does Alaska’s and Oregon’s Legalization of Marijuana Change for Employers?  Answer:  Probably Not Much. on our sister blog, World of Employment.

Alcoholic Beverages Law Blog Launches New Responsive Design and Enhanced Reader Features

Dear Alcoholic Beverages Law Blog readers. We first launched this blog in 2010 to help us keep you informed about major alcoholic beverages law news and – in particular – how these developments could impact your business. While our commitment to keep you informed hasn’t changed, technology certainly has. More than four years ago, we were still operating in a desktop- and RSS-dominated world. Today, more and more of you are reading our posts on tablets and smartphones. As readers ourselves, we understand your need for news on-the-go and at your convenience.

So we’re very excited to announce to you today a completely new – and improved – blog design, along with new feature sets we think will enhance your content experience.

  • First, Alcoholic Beverages Law Blog now uses a responsive design format. So no matter where – or on what device – you visit us, you can be assured of a consistent, clean and crisp reader experience.
  • Second, we’ve added new social sharing features to our posts. With easy-to-read social icons, sharing Alcoholic Beverages Law Blog posts with your social networks is now a snap.
  • Third, we’ve improved our content subscription options. We’ve expanded the number of RSS subscription feeds, optimized the look and feel of our email subscription service, and added links to our Twitter feed as an alternative content consumption option.

We hope you enjoy the new design and accompanying readership experience enhancements. Thanks again for visiting and keeping us on your list of must-read alcoholic beverages news sites!

Rebuilding: Dealing with or Without Earthquake Insurance

The following post was written by my colleagues Tom Woods, Parissa Ebrahimzadeh & Bao Vu

As part of the Northern California business community and as an advisor to business, we support the Napa and the surrounding Bay Area in getting homes and businesses back on their feet following the August 24, 2014 Napa Valley earthquake.

The earthquake that rocked Napa Valley and nearby regions left an estimated $1 billion in damages, according to a county news release. The McClatchy News Service recently observed the quake “upended more than wine barrels and mobile homes. It also was an unsettling reminder of how few Californians – homeowners and businesses alike – carry earthquake insurance.”

Sure, insurance agents will discuss earthquake insurance policies with business owners, but Napa Valley region had not experienced a quake of such magnitude since 1989. Thus, this rare but catastrophic risk was one for which the cost-benefit analysis dictated to many Californians that they should forgo the expensive form of insurance. Statistically, the shocking drop in homeowner earthquake insurance policies purchased over the last decade was dwarfed by the 29% drop in the number of California businesses that purchased policies over the same period. Reports are that only 10% of California businesses and residents carrying property insurance also carry earthquake insurance.

Where the wine and agriculture industry suffered $48 million worth of damage, and with over 120 businesses affected, the questions running through so many confused and disrupted lives include: “What do I do now? Did I need earthquake insurance, specifically? Am I covered? How do I perfect a claim if I am covered and where can I go for help?”

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TTB Will Consider Penalty Waivers for Late Payment of Excise Taxes By Businesses Impacted by Northern California Earthquake

The Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a notice yesterday stating that it will consider waiving – on a case-by-case basis – late filing, payment or deposit penalties for taxpayers unable to file payment of Federal excise taxes due to the August 24, 2014, Northern California earthquake. Text of the statement follows below.

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Compliance Checklist for Mandatory Quality Assurance Testing of Marijuana Products

To considerable fanfare – and the occasional stumble – the legal recreational marijuana industry opened for business in Washington state last week. So far, the Washington State Liquor Control Board (WSLCB) has issued the state’s first 24 marijuana retailer licenses, representing the first of 334 licenses allotted by the WSLCB for retail sales who have successfully completed the Initiative 502 licensing process. Now that sales of legal marijuana and marijuana-infused products have commenced in the state, many are asking about the quality and safety of these products.

Like other food and beverage items we ingest, marijuana products can contain mites, molds, and even foodborne pathogens such as E. coli. In order to stave off potential health and safety risks, WSLCB mandated that all marijuana products undergo rigorous quality assurance testing by certified labs. In fact, as Dan Flynn at Food Safety News reports, “Washington state is off to a safer start than Colorado.” According to Flynn:

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Doors Open for Business for Licensed Marijuana Retailers in Washington State

Hundreds of eager customers lined up outside of Washington’s newly licensed marijuana retailers on Tuesday to make history by participating in the first legal sales of recreational marijuana in the state. Earlier this week, the Washington State Liquor Control Board (WSLCB) issued the state’s first 24 marijuana retailer licenses. These businesses represent the first of 334 licenses allotted by the WSLCB for retail sales who have successfully completed the licensing process.

Early in the morning on Monday, July 7, 2014, the 24 applicants were notified via email that they were approved for a retail license. According to the recently finalized rules around state-sanctioned sales of marijuana, once approved for a license, producers and/or processors are able to file a required manifest for transporting to the licensed retail locations. Following a 24 hour quarantine period, they may begin transporting products to retail stores. After this 24 hour period, licensed marijuana retailers are then permitted to sell their inventory and enter it in to the established traceability system.

Despite the issuance of 24 new retailer licenses, only a handful of licensed marijuana retailers opened their doors for business on Tuesday. Retailers explained that this was largely due to a lack of supply. Marijuana growers in the state only received their licenses in March, which was not enough time to produce a substantial crop. Because of this supply issue, some retailers have decided to ration supplies over the next several weeks, allowing customers to buy only a fraction of what is permissible under the law.

Locations receiving licenses were selected by taking into account population, geographic dispersion and the individual applicant’s readiness to be licensed. A complete listing, including contact information of the new retail licensees, can be found online within the Public Records section of the WSLCB website.

Buying and Selling Liquor Licenses in Utah

By Adrienne Bell and Catherine Parrish Lake

Utah’s Transfer of Retail License Act (the “Act”), which becomes effective today, permits the transfer and sale of retail liquor licenses by current retail license holders. Although enacted in 2011, the legislature previously delayed implementing the Act in response to concerns that the creation of a private market for retail licenses would drive up prices and create additional barriers to entry for small businesses. The legislature opted against further extending the effective date of the Act during the last session. Consequently, current holders of retail licenses, such as restaurant and club licenses, are now able to sell and transfer these licenses subject to the provisions of the Act.

To transfer a retail license, a proposed buyer first has to file a notice of intended transfer with the Department of Alcoholic Beverage Control (the “DABC”) at least 10 days before filing a transfer application. The buyer must include a statement regarding the amount to be paid to the license holder for the transfer. If the transfer includes payment to the license holder, steps are required to protect any creditors of the license holder. The license holder must provide the buyer with a list of creditors with claims against the license holder. The license holder and buyer also have to establish an escrow [with an approved institution] into which any payment for the license will be deposited. The Act sets forth the priority for disbursement of payment, with claims for back taxes and wages and other secured and statutory claims have priority over the license holder. Escrow is not required for transfers that do not include payment for the license.

Before the Commission can approve the transfer, the DABC is required to conduct an investigation and may hold public hearings to gather information and make recommendations to the Commission as to whether the transfer should be approved. The Commission may not, however, approve a transfer of a retail license between two different counties or to an entity that is not eligible to hold that type of retail license.

The Act also applies to certain changes in ownership of a business entity that currently holds a retail license. Each of the following must comply with the Act:

  • a change in ownership of 51% or more of the shares of stock of a corporation;
  • admission of a new general partner into a partnership or when 51% or more of the capital or profits of a limited partnership is acquired by or transferred to others as general or limited partners; and
  • a change in ownership of 51% or more of the interests in a limited liability company.

Importantly, if a license holder fails to comply with the provisions of the Act within 30 days following one of the changes noted above, the retail license is automatically forfeited. Additionally, the Commission may void any transfers of retail licenses that violate the provisions of the Act and require the forfeiture of the retail license.

The DABC anticipates that the process to review and approve transfer applications will take at least 45 to 60 days. Application forms and materials should be available on the DABC website beginning today. Please contact me or Catherine Parrish Lake with questions about the Act or for assistance with the license transfer process.

Reclamation Will Not Approve the Use of Federal Irrigation Water for Marijuana Cultivation

This post is authored by Environment, Land Use and Natural Resources lawyer Kirk Maag of Stoel Rives.

The U.S. Bureau of Reclamation issued a temporary policy regarding the use of water from Reclamation reservoirs for activities prohibited by the Controlled Substances Act of 1970 (CSA)—for example, growing marijuana. The temporary policy is effective for one year.

The policy was prompted by the recent legalization of marijuana in states like Washington and Colorado. Similar initiatives are being considered in other states, like Oregon. However, despite these changes (and proposed changes) to state law, the cultivation, possession, use, and sale of marijuana remains illegal under federal law.

The recent changes to state law caused Reclamation to consider whether water from its reservoirs can be delivered to marijuana growers by the irrigation districts that deliver Reclamation water. The first line of the policy emphasizes the key issue: The CSA and its implementing regulations prohibit the cultivation of marijuana. The policy explains that Reclamation, as a Federal agency, must uphold federal law. As such, Reclamation and its employees cannot (and will not) approve the use of Reclamation water or facilities to facilitate the cultivation of marijuana. However, the policy acknowledges that “Reclamation does not have a responsibility or designated role in actively seeking enforcement of the CSA.”

Nevertheless, the policy provides that, if a Reclamation employee becomes aware of Reclamation water being used to irrigate marijuana, the employee must report such use to their regional director. The regional director will report this information to the U.S. Department of Justice (DOJ). Reclamation employees will document all activities and communications regarding known or potential uses of Reclamation water for the irrigation of marijuana. This information will presumably be turned over to DOJ. It remains to be seen whether the DOJ will take enforcement action based on these reports.

Some elected officials have blasted the policy. The Huffington Post reports that Rep. Jared Polis (D-Colo.) issued the following statement:

Today’s backward-looking decision by the Bureau of Reclamation will hinder the growth and success of Colorado and Washington’s legal marijuana industry. . . . This policy places the Bureau of Reclamation at odds with the administration’s current guidance to not interfere with the marijuana and hemp industries made lawful by voters in those states. The Bureau of Reclamation is challenging the commonly-held understanding in the arid west that water rights are state-based, an extremely delicate proposition for citizens dependent on water for their livelihood.

Rep. Earl Blumenauer (D-Ore.) criticized the decision by stating: “Today’s decision again brings federal, state, and local law into conflict in a way that creates uncertainty among residents of states that have approved the use of marijuana. . . . The administration needs to give clear marching orders to the various agencies and for them to get in step to avoid problems like this in the future.”

The Seattle Times editorial board wrote: “The federal government’s response to the marijuana revolt brewing on the state level should carry a warning label. Beware: signs of impaired decision-making, with erratic policy-swerving and conflicting statements.”

Will Bureau of Reclamation Leave Washington’s Marijuana Crop High and Dry?

The U.S. Bureau of Reclamation provides irrigation water to one out of five farmers in the Western United States. According to Reclamation, the irrigation water it provides is used to produce 60% of our nation’s vegetables and 25% of our fruits and nuts. But Reclamation is now deciding whether to leave one Washington crop high and dry: marijuana.

Washington recently issued licenses that allow licensees to grow marijuana. But the cultivation, possession, use, and sale of marijuana remains illegal under federal law. This tension between state and federal law is forcing Reclamation to analyze whether it can provide irrigation water to contract holders who plan to grow marijuana.

The timing of Reclamation’s decision is important because the irrigation season is rapidly approaching in many parts of Washington and has already arrived in other parts of the state. The Olympian reports that Dan DuBray, a spokesman for Reclamation, recently said that Reclamation will make a decision on this issue by early May, and perhaps as early as this week.

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Attending the Craft Beverage Expo: A Few Reasons Why You Should!

The Craft Beverage Expo is right around the corner, and there is still time to register! This inaugural event takes place in San Jose, CA on May 6 – 8, 2014, and the Stoel Rives Beverage & Hospitality Group has you covered! We are pleased to offer our blog subscribers a $100 discount off of the full registration. Please click here to register by using registration code: STOELRIVES14.

Here are some reasons why we are especially excited for the Expo:

  1. Agenda! The CBE Advisory Board did its homework and has lined up a unique mix of speakers covering a wide range of topics, including sales, marketing, regulatory and legal compliance, and business development, among others. You certainly don’t want to miss the "Trademark Primer," presented by Anne Glazer of Stoel’s Technology and Intellectual Property Group on Wednesday, May 7 at 11:00 a.m. Attendees will walk away with an understanding of the trademark clearance and registration process, as well as how to avoid conflicts. You can read more about the presenters and topics at Craft Beverage Expo Schedule at a Glance.
  2. Audience! The conference promises to unite artisan wine makers and craft beer, cider, and spirit producers over the course of two days. Each market segment will be able to share best practices with one another at a trade show dedicated exclusively to the growing craft industry.
  3. Exhibitors! More than 100 exhibitors and vendors committed to moving the craft beverage industry forward will be in attendance at the expo. Be sure to stop by Booth #405, where Stoel alcohol beverage lawyers will answer your hot topic industry questions. Follow us on Twitter at @stoelrives to test your knowledge on legal issues that impact your industry. Correct answers will receive a prize (while supplies last).

We look forward to mixing and mingling with our clients and friends at the 2014 Craft Beverage Expo.

About Stoel Rives LLP – Beverage & Hospitality Group
Over the past 30 years, Stoel Rives LLP has developed a strong reputation for the successful representation of wineries, breweries, distilleries, and alcohol beverage retailers on a wide range of legal matters, including corporate and finance, licensing and regulatory compliance, intellectual property, advertising/marketing law, employment, and real estate. The firm has nearly two dozen beverage and hospitality lawyers operating out of offices in Portland, Seattle, Salt Lake City, Sacramento, and Boise.