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Audit: Marijuana-rich Oregon must prep for US legalization

Oregon has huge stockpiles of the drug and would be competing with other pot-producing states for the export market if marijuana is ever legalized nationally.
Credit: AP
Co-founder Tanner Mariani looks over bags of marijuana buds that fill the showroom of the Portland Cannabis Market in Portland, Ore., on March 31, 2023. Along the West Coast, which has dominated U.S. marijuana production from long before legalization, producers are struggling with what many call the failed economics of legal pot...a challenge inherent in regulating a product that remains illegal under federal law.(AP Photo/Eric Risberg)

SALEM, Ore. — Oregon should prepare for the U.S. government eventually legalizing marijuana and position the state, with its huge stockpiles of the drug, as a national leader in the industry, state auditors said Friday.

Oregon, long known for its potent marijuana, would be competing with other pot-producing states — particularly California, which also has a vast oversupply — for the export market if marijuana is ever legalized nationally.

“Now is the time for Oregon to prepare its system for a future when cannabis is legal nationally,” said Oregon Deputy Secretary of State Cheryl Myers, whose office conducted the audit.

In a news conference Friday, Oregon Audits Director Kip Memmott noted with a bit of envy that Canada legalized marijuana and is “a lot more proactive in looking at the benefits financially.”

Oregon can lead the way in the United States in how pot is regulated, while also offering its high-end strains of marijuana, Memmott said.

“We have kind of a signature commodity, along with ... our timber and all the other great things that Oregon produces here. And there’s a real opportunity,” Memmott said.

Oregon's auditors reminded the Oregon Liquor and Cannabis Commission to follow its own strategic plan to position the state as a national leader by increasing the number of speaking engagements at national conferences, holding more statewide meetings and championing a nationwide framework for cannabis regulation.

OLCC Executive Director Craig Prins wrote in response that his agency is keen on moving quickly if, and when, interstate marijuana commerce is permitted.

Prins said he expects that “only the highest quality products from well-regulated systems, that have recognized testing, packaging, labeling, and traceability standards, will be allowed for sale into other states.”

Oregon has been prioritizing these standards, aimed at protecting consumers, for years, Prins said.

Secretary of State Shemia Fagan recused herself from the audit because she is a paid consultant of an affiliate of marijuana retail chain La Mota, said spokesman Ben Morris. News of the consultancy was first reported Thursday by Willamette Week, a Portland newspaper.

La Mota’s co-owner has hosted fundraisers for top Democratic Oregon politicians, including Fagan, while the co-owner, her partner and their business allegedly owe $1.7 million in unpaid bills and more in state and federal taxes, according to Willamette Week.

Republican legislative leaders on Friday called for Fagan to resign over the consulting job. Gov. Tina Kotek, a Democrat, said later on Friday she wanted two investigations.

“It’s critical that Oregonians trust their government. That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation,” Kotek said in an emailed statement. “Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission (OLCC) and its cannabis program.”

Morris denied Fagan’s outside work represented a conflict of interest and said Oregon Government Ethics Commission guidelines specifically allow public officials to maintain private employment.

Senate Republican leader Tim Knopp and House Republican leader Vikki Breese-Iverson said in a joint statement: “This appears to be an ethics violation and if it isn’t then Oregon’s ethics laws are broken."

The auditors said the OLCC should make burdensome marijuana regulations more like those governing distilled spirits, which the agency also regulates.

The state audit questioned the OLCC's requirement that marijuana businesses keep their stash behind steel doors and have 24-hour video surveillance systems.

“A steel door cannot prevent someone from purchasing cannabis legally in Oregon and taking that cannabis out of the state,” the auditors said.

The auditors noted that federal authorities have been hands-off on states that legalize marijuana since the “Cole Memorandum,” written by a U.S. deputy attorney general, came out in 2013. The memorandum said federal intervention wouldn't be necessary as long as marijuana in those states was not trafficked to other states or distributed to minors, among other conditions.

It was rescinded in January 2018 by U.S. Attorney General Jeff Sessions. But four months later, Oregon's then-U.S. attorney issued five priorities that closely mirrored the Cole Memorandum.

The Oregon auditors concluded that the risk of federal intervention in the state's regulated system is increasingly unlikely, in part because it hasn't happened yet. They also cited “the changing social and political environments, and increasing number of draft federal bills focused on cannabis reform.”

A total of 21 states and Washington, D.C., have legalized recreational use of marijuana, but activists see little chance of the current Congress moving toward national legalization. Still, there’s hope the Biden administration will allow pot commerce among states that have legalized it.

The legislatures of Oregon and California have already authorized their governors to enter into interstate cannabis trade agreements if the feds allow it. Lawmakers in Washington state followed suit this month, with the measure waiting for Gov. Jay Inslee’s signature.

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