Oregon’s New Industrial Hemp Rules and the 2018 Farm Bill

Last year was a big one for the Oregon industrial hemp program. If you recall, the state legislature enacted House Bill 4089, which provided a much needed regulatory framework for the crop and authorized its processing and sale into the Oregon Liquor Control Commission (“OLCC”) recreational market. To administer a portion of these statutory changes, OLCC drafted rule changes in September, which will soon be adopted.

However, a lot has happened since September. Indeed, the Agriculture Improvement Act of 2018, more famously known as the “2018 Farm Bill,” became law last month. Specifically, the 2018 Farm Bill legalized industrial hemp by removing the crop from the Controlled Substance Act—this means no more risk of enforcement action by the U.S. Drug and Enforcement Agency because industrial hemp, including concentrates and extracts, is no longer treated as a Schedule I substance—and delegated authority to states to regulate and limit its production.

The federal legalization of industrial hemp has triggered numerous inquiries from our Oregon clients regarding the impact, if any, of the new federal bill on the most recent set of OLCC rules. This post aims to answer this question.

Although industrial hemp is no longer illegal under federal law, states are not yet authorized to hold primary regulatory authority over the production of the crop. Before they can exercise this option, states will need to submit a regulatory plan (the “Plan”) to the U.S. Department of Agriculture (the “USDA”) for approval. However, approval won’t be given until the USDA promulgates rules and regulations regarding those Plans, a process that will most certainly take months, possibly more if the government shuts down again.

Section 7605(b) of the 2018 Farm Bill further provides that:

Effective on the date that is 1 year after the date on which the [USDA] Secretary establishes a plan under section 297C of the Agricultural Marketing Act of 1946, section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940) [the 2014 Farm Bill] is repealed.”

In other words, the 2018 Farm Bill won’t become effective until one year following the adoption of rules and regulations for the Plans by the USDA. Until then, the 2014 Farm Bill remains the legal framework under which state industrial hemp pilot programs operate.

Accordingly, states that have adopted an industrial hemp pilot program will continue to operate the way they have since before the passage of the 2018 Farm Bill into law. This means that the legal framework for interstate sales of Oregon hemp should not be affected. As far as sales into the OLCC market, growers, processors, and distributors will need to familiarize themselves with the new OLCC rules.

Under the OLCC rules, hemp handlers and growers will need to be certified by the Commission in order to place their products in the recreational market. The OLCC will then monitor and track this new input into the market via the Cannabis Tracking System (“CTS”). But hemp growers and handler certificate holders won’t be the only actors obliged to comply with these rules. Recreational licensees, processor licensees, and wholesale licensees will also be subject to a new set of guidelines.

For more information on these rules and how they might affect your business operations, don’t hesitate to contact our Portland office.