With the passage of Measure 91 in 2014, the recreational marijuana industry became legal in Oregon. For those interested in the marijuana business or those with concerns about a new or proposed marijuana facility, Oregon's new law raises many questions about where, when, and how those producing, selling and processing, marijuana may operate. To control this new industry, the state of Oregon and local governments, have adopted various regulations.
This article addresses basic land use issues surrounding the retail sale, processing, and wholesaling of recreational marijuana in Oregon. It does not address land use issues facing recreational growers. This article also does not discuss the medical marijuana industry, which has a separate set of regulations.
If you are already involved in, or looking to get into, the recreational marijuana business, is important to remember that marijuana remains unlawful under federal law. So, even though recreational marijuana is legal now in Oregon, the risk of civil and criminal liability remains. Talk to your attorney so that you fully understand all the risks of being in the marijuana business.
The Oregon Liquor Control Commission ("OLCC") has principal responsibility for regulating marijuana processors, wholesalers, and retailers. (ORS 475B.090-110.) For these businesses, it controls a broad range of activities and has adopted rules regarding such things as license application requirements, testing products, taxes, and security. For a complete list of OLCC regulations, see Oregon Administrative Rule ("OAR") 845-25.
Additionally, the OLCC regulates where retailers, processors, and wholesalers may locate. These rules prohibit business types from locating on federal land, at a liquor store, or at a medical marijuana grow site, processing site, or dispensary (see OAR 845-025-1230(1). Examples of other OLCC regulations include:
In addition to OLCC"s regulations, state law allows local governments to adopt reasonable "time, place, and manner" regulations. (ORS 475B.340(a).) Local governments frequently adopt these rules in the form of land use controls found in the applicable development code (sometimes called a zoning ordinance or zoning code.)
These land use regulations implement zoning and development standards that control the use of property. See Nolo's article Building on Vacant Land: Zoning Issues You Might Face for a general explanation of zoning regulations.
Most local governments make their development codes available online. To find the applicable code, determine what city or county the subject property is in and go to that governing body's website.
Development codes classify land into various zones (examples include, multi-family residential, mixed-use, and heavy industrial.) The zoning classification will dictate what uses are allowed in a particular geographic area.
The development code will also include development standards that apply to specific land uses. For example, there will be setbacks and minimum lots size requirements. Development standards also often regulate things like fences, screening, parking, and access.
So, what does this all mean for potential recreational marijuana retailers, wholesalers, and processors? First, the use must be allowed in the applicable zone. For example, Clackamas County permits recreational marijuana retail shops in both rural and urban commercial zones, and it allows wholesalers in urban industrial, rural commercial, and industrial zones.
The proposed marijuana business must also comply with all development standards. For the marijuana business, these typically include:
It is important to understand how the zoning and development standards will control any proposed marijuana retailer, wholesaler, or processor. For instance, if a piece of property is zoned so that retail marijuana is allowed, but the proposed retail building cannot meet setback and minimum distance requirements, the application will typically be denied (unless the developer can get a variance.)
Oregon law allows cities and counties to prohibit recreational marijuana businesses in some cases. (ORS 475B.800.) If a city or county does so, it will be placed OLCC's "opt out" list. Since it is possible for a local jurisdiction to ban some business types, but not others (for example, a county may prohibit processors, but allow retailers), reviewing the opt out list to see what a local allows is important. A copy of the opt out list is available online.
Local land use regulations play a significant role in OLCC's decision to grant or deny a license to recreational marijuana businesses. As a critical first step in OLCC's review of any license application, it will require the applicant to submit a Land Use Compatibility Statement ("LUCS".) If the LUCS indicates the retail, wholesale, or processing facility is not lawful under local land use laws, OLCC will deny the license application.
The LUCS form is available at the OLCC's website.
For those with an interest in, or concern about, a proposed marijuana business, OLCC has produced a helpful "Business Readiness Guide". Reviewing it will provide you an overview of the applicable regulations.
While land use regulations play a significant role in controlling the retail sale, wholesale, and processing of recreation marijuana, it is only one part of a heavily regulated industry. Other important areas of law, include employment, tax, and even criminal law. Hiring an attorney to help you through the myriad of laws and regulations process is a good idea.