Prohibition Crumbles in Oregon: Hemp Market Already Showing Signs of Growth After Regulations were Lessened

SALEM, Ore. (May 16, 2016) – Legislation passed in the Oregon legislature just a few months ago already shows signs of delivering on promises to further open up the state’s budding hemp market, a development that will help further block federal prohibition in practice.

Oregon Governor Kate Brown signed House Bill 4060 (HB4060) into law in March. It relaxed state laws regulating hemp already on the books and made the crop more like other agricultural products. Last week, the Oregon Department of Agriculture promulgated new rules under the reformed law. According to Oregon’s Cannabis Connection, the rules set the stage to creates a “massive” medical hemp market.

“The new rules appear to make way for cannabis medicines to be produced on a major scale, using revised the ODA industrial hemp program. With changes in the rules affecting propagation techniques, farm sizes, planting density, and more, the industrial hemp farms are poised to become the largest producers of medical cannabis in the state…New hemp cultivars can be very high in CBD (cannabidiol), yet must be under 1% THC (tetrahydrocannabinol) to qualify as industrial hemp and not marijuana—which is higher in THC, the psychoactive component of cannabis. The CBD oil from the flowers is highly valuable, making the extracted oil much more valuable, by far, than the traditional plant materials, like fibers, seeds and seed oil…Though Hemp products are not allowed to be sold in Oregon OHA licensed dispensaries by rule, high CBD products can still be sold as a hemp product and will be allowed in OLCC recreational dispensaries as long as the products are tested to the standards they set forth.  It would be no surprise if it is eventually allowed into Oregon OHA licensed dispensaries, as well.”

Here are the major changes in hemp rules according to Oregon’s Cannabis Connection,

  • There is no longer a minimum acreage requirement.
  • Growing in greenhouses or other indoor areas is permitted.
  • Planting in pots or other containers is permitted.
  • Any method of propagation is allowed including planting seeds, starts, or the use of clones or cuttings.
  • A registration for growing industrial hemp may be used for multiple areas. While each noncontiguous growing area must be declared, there are no additional fees.
  • Growing and handling industrial hemp is no longer covered under the same registration and requires a separate fee for each.

This demonstrates how even mediocre state laws can lead to better state laws once markets begin to develop. Legislators recognize the economic benefits and ride the proverbial wave. It also proves that removing a layer of law at the state level encourages action in spite of federal prohibition. Since the vast majority of enforcement action comes from the state level, farmers and producers find the minimal risk of federal enforcement worth taking in light of the tremendous economic potential hemp offers.

The Oregon legislature initially legalized industrial hemp production in 2009. When the Oregon Department of Agriculture finally put its licensing and regulatory program in place early in 2014, some farmers began growing hemp, despite high barriers to entry. Passage of this new law broke down some of those roadblocks, and appears likely to spur even more activity in the state. Oregon Industrial Hemp Farmers Association members said with the new law in place they expect to grow at least 200 acres of industrial hemp in 2016.

The federal government still prohibits the cultivation of industrial hemp in most cases, and it prohibits the commercial cultivation of hemp in all cases. Despite federal prohibition, Oregon’s current law sets the foundation for people to thwart the ban by encouraging hemp production in the state. By relaxing regulations and facilitating further development of the hemp industry with this new law, Oregon will ultimately expand this “illegal” market.

The evolution of the hemp program in Oregon also demonstrates a practical reality. Public policy expert Michael Boldin pointed out when states pass bills that remove a layer of law, markets will inevitably begin to develop.

“As those markets take root, legislators start feeling the pressure to relax laws further,” he said. “Some critics complain that state licensing programs ‘restrict freedom.’ Still, state-restricted hemp farming is better than no hemp farming at all. That’s at least a little more freedom. And as we’re seeing in Oregon, it ultimately opens the door to even freer markets down the road. A little freedom begets more freedom.”

FEDERAL FARM BILL

Early in 2014, President Barack Obama signed a new farm bill into law, which included a provision allowing a handful of states to begin limited research programs growing hemp. The “hemp amendment”

"…allows State Agriculture Departments, colleges and universities to grow hemp, defined as the non-drug oil-seed and fiber varieties of Cannabis, for academic or agricultural research purposes, but it applies only to states where industrial hemp farming is already legal under state law."

In short, current federal law authorizes the farming of hemp – by research institutions only, for research only. Farming for commercial purposes by individuals and businesses remains prohibited. Oregon law ignores federal prohibition and authorizes commercial farming and production anyway.

OTHER STATES

Oregon joins with a number of other states – including Colorado, South Carolina, Connecticut, Maine, North Dakota and Vermont – simply ignoring federal prohibition and legalizing industrial hemp production within their state borders.

While prospective hemp growers still have to take federal law into consideration, by eliminating the state requirement for federal permission, state hemp legalization clears away a major obstacle to widespread commercial hemp farming within the borders of the state.

Farmers in SE Colorado started harvesting the plant in 2013, and farmers in Vermont began harvesting in 2014, effectively stopping federal restrictions on such agricultural activities. On Feb. 2 of last year, the Oregon hemp industry officially opened for business and one week later, the first license went to a small non-profit group. As more people engage in hemp production and the market grows within these states, more people will become emboldened creating an exponential wave, ultimately blocking the federal ban in effect.

HUGE MARKET FOR HEMP

According to a 2005 Congressional Research Service report, the U.S. is the only developed nation that hasn’t developed an industrial hemp crop for economic purposes.

Experts suggest that the U.S. market for hemp is around $600 million per year. They count as many as 25,000 uses for industrial hemp, including food, cosmetics, plastics and bio-fuel. The U.S. is currently the world’s #1 importer of hemp fiber for various products, with China and Canada acting as the top two exporters in the world.

During World War II, the United States military relied heavily on hemp products, which resulted in the famous campaign and government-produced film, “Hemp for Victory!”.