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U.S. attorney: Oregon has major pot overproduction

UPDATED: Fri., May 18, 2018

In this Sept. 30, 2016  photo, a marijuana harvester examines a bud that is going through a trimming machine in a rural area near Corvallis, Ore. (Andrew Selsky / Associated Press)
In this Sept. 30, 2016 photo, a marijuana harvester examines a bud that is going through a trimming machine in a rural area near Corvallis, Ore. (Andrew Selsky / Associated Press)
By Gillian Flaccus Associated Press

PORTLAND – The black market for marijuana is thriving in Oregon and an oversupply of weed from growers is flowing to more than two dozen states where pot remains illegal, a top federal law enforcement official said Friday.

U.S. Attorney Billy Williams said the state has a “significant overproduction” problem and that he would prioritize enforcement of overproduction, interstate trafficking, organized crime and cases involving underage marijuana use and environmental damage from illicit pot farms.

The comments, which echoed those he made earlier this year, were included in a memo that outlines his plans for enforcing federal drug laws in a state with legalized marijuana. Williams is the first U.S. attorney to issue such guidance after Attorney General Jeff Sessions rescinded the Obama administration’s guidance on pot-friendly states in January.

“As the primary law enforcement official in Oregon, I will not make broad proclamations of blanket immunity from prosecution to those who violate federal law,” he wrote.

Sessions asked federal prosecutors to determine marijuana policies for their districts, prompting Williams to convene a summit in Portland earlier this year to discuss the state’s oversupply problem. At the time, Williams also penned an editorial that described a glut of marijuana making its way out of the state illegally and called for action by local and state leaders.

Those in the marijuana industry reacted with cautious optimism to the memo and said it didn’t seem to change federal marijuana policy in Oregon.

“I think that’s already what law enforcement was focusing on and we need to crack down on the illegal grows out there, which is not good for the legal market either,” said Brent Kenyon, who runs a consulting business that helps entrepreneurs set up pot businesses.

“I applaud him for not wasting any taxpayer dollars on trying to mess with the legal system as it’s set up.”

The state currently has nearly 1 million pounds of marijuana flower in inventory, a staggering amount for a state with a population of 4.1 million people. That doesn’t include 350,000 pounds of marijuana edibles, tinctures and concentrates.

The retail price for a gram of pot has fallen about 50 percent since 2015, from $14 to $7, according to a report by the Oregon Office of Economic Analysis. Legal growers and retailers alike have felt the sting.

The true amount of marijuana leaving the state is hard to pin down, said Beau Whitney, a senior economist at New Frontier Data, a national cannabis analytics firm.

The state has 21 million square feet of legal marijuana growing and a $1 billion market statewide, he said. Of that, about one-third – or about $300 million – is diverted to the illegal market within the state, but it is not clear how much is leaving Oregon, he added.

The amount being grown legally is “more than enough to handle all of the demand in Oregon and so to me, it’s no wonder that there’s excess supply in the space. What people choose to do with it, it’s tough to estimate,” Whitney said.

“They’re saying, ‘If you’re exporting, then we’re going to come down on you.’”

To that end, Williams said Oregon needs to do a better job at gathering data about the marijuana industry and devote more resources to enforcement and oversight. Federal prosecutors have finite resources in Oregon, he wrote, and they will “strategically consider” which cases to pursue, in some cases favoring asset forfeiture and other civil punishments over criminal prosecutions.

Entrepreneurs who have successfully navigated the oversupplied market said they hoped Williams’ approach wouldn’t jeopardize their state-legal businesses. William Simpson, founder of Chalice, will soon open his seventh retail store in Oregon and is hoping to expand into California, Nevada and Canada.

“I’m fearful with this oversupply it basically puts a lot of people in a desperate situation … and it forces them to do illegal things. What that’s going to do is bring a microscope by the federal government over the state of Oregon,” he said.

“It can put the whole thing in danger. I think we’re past that point, but we definitely don’t want to give them a reason to rethink that.”

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