SALEM — Oregon's strict rules around pesticide testing are hurting the state's fledgling recreational marijuana industry and could mean a $10 million drop in tax revenue from sales in the fourth quarter — or at least that's the argument in a report released this week by those in the business.
The Oregon Health Authority began enforcing new regulations on Oct. 1 that tightened protocols for testing recreational marijuana, expanded the list of banned substances and required product to pass tests at state-certified labs before it could be sold.
The regulations are the first mandatory pre-emptive testing in the country for marijuana; so far, the state has issued two recall notices for pot product that failed tests.
But Oregon has only certified six labs, and that's created a bottleneck for testing, according to a report released Wednesday by Beau Whitney, a cannabis industry economist, and by the Oregon Cannabis Business Council.
Testing that should take five days is taking to up to 21 days — a delay that's meant low supply, increased prices and lost revenue, said Whitney, a former executive for a marijuana production company. Product can't be sold until it's tested. If it fails the tests, it must be discarded.
Whitney conducted a survey of more than 680 Oregon cannabis business people. Seventy-two responded, and of those, 16 said they were closing because of the new rules.
"October was a defining, if not catastrophic, month for Oregon's cannabis industry, which, until then, was growing at a very fast rate," Whitney said.
Recreational marijuana was tested before Oct. 1, but there weren't uniform protocols or state-approved facilities for doing so — and it wasn't clear what happened if product failed. State health officials say the new laws protect the public and the slowdown is the price of safety.
"No one should be exposed to these pesticides when they're using these marijuana products," said Jonathan Modie, a spokesman for the Oregon Health Authority.
The health authority has borrowed inspectors from other departments to get more labs on line, and the governor's office is expected to announce some temporary fixes to address the backlog next week, according to The Oregonian/OregonLive.
Other states that have legalized recreational marijuana, such as Washington, have rules in place for pesticide use, but Oregon is the only state to require pre-sale testing.
Rodger Voelker, lab director of one of the pesticide testing laboratories, Eugene's OG Analytical, said the delays are a temporary growing pain of a new industry.
"I hear this constantly — people saying this is totally unfair, that they don't expect this of anybody else," Voelker said. "That's actually completely wrong. These things are expected of any industry where people are putting things in their mouth."
The report, however, argues that the rules are shifting business to the black market and costing pot entrepreneurs thousands in revenue.
It projects that a tighter supply and increased prices will mean an increase of $187.5 million in black market activity on an annual basis.
Oregon made $40 million in tax revenue from recreational marijuana as of September of this year — but the report says that could drop $10 million in the fourth quarter.
Amy Margolis, a Portland-based attorney who litigates marijuana-related cases, told the Statesman Journal that the new regulations have "made it very difficult for people to operate in the regulated market."
The report calls for a temporary moratorium on the new testing standards until regulators can figure out a better balance.
In the meantime, its authors suggest affixing a sticker to the product telling consumers they are consuming it at their own risk.