Report argues new Oregon testing rules are straining pot supply

New marijuana testing regulations may be hurting the profitability of Oregon's young pot industry, with some marijuana businesses considering closing their doors because of strained supplies, according to a new report.

Economist Beau Whitney argues in a report released Wednesday that new state testing rules, intended to ensure the safety of marijuana products, are shifting business onto the black market and are resulting in thousands of dollars of lost revenue for legal cannabis operations. Whitney was an executive with Golden Leaf Holdings, a marijuana company.

The new testing regulations from the Oregon Health Authority started to be enforced starting Oct. 1, according to Mark Pettinger, a spokesman for the Oregon Liquor Control Commission.

Cannabis that was "compliant" at the end of September ended up being non-compliant after the new rules came into play, according to Whitney's report. Products that fail the tests are supposed to be pulled from store shelves.

Increased stringency in testing regulations may have led to a chilling of supplies. But for the Health Authority, it's a matter of safeguarding public well-being.

State officials have in recent months issued multiple alerts for marijuana strains sold in Oregon that have surpassed the "action level" for pesticides.

Jonathan Modie, spokesman for the Health Authority, points to those as examples of why the rules are in place. “No one should be exposed to these pesticides when they’re using these marijuana products," he said.

The Health Authority, for instance, has said it doesn't know the effects of smoking spinosad, a chemical that has made its way onto some of the plants, and that the batch a tainted marijuana product comes from has to be destroyed.

"The intent of these rules (is) to protect public health, to make sure that marijuana consumers are not exposed to potentially dangerous chemicals,” Modie said.

KGW reports that Oregon has the strictest pot testing standards in the business, with the crop being more thoroughly vetted than food.

"The new testing regulations have made it very difficult for people to operate in the regulated market," said Amy Margolis, a Portland-based attorney who litigates marijuana-related cases.

Whitney said there should be a "temporary moratorium" on the testing standards, letting product go onto the legal markets with a mark that warns consumers the pot could be harmful if it's used.

"The common goal is public safety," Whitney said. It's just a matter of how quickly the regulations should be implemented.

"Although public safety is of paramount importance, the deployment of the test changes have resulted in higher prices, less supply, job losses and economic hardships," he writes in the report. "Higher prices and reduced supply will only stoke the ever present black market and generate results contrary to the legislative intent."

Whitney conducted a survey of more than 680 Oregon cannabis business people in partnership with the Oregon Cannabis Business Council, though only 72 of them had responded as of the survey's release.

Sixteen of the 72 respondents to Whitney's survey said they were shuttering because of the new rules. The report also says tax revenue is set to fall at least $10 million for the fourth quarter. As of September, Oregon had raked in around $40 million in tax revenue from sales of the plant. Whitney is continuing to collect survey results until early December.

Send questions, comments or news tips to jbach @statesmanjournal.com or 503-399-6714. Follow him on Twitter @JonathanMBach.