How a manufactured compliance crisis threatens Oklahoma’s cannabis industry
The Oklahoma marijuana industry has faced a tumultuous year, marked by regulatory upheavals that have sent shockwaves through the state's burgeoning cannabis market.
Two critical changes have precipitated a crisis: Senate Bill 15x's substantial fee hike and the Oklahoma Bureau of Narcotics and Dangerous Drugs Control's (OBNDD) new Certificate of Occupancy prerequisite for manufacturers.
SB 15x's impact was immediate and financially bruising, inflating annual OBNDD fees by an astonishing 400%, soaring from $500 to $2,500. This financial strain was compounded by the OBNDD's announcement that all medical marijuana manufacturers (growers and processors) must submit a comprehensive application packet with their new and renewal registration. More critically, they must now furnish a Certificate of Occupancy (COO) as a part of that packet before any permit is issued.
In the early days of Oklahoma's medical marijuana boom, many growers and processors were drawn to rural Oklahoma due to the absence of local building codes and permit requirements within unincorporated counties. This contrasted sharply with the situations in cities like Oklahoma City or Tulsa, where the process to obtain a COO was already mandatory and known to be rigorous and time-consuming. In rural areas, growers could set up operations more swiftly and with fewer upfront costs. Now we find the manufacturers who chose to navigate the bureaucratic labyrinth of Oklahoma City or Tulsa, or many other municipalities, despite its initial demands, inadvertently future-proofed their operations against the tidal wave of compliance issues now swamping their rural counterparts. Beyond the rural rush, many more license holders already possessed properties in unincorporated areas adapted their existing buildings and structures into cultivation facilities, operating under the belief that they also did not require building permits for such modifications.
This is all further complicated by the fact that, while the stipulations from the OBNDD are new, the underlying legal obligations are not. Oklahoma Statutes Title 74 makes it clear that any structural modifications or equipment installations require appropriate permits. However, grow operations, predominantly situated in rural areas lacking building codes, were “mistakenly” authorized by virtue of non-existent local ordinances and neither OBNDD nor the Oklahoma Medical Marijuana Authority (OMMA) previously requiring proof of the business having gone through state inspections as a result.
Attorney General Drummond, who lamented the "rampant noncompliance" with building codes within the cannabis industry was a key voice in the push for enforcing COO requirements. He cited serious safety incidents, including fires and exposure to hazardous substances, underscoring a prevailing disregard for regulations.
Whether the situation is a result of a prevailing disregard for regulations from the licensees, or more a complete failure to enforce and enact the law from the state depends on who you ask. Either way, the new proof of COO mandate from OBNDD had immediate, dire consequences. It led to costly expedients, with growers enlisting drafters, contractors, and legal counsel to navigate a regulatory maze they may have previously traversed alone. Many growers and manufacturers were forced to suspend operations as a result, unable to meet the October 31st deadline to fulfill COO and renewal requirements.
The fallout was dramatic: on October 31st, Oklahoma boasted 6,728 licensed grows and processors. By November 1st, only 3,730 remained. Dispensaries with active OBNDD permits dropped from 2,476 to 1,777 overnight.
Commercial cannabis licensees in Oklahoma need a permit from OBNDD and a certificate from OMMA to be able to legally operate and possess cannabis product. Without one or the other, the business cannot operate not have product on their premises.
In August The Frontier reported OBN Spokesperson Mark Woodward said he is “hopeful many will close down due to newly required paperwork, designed to detect fraudulent licenses, that all growers must submit by the end of October.”
Let's not lose sight of the fact that we are discussing an industry that is legally sanctioned and economically significant. In 2021, at the peak of Oklahoma’s licensing numbers, the cannabis sector in Oklahoma ranked as the 9th largest in the nation in terms of cannabis-related employment. The workforce tied to this green economy has eclipsed that of the construction sector within the state. This is a testament to the industry's substantial contribution to the job market and the livelihoods it sustains — a clear indicator of its now integral role in Oklahoma's economic fabric.
Yet in another revealing statement to The Frontier, OBN spokesperson Mark Woodward expressed that he’d “be shocked if there's not a large number that never renew because they know they cannot get through the paperwork process without getting caught.” This sentiment goes beyond mere regulatory enforcement; it strikes at the heart of the industry with an insinuation of widespread wrongdoing. It's a perspective that paints the entire industry with a broad brush of criminality, an approach that inverts the principle of 'innocent until proven guilty' into a preemptive presumption of guilt if you work with weed. This was furthered by Woodward’s statement to Fox 25 following the post-renewal deadline collapse, that "If there is a single plant still growing on a place that did not renew their license, they're going to be arrested for cultivation."
The other side to this narrative is one of collateral damage. Among those ensnared by the tightened regulatory net are hundreds, if not thousands of legitimate business owners who find themselves inadvertently targeted. These are the Oklahomans, entrepreneurs who have played by the rules as they’ve been laid out, yet now face the daunting prospect of bringing their operations up to a commercial code at great expense, with some having to undergo a complete overhaul of their facilities. The financial burden imposed by these changes has been enormous, pushing many regular people to the brink, and forcing them out of an industry they helped to build. It's a scenario that evokes a sense of a deliberate culling by design, shaking the foundations of what could continue to be a thriving sector of Oklahoma's economy.
Beyond how businesses and industry perception has been affected, statements from representatives of the OBNDD and elected officials linking ethnicity to criminal activities within the cannabis industry have cast a troubling shadow beyond the confines of the sector. Such pronouncements have had far-reaching consequences, unfairly stigmatizing communities based on their heritage. For example, in a distressing turn of events, Asian Oklahomans find themselves disproportionately targeted, suffering the indignity and injustice of having their cash confiscated during routine traffic stops. This overreach stems from a narrative fueled by both media portrayals and official discourse that repeatedly and intentionally correlates illicit cultivation activities with specific ethnic groups. The repercussions of these associations are profound, affecting individuals who have never engaged with marijuana, let alone contravened the law. It's a situation that underscores the need for a discourse based on facts and fairness, not prejudice and presumption.
The deliberate attempt to conflate the legitimate cannabis industry with foreign countries and cartel operations is a regressive tactic reminiscent of the antiquated 'Reefer Madness' propaganda era. Even if such groups are present, they are not anywhere near a majority, and such maneuvers serve to unjustly vilify the entire industry by resurrecting long-debunked stereotypes and fear-mongering narratives. It's a strategy straight out of an old playbook that aimed to demonize cannabis by stitching it into the fabric of criminal enterprise, thereby stoking public fear and perpetuating stigma. This kind of rhetoric is not just misleading but also an affront to the progress made in understanding cannabis and recognizing its place in legal commerce and medicine. It disregards the sophisticated, regulated, and professional nature of the modern cannabis industry, which actually in large part operates under stringent legal frameworks to ensure safety, compliance, and economic contribution.
Adding to all this chaos and noise to navigate, on the eve of the OBNDD renewal deadline, OMMA announced that pending license applications would be rejected, mandating resubmission within 30 days inclusive of COO documents—a timeline that is completely unrealistic.
Two scenarios illustrate the gravity of the situation for legal operators: New applicants awaiting OMMA to process a transfer face the annulment of their investments, unable to comply with COO requirements within the impractical timeframe. Secondly, OMMA and OBNDD, by revoking licenses they had initially approved due to newly enforced documentation, are inadvertently penalizing otherwise law-abiding businesses for the agencies' own initial oversight.
While the need and requirement for certificates of occupancy may well be valid, the implementation of the requirement is arguably precipitous and lacks a framework for equitable transition. The abruptness with which these rules were enforced has left many honest operators in a lurch, with little to no leeway for compliance without jeopardizing their livelihoods. It's a sweeping reform that seems to overlook the practicalities of small business operations and the time it takes to adapt to new regulations. This 'one-size-fits-all' approach to enforcement, rather than a phased or tiered implementation, speaks to a disconnect between the regulatory bodies and the realities of the industry they govern. Such a stringent imposition of rules may achieve regulatory compliance on paper, but it risks the vitality and diversity of an industry that is still in its relative infancy and evolving. The true measure of these regulations will not be in the number of businesses they close, but in the number of businesses they help to improve and the standards they set without stifling growth and innovation.
All of this also highlights there is a pressing need for a paradigm shift toward constructive engagement between regulatory bodies and the cannabis industry they oversee. Agencies and industry players must transcend a relationship marked by suspicion and adversarial postures to foster a collaborative environment. Such cooperation would not only enhance compliance and public safety but also ensure the sustainability and growth of this vital sector. By working in partnership, with open channels of communication and a shared commitment to the well-being of the industry and the community, Oklahoma can set a precedent for regulatory excellence that aligns with the homegrown entrepreneurial spirit embodied here and the rule of law. It's through this synergy that the state can cultivate an atmosphere where regulation is a collaborative process, not a combative one, thereby fortifying the foundation of this legal industry for the betterment of all.
Anyone who has been around for these cycles in older legal states could attest, these overt regulatory crackdowns can create a vacuum that the gray or black market is all too ready to fill, undermining the very objectives of regulation and control. It's a precarious balance that must be struck to prevent a regression into the shadows, where neither safety nor compliance can be adequately monitored or enforced.
It will be interesting to see what unfolds from here. At this growth stage in Oklahoma’s weed industry few things are sure, all licensees are facing great adversity, all licensees will eventually grapple with the COO requirements… And no matter how wrong it may seem, or who puts forth what lawsuit about it, the message to licensees is clear: Compliance is non-negotiable.
