Oklahoma-grown Marijuana fuels the black market in other states

Posted August 14, 2023 on Kosu

One evening in mid-July, state drug enforcement agents intercepted a semi-truck leaving an Oklahoma City warehouse bound for New York.

The truck was hauling 7,000 pounds of Oklahoma-grown marijuana, concealed in produce boxes, which would have been worth about $28 million on the East Coast. The same amount of marijuana would only go for $6 million in Oklahoma’s legal market, according to law enforcement estimates.

Before it was shut down, investigators said multiple truckloads would depart the warehouse every week, headed for other states, according to Mark Woodward, spokesman for the Oklahoma Bureau of Narcotics and Dangerous Drugs.

The bureau is actively investigating several similar operations, he said.

Oklahoma’s loose oversight of its medical marijuana program, coupled with cheap land and licensing fees, has sparked an influx of illicit grow operations that has overwhelmed law enforcement.

“We’ve been told we are now the number-one supplier of black market marijuana in the country,” Woodward said, citing information from agencies around the U.S.

Over the past two years, the Bureau of Narcotics has shut down nearly 1,000 illicit marijuana grow operations across Oklahoma, but as many as 5,000 more may remain, according to Woodward and other officials.

Last year, state lawmakers attempted to contain the problem by enacting a moratorium on new grower licenses and raising fees, but officials say Oklahoma is still catching up on enforcement after a successful citizen-led effort to legalize medical use in 2018 led to a massive marijuana boom.

A marijuana grow in Northeastern Oklahoma as workers loaded a trailer with trash bags.

Even though the number of growers peaked in 2021, Oklahoma is still producing 64 times more cannabis than is needed to meet demand for legal marijuana within the state, according to research published in June by the Oklahoma Medical Marijuana Authority. Some of this oversupply may be frozen to be sold legally at a later date, but much of it is fueling black market sales out of state, according to the report.

Michael Sofis, co-author of the report, estimated that Oklahoma’s oversupply is at least five times larger than any he’s observed in other places, including Oregon, which made headlines in 2019 for a similar problem.

The Bureau of Narcotics has traced Oklahoma-grown marijuana to almost every state and is currently investigating over 3,000 farms. Law enforcement officials said most of these grows are operated by foreign criminal organizations — many of which make use of indentured labor, spray their plants with dangerous pesticides, and illegally move marijuana across state lines.

A thriving U.S. black market

“No trespassing” and “beware of dogs” signs line the fence at one large marijuana grow situated on the Canadian River near the town of Wayne. Tightly-packed rows of marijuana seedlings could be seen in one greenhouse on the day Frontier reporters visited.

The out-of-state operators came to Oklahoma for one reason:

“Money,” said one farm worker, chuckling.

The man, who didn’t give his name and spoke limited English, said he had moved from China to Oakland, Calif., and then to Oklahoma to work in the marijuana industry.

He said many operations have more than doubled their returns by moving to Oklahoma from other states, as he wrote down figures on a napkin to illustrate his point.

Attempts to contact the owner of the grow operation near Wayne were unsuccessful.

Even though recreational marijuana has been legalized in 23 states, growers can still make more money shipping their product out of Oklahoma because higher prices and stringent regulations in other states have allowed the black market to continue to prosper.

“Oklahoma should blame other states that have made it so difficult for legal weed to survive,” said Robin Goldstein, professor of agricultural economics at the University of California, Davis and co-author of

Can Legal Weed Win?. “Illegal growers in Oklahoma are only able to thrive and exist because, in those other states, legal weed is so expensive.”

An indoor grow in Central Oklahoma after sunset.

Before many states legalized recreational use, legal medical marijuana was much cheaper, Goldstein said. But legal recreational marijuana brought higher taxes and more regulations with it, making it harder for legal growers and sellers to compete with the black market. For example, New York — which is one of the top destinations for Oklahoma marijuana, according to the Bureau of Narcotics — implemented a new tax on marijuana after legalizing recreational use in 2021.

With some of the cheapest agricultural land in the country, comparatively low licensing fees, and a lack of pandemic restrictions on travel, Oklahoma was one of the most inexpensive places to grow marijuana in the U.S. when growers began coming in droves in late 2020.

Before the state enacted a moratorium on grow licenses in 2022, growers only needed to pay $3,000 in licensing fees.

Many states, including Arkansas and Missouri, allow only a handful of licensed growers and have much higher fees. Arkansas law allows only eight companies to grow statewide and each of them must pay the state $100,000 annually.

Oklahoma law also requires that at least 75% ownership of a medical marijuana operation be held by an Oklahoma resident who has lived in the state for over two years. But out-of-state and foreign groups were able to hire law firms or pay individual residents to become “straw owners,” bypassing this requirement.

The heads of two law firms, Yukon-based Stacy Legal Group and Tulsa-based Jones-Brown Law face felony drug and conspiracy charges after putting themselves, their employees or other residents down as the majority owners of hundreds of grows. All have pleaded not guilty.

Workers are seen at a marijuana grow in Wayne.

Criminal growers have been able to become nearly indistinguishable from legal growers on paper by acquiring licenses, helping them evade law enforcement, said Andrew Livingston, Director of Economics and Research at Vicente LLP, a cannabis law firm headquartered in Denver.

Given this advantage and the low barriers to get a license, police say they’ve found very few grows in Oklahoma that are unlicensed.

“Our licenses are so cheap and so easy to gain,” Woodward said, “that most are not going to risk it when they can just go get a license and hide in plain sight.”

Thousands of operations with fraudulent licenses are still operating, he added.

Oklahoma also requires grows to have unique tags on every plant from “seed to sale.” This tracking system is designed to enable fine-grained product recalls if contaminants like banned pesticides or heavy metals are detected. But they are also used for enforcement purposes. If a grow has plants that are untagged, the Oklahoma Medical Marijuana Authority will use that as a signal to investigate the grow further, said Porsha Riley, a spokeswoman for the agency.

However, Woodward says most illegal grows have these tags to pass state inspections.

“But that doesn’t stop them from taking the tags off in the middle of the night and moving all that product to an Oklahoma City warehouse so it can be shipped out of state,” he said.

Lack of state funding for enforcement

The Bureau of Narcotics only has around 30 marijuana enforcement agents statewide dedicated to investigating Oklahoma’s thousands of grow operations, although state narcotics agents focused on other investigations sometimes also end up helping.

“Even our enforcement agents that are working on meth, cocaine, fentanyl, and other types of drugs are intercepting shipments during the course of their other investigations that are linked back to these marijuana grows,” Woodward said. “So our entire agency is overwhelmed by this.”

State law enforcement also assists federal agencies in investigating and prosecuting black-market sellers.

Twelve prosecutors, fewer than half of district attorney offices around the state, have their own drug task force investigators funded by federal programs. But these agents investigate illicit marijuana on top of the ongoing fentanyl crisis and other drug crimes, said Jack Thorp, district attorney for Adair, Cherokee, Wagoner and Sequoyah counties.

Earlier this year, the Oklahoma Legislature approved raising fees for marijuana growers from $500 to $2,500. This will increase the Bureau of Narcotics’ revenue by $6 million to $8 million dollars per year, but the money will only sustain the agency’s current size and will not be enough to immediately add additional agents, Woodward said.

“We’re hoping to continue to hire additional investigators to deal with this,” he said. “But we need to see what’s available and what we’re financially capable of going forward.”

In 2022, the Legislature also created a fund for county sheriffs to help take on illegal grows. Sen. Darrell Weaver, R-Moore, Senate sponsor of the bill that created the fund, is also the former director of the Bureau of Narcotics. Weaver said state drug agents have limited resources and need support from local sheriff’s deputies to cover rural parts of the state.

“They’re at ground zero. They’re the boots on the ground,” Weaver said.

Oklahoma sheriffs had hoped the Legislature would send between $5 million and $13 million to the fund. But all funding requests have been denied.

Sen. Roger Thompson, R-Okemah, chairman of the Senate appropriations committee, has blocked the funding because he says it wasn’t clear how sheriffs would use the money.

Ray McNair, director of the Oklahoma Sheriffs’ Association, said the funding would have been used to allow “deputies to work overtime locating and assisting state agencies with the eradication of illegal grow operations.”

Oklahoma tries to contain its marijuana boom

The state ballot measure that legalized medical marijuana in 2018 was written by citizens and included few regulations, said Rep. Jon Echols, R-Oklahoma City. Echols has worked to revise the law, including adding a two-year residency requirement for the majority owners of Oklahoma marijuana grows in 2019.

But these revisions didn’t stop a large wave of new non-resident growers, as they were able to bypass the requirement by using straw owners, said Woodward.

Oklahoma lawmakers have attempted to slow this flood of new growers with a two-year moratorium on new licenses in 2022 that has since been extended through 2026.

The Oklahoma State Fire Marshal is also cracking down on hazards like unsafe wiring, exposed insulation and poor chemical storage at rural grow operations.

Many illegal grows are not in compliance with state fire codes, said State Fire Marshal G. Keith Bryant.

“This is the best way to take on bad actors,” he said.

The moratorium, along with more attention from law enforcement and natural market forces, has led to a steady decrease in the number of grows over the past few years. The Oklahoma Medical Marijuana Authority also did away with a grace period for expired licenses in late 2021.

But the moratorium does not prohibit an owner from transferring a license. Despite the moratorium, the Bureau of Narcotics has received around seven to 10 new grower applications per week, all of which are from applicants who have transferred their license through the Oklahoma Medical Marijuana Authority.

“While there is a moratorium, we’ve still had people able to start up a business, and many of them are criminals,” Woodward said.

When the state moratorium on new growers is lifted in 2026, licensing prices will also increase to as much as $40,000, depending on the size of the farm.

Even though thousands of illicit grows remain, Woodward says 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. The majority owner will also have to show up in-person for a review of this paperwork with a narcotics agent.

Since the new requirements were rolled out in January, many more applicants have backed out of the application process due to the new requirements compared to previous years, Woodward said.

“I'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.”