Oklahoma's Pot Boom Impact
Oklahoma Has Seen a Marijuana Land Rush and Some Residents Push Back
OKLAHOMA CITY (DTN) -- Merle Haggard famously crooned, "We don't smoke marijuana in Muskogee." But now, medical dispensaries are scattered across Muskogee and pretty much every other town in Oklahoma and large-scale marijuana grow operations dot the landscape.
The state settled with the 1889 land rush has seen a similar rush since nearly 57% of voters approved medical marijuana in June 2018. Roughly 7,850 businesses have gotten licenses across the state to grow marijuana commercially and nearly 2,264 medical marijuana dispensaries have opened, according to statistics from the Oklahoma Medical Marijuana Authority.
There are more licensed marijuana grow operations now in Oklahoma than there were wheat farmers statewide reported in the 2017 Ag Census.
BUSINESS IS BOOMING
Since the beginning of 2019, a special tax on marijuana sales, along with normal state and local sales taxes, has generated $216.8 million in tax revenue. That translates into roughly $1.5 billion in legal sales.
Yet, stories are rampant across the state about landowners getting offered three, five, even 10 times the typical land value -- in cash -- for a 40-acre tract to start a grow operation as long as the landowners also agree to put their names on the $2,500 license needed to start the grow operation.
"It's like a gold rush," said state Sen. Casey Murdock, a rancher in western Oklahoma. "There are stories across the state. Criminal enterprises are coming in and buying up a lot of land."
They are not all criminals, but the grow operations have created a lot of illegal activity. Out-of-state and out-of-country people are coming to Oklahoma and paying locals to qualify for a grow license. State law requires 75% of the ownership in a marijuana farm must be held by someone who lives in the state.
"So, they're paying people a percentage to put their name on the license," said Mark Woodward, public information officer for the Oklahoma Bureau of Narcotics.
But then some of those growers are moving 100% of their product out of state to sell illegally around the country.
It has led to some high-profile busts of foreign nationals and rumors of "Chinese mafia" running major grow operations in rural counties. There have been raids that rounded up dozens of Chinese or Hispanic workers at large-scale grow operations tucked into rural areas.
"I don't want to paint with a broad brush and say that's all of these Chinese growers," Woodward said. "I can tell you though, the reason so many of them (cases) that we've worked are Chinese-operated and owned are because they're all tied to the same investigation that we're working."
There also have been locals arrested for starting unlicensed operations. Woodward said there is some intelligence on potential Russian organizations coming to Oklahoma. "We're getting some tips that there's certain farms operated by Russian organizations that they're asking us to look into," he said. "So ... they're coming from everywhere."
The land rush is sparked by multiple factors, Woodward said. One is Oklahoma's low land costs compared to other states, whether those grow businesses are legal or not. People growing marijuana in California or Colorado can come to Oklahoma, pay multiple times what the land is worth, and still pay a fraction of what they were paying before.
Even with roughly 383,128 state residents now with medical marijuana prescriptions -- basically one in every 10 residents of the state -- there is strong evidence way more marijuana is being grown in Oklahoma than residents can inhale or consume.
Other factors include the cheap regulatory costs. A grow license in Oklahoma is $2,500 to the state's Medical Marijuana Authority and another $500 to the Bureau of Narcotics. The state also has no cap on the number of licenses, or limits on the number of plants, per farm.
"And, so our laws are some of the least-restrictive in the United States," Woodward said. "And those things combined, I think, are the reason why Oklahoma is so attractive for ... the Chinese, Hispanic, Russians, or even U.S. citizens coming in and bringing their operations to our state."
While it's easy to spot as many as a half dozen medical marijuana dispensaries just sitting at a red light in Oklahoma City, the high number of grow operations are producing way more product than can be smoked or consumed in the state. Also, a pound of marijuana sold illegally outside of the state can be worth five or six times more than it can be sold for legally in the state.
"There's just not that big of a market here in Oklahoma to support all of this," Woodward said. "And, so we know that many of these are growing here because of our economy and land prices; but the product is all going out of state."
FARMER CONCERNS GROWING
Last month, Oklahoma farm groups created a task force to look for solutions to the "exponential growth of the medical marijuana industry" across the state. Farmers and livestock producers have complained about inflated land values, demands on electrical and water resources and concerns that pot operations could affect the ability to spray pesticides or fertilizers on traditional field crops.
"It's a challenge for us at Farm Bureau where we're big on private property rights and so forth," said Rodd Moesel, president of the Oklahoma Farm Bureau in an interview with DTN. "A lot of the things people talk about as solutions can take away rights from the farm farmers. We're trying to be real careful. We don't want to take long-term actions for short-term problems."
Roughly 400,000 state residents, about 10% of the population, have a medical marijuana prescription, which surprises Moesel. "I never would have thought so many Oklahomans would get a medical marijuana card," he said. "It's not recreational, but you can get a two-year prescription. So the doctor can prescribe it if he thinks you need it for a hangnail. You can get your prescription for nearly any medical condition."
At meetings around the state, Moesel said one of the biggest complaints about the marijuana rush is how it is driving up land prices, though he noted land prices are going up across the country for various reasons. Moesel said he is surprised at the volume of dispensaries and grow operations across the state, but expects eventually there will be some market corrections.
Often facilities will look like any large greenhouse operation surrounded by high fencing. Others will have several large metal buildings with multiple air conditioning units and electrical transformers. Moesel pointed to the large amounts of electrical infrastructure being run to support the grow operations.
"It's not cheap to build the infrastructure, you know, for that kind of service," Moesel said. "So if something's going to be there and gone in six months or a year, you know, the rest of the ratepayers can be paying expenses for, you know, for a long time for something that doesn't last and so there's a lot of concern about whether they're, whether they're making huge capital outlays that are going to be long term or short term."
Among the increased complaints at local meetings also has been the increased odor that comes from the proliferation of large marijuana grow operations. A rural postal carrier told DTN it is quickly obvious to recognize when a new growing facility has arrived.
NEW STATE LAW
Gov. Kevin Stitt signed a new law in late May tightening some restrictions on dispensaries and oversight of grow facilities. Some lawmakers who worked on the legislation said the proliferation of grow facilities in rural areas was becoming the top concern for their constituents. Among one of the top priorities for rural lawmakers was ensuring grow operations adhere to state law that prevents foreign ownership of land in the state. People applying for grow licenses must show that 75% of the business partners and managers are Oklahoma residents.
Woodward said farmers and business groups like local chambers of commerce want more enforcement, but he also stressed that simply because the workers may be foreign, that does not make the operation illegal. Still, he expects crackdowns on illegal operations to increase, and that could lead to property seizures as well.
"It looks like the Wild West right now because it has been kind of anything goes. But we're really hoping to send a message and go aggressively not only with criminal charges, but eventually start seizing and forfeiting this land and auctioning it back off so there's an opportunity for it to come back into the hands of Oklahomans."
Chris Clayton can be reached at Chris.Clayton@dtn.com
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