OKLAHOMA CITY — The primary goal of a new law that greatly increased licensing fees for medical marijuana businesses in Oklahoma was “to address the oversupply of marijuana” in this state, attorneys for the state insist.
Jed Green, founder of Oklahomans for Responsible Cannabis Action; Pharside LLC, a marijuana grower and processor in Lexington; Oklahoma Natural Cures LLC, a medical marijuana dispensary in Warr Acres; and Bingo 101, a medical marijuana processor in Oklahoma City, collectively sued the Oklahoma Medical Marijuana Authority on June 30.
All four contend they “stand to suffer economic harm with the increased license fees/taxes imposed” by House Bill 2179, which the Legislature passed, and Governor Stitt signed last year but did not go into effect until June 1 of this year.
The complainants asked the Oklahoma Supreme Court to assume original jurisdiction and nullify the statute. The petitioners contend HB 2179 raises state revenue by “substantially increasing licensing fees” for medical marijuana growers, dispensaries, processors, and laboratories.
The OMMA readily concedes that HB 2179 raised licensing fees, but argues that it did so to curtail the “oversupply” of marijuana in Oklahoma “by increasing the license fees paid by some medical marijuana businesses.”
It appears that Oklahoma is “experiencing the largest oversupply of cannabis any state has ever seen,” the OMMA told the Supreme Court. “This strongly suggests that the excess supply is being illegally trafficked between states, as well as supplying illicit use within” Oklahoma.
Moreover, the OMMA continued, the “sheer number’ of growers – 6,497 as of July 5 – means that the amount of enforcement and staff and funding necessary to regularly oversee these businesses is unattainable” and has created “an immediate threat to public safety.”
The “explosive growth” of suppliers combined with low barriers of entry “means Oklahoma is an ideal place for organized crime to grow marijuana before selling it illegally,” the OMMA asserted in its brief.
“Our land is inexpensive, our enforcement of law has been lax, we have Interstate 40, Interstate 35, Interstate 44, and all the tributaries that go outside in other states,” Oklahoma Attorney General Gentner Drummond said in June. “We have the ability to generate a lot of marijuana and other products, and we are the distribution network for the United States.”
Speaking to the Oklahoma Press Association, Drummond said two “significant” Mexican cartels have been identified “doing business in Oklahoma.” A Chinese syndicated crime organization is “robust” in this state. “We recently identified a Cuban cartel that is in our state.” And in the last six months “we’ve identified numerous Eastern Europeans that have come into Oklahoma.”
He also claimed that 40% of the marijuana consumed in New York City is grown in Oklahoma.
License fees rose
Prior to June 1, 2023, the petitioners relate, the licensing fee for medical marijuana companies was $2,500. HB 2179, though, “imposes a tiered licensing fee scheme” for growers and processors. The amount of their license fee is determined by the tier the applicant “falls into.”
Licensing tiers for growers are distinguished by two categories: indoor, greenhouse or light deprivation, and outdoor. The initial license fee will be calculated based on the total amount of square feet of canopy or acres the grower estimates will be harvested for the year, and the annual license fee will be based on the total amount of square feet of canopy the grower harvested during the previous year.
Growers who use both indoor and outdoor growing facilities must obtain separate licenses for each type of operation.
A grower applying to renew its license “could fall into a Tier 7 category and have to pay a $50,000 license fee,” 20 times more than before HB 2179 went into effect, the petitioners complain.
The statute separates the medical marijuana processor license into tiers based on pounds of cannabis biomass and liters of cannabis concentrate. A processor who previously paid a flat $2,500 license fee “could fall into a Tier 3 category and have to pay $10,000” – four times as much – for that license, the petitioners point out.
For dispensaries, the initial license fee is $2,500. The annual license fee for a dispensary will be calculated at 10% of the sum of the combined state sales taxes and state excise taxes that the dispensary collects in a 12-month period; that fee will be a minimum of $2,500 and a maximum of $10,000, the new law stipulates.
The new license fee for a marijuana testing laboratory will be $20,000 – “eight times what it was before HB 2179,” the petitioners note.
The OMMA countered that more than a dozen states “set certain fees of $50,000 or more,” and wrote that in neighboring Arkansas “it costs $100,000 or more to apply for a business, cultivation or transportation license…”
OMMA maintains HB 2179 was not a ‘revenue bill’
Passage of HB 2179 violated two provisions in Article V, Section 33, of the Oklahoma Constitution – created by statewide voter approval of State Question 640 at a special election in 1992 – the petitioners argue.
• HB 2179 did not pass by a “super majority” of three-fourths of the members in both legislative chambers. It cleared the state Senate with precisely the requisite number of “aye” votes: 37-7. But the bill passed the state House of Representatives on a 60-16 vote; a three-fourths majority requires 76 votes in the 101-member House.
The OMMA argued that the bill passed with a three-fourths majority in both the House and the Senate, but did not receive approval from three-fourths of all members of the House of Representatives because of absences.
• The Legislature passed HB 2179 during the last five days of the 2022 regular session. Article V, Section 33, decrees: “No revenue bill shall be passed during the five last days of the session.”
“Despite its concern with licensing ‘fees,’ HB 2179 raises revenue by imposing a tax in the strict sense of the word,” the petitioners assert. The measure “imposes a revenue-raising tax disguised as a fee.”
The OMMA and the Attorney General’s Office responded that HB 2179 passed the Legislature on May 20 and the regular legislative session did not end until a week later, on May 27; therefore, the Act was passed before the final five days of the session.
Moreover, the legislation was not a “revenue-raising bill” for two reasons:
• The licensing fees at issue are “paid by a burgeoning industry for the high costs of regulating that industry.”
• The primary purpose of the bill was not to raise revenue. “Revenue laws are only those ‘whose principal object is the raising of revenue, and not those under which revenue may incidentally arise,’” according to a 1956 court ruling.
A notation in the Oklahoma State Courts Network states that on Aug. 7 the case was assigned to the Supreme Court.
HB 2179 was authored by Rep. Scott Fetgatter (R-Okmulgee) and Sen. Jessica Garvin (R-Duncan).