House Bill 2612 is now in effect, forcing all cannabis businesses to update their models to be in compliance.
Commercial cannabis licensees are by now familiar with many of the obligations imposed by House Bill 2612, commonly referred to as the “Unity Bill,” a comprehensive legislative effort to close the gaps left in Oklahoma law following the enactment of State Question 788. In many respects, its implementation is causing the industry tremendous frustration. Although business owners continue to become more knowledgeable concerning Unity Bill’s requirements, there remains a great deal of misinformation and confusion among license holders concerning their legal rights and obligations.
While certainly not a comprehensive summary of all of the myriad means by which the Unity Bill has affected the cannabis industry, these are commonly understood to be some of the most significant departures from prior law.
Unity Bill requires commercial growers and processors to submit samples of their products for each and every 10-pound batch of uniform cannabis strain or product to approved testing facilities for testing. These tests are required to ensure that the cannabis product does not contain impermissible levels of microbials, mycotoxins, residual solvents and chemical residues, metals, pesticides and other filth and contaminants determined by Oklahoma Medical Marijuana Authority (OMMA) to be potentially injurious to consumer health. These testing facilities will be licensed by OMMA, and it has begun accepting applications for testing facilities’ licenses as of Nov. 1. Currently, commercial operators are experiencing wildly divergent results from multiple testing facilities for identical products and other curious results that have led to widespread distrust of the validity of the available testing practices and techniques. It might take a month or more for OMMA to process the first of its testing facility license applications, but some relief is quickly coming.
Included among the changes brought about by Unity Bill is the requirement that cannabis “waste” must now be destroyed by a licensed medical marijuana waste disposal company. No waste disposal licenses have currently been issued, and the application window has only recently opened. Nonetheless, commercial entities are now legally obligated to utilize a licensed waste disposal company to dispose of “unused, surplus, returned or out of date product, recalled product, and other plant debris, including dead plants.” The law explicitly excludes “roots, stems, stalks, and fan leaves” as cannabis waste that must be disposed of through a licensed company. Operators may continue to dispose of those byproducts of their operations through open burning, incineration, burying, mulching, composting or any other means approved by the Department of Environmental Quality.
Transportation and Transport-Agent Licenses and Revised Residency Requirements
To the extent a cannabis company desires to transport its product from its facility — whether to a testing facility or buyer — it is now required to do so through a licensed transport agent. It is no longer sufficient to transport cannabis pursuant to the transportation license that the state previously issued to every commercial business along with its business license. Every individual that transports products for a cannabis company must now be individually granted his or her own transport agent license.
The law requires that these transport agents meet even more exacting residency standards than that of all owners of a cannabis business in order to obtain their license. Specifically, while cannabis businesses are permitted to have out-of-state minority ownership groups, all transport agent licensees must be Oklahoma residents that have maintained residency within the state for either two years preceding their application or for five of the past twenty-five years. An out-of-state resident may now legally maintain an ownership interest in a cannabis company under Unity Bill, but he or she may not transport their own product to a buyer unless they have lived in the state for the two preceding years.
This two-year residency requirement has similarly caused out-of-state investors to find a more creative solution to establishing their Oklahoma residency than simply obtaining an Oklahoma driver’s license in order to satisfy the state’s requirement that 75 percent of any commercial cannabis business be owned by Oklahoma residents.
Inventory Tracking and Record Keeping
Each commercial business must now also maintain an inventory tracking system that permits it to trace each batch of cannabis product in its possession from either the seed or immature plant stage until the product is “consumed, used, disposed of or otherwise destroyed.” The state has not identified which software program it intends to utilize for its own compliance checks but has said that companies must be able to integrate their own tracking system with the state’s. Owners must also now ensure that they maintain inventory manifests detailing, among other things, the origination, destination, date, time, agents, quantities and type of cannabis product being transported to and from their operations.
Licensed entities must maintain business records sufficient to replicate all cannabis transactions, down to the particular batch number of products involved in the transaction, including the date of each, all point-of-sale records, inventory manifests and waste disposal records for a period of two years. Businesses may not, however, maintain private patient information for more than 60 days absent the patient’s express consent.
Unity Bill expands upon OMMA’s ability to audit or otherwise obtain records from these establishments upon written notice to provide the requested information within 10 days. The prior law permitted businesses 15 days in which to provide documents responsive to OMMA’s request. On-site inspections are permitted up to two times per year upon only 24-hour notice without cause and without notice at all if OMMA has cause to suspect a violation of the law. Failure to cooperate with these requests is grounds for OMMA’s nonrenewal, suspension or revocation of a commercial license.
Labeling and Advertising
Another feature of Unity Bill is additional rules governing the labeling and advertising of cannabis products. Labels must not reasonably appear to target children and, thus, are restricted from depicting content such as toys, cartoon characters or similar images. The labels may not contain any false or misleading statements or statements that the marijuana product “provides health or physical benefits to the patient.” Advertising representing that marijuana has “curative or therapeutic effects” is deemed similarly improper. The state plainly does not want Oklahoma’s medical cannabis to be confused with medicine.
School Proximity Changes
One of the more prominent effects of Unity Bill’s enactment has been the submission of letters of revocation for dispensary licensees that had previously been issued valid licenses from OMMA. One common reason for these revocations is the state’s alteration of what constitutes a “school” under the law. The state previously required that no dispensary operate within 1,000 feet of a “school.” SQ788 contemplated that dispensaries would not open near any “school building” where class instruction or services took place. Unity Bill excludes dispensaries from operating within 1,000 feet of any door, passage or gate to not only school buildings, but also other “facilities” or “indoor and outdoor property” utilized for “school activities.” Properties located near everything from bus barns and agricultural facilities to practice fields are now explicitly off-limits to dispensary owners. Preschools are also now deemed “schools” under the law. Dispensaries that had previously been issued their license and owners that had invested (in some cases) tens or hundreds of thousands of dollars in acquiring and improving property have now found themselves operating illegally upon Unity Bill’s enactment.
Despite the frustrations that many have experienced in complying with these new rules, the industry continues to grow at an incredible pace. Any nascent industry should expect to undergo growing pains just like these. While that assurance might not resolve one’s immediate frustration with his or her current predicament that Unity Bill might have imposed, there is always an attorney willing to work toward a creative solution.
Justin Williams is a founding partner and member of Climb Collective and Overman Legal Group. Since graduating with distinction from University of Oklahoma College of Law in 2015, Justin has practiced law widely across the spectrum of civil litigation.