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Oregon’s Ganja Glut Sends Pot Growers To Black Market

Oregon’s Ganja Glut Sends Pot Growers To Black Market

By: Natalie O’Neill

Last spring, Forrest Griffin*, an Oregon cannabis farmer, was forced to throw away hundreds of pounds of high-end weed. His small grow-op had folded, in part due to a pesticide test, and the state demanded he destroy piles of his skunky-sweet leftovers.

Heartbroken over his failed business, he stuffed more than 200 pounds of pot into paper lawn bags, hauled them to a compost site and dumped every last nug.  “It felt horrible, like a massive, massive failure,” said Griffin, who is in his 30s, lives near Portland and has a background in horticulture. “It was a sad day.”

For months, he had nurtured his plants like a protective dad.  After harvest, he was proud of the calm, euphoric high they yielded. In other states, the load of sun-grown indica could have sold for more than $100,000. And it just seemed wrong to throw it away.

“It felt fucked-up to waste it. It was perfectly good weed—it could have been used as medicine,” he said. “All of my options were shitty.”

Dispensaries wouldn’t touch it. Wholesalers didn’t want it either. And there was no way to donate it to poor folks with health problems.

Frustrated, he soon broke the law. When it came time to trash the rest of the crop, he logged into the state’s cannabis tracking software system and listed it as “destroyed.” But instead of actually tossing it, he handed some of it off to a friend, who converted it to THC known as “shatter” and sold it illegally out of state.

(*Griffin asked to use a pseudonym to avoid incriminating himself.)

He isn’t the only legal weed farmer who has been pushed, at least temporarily, back to the black market. In the past two years, at least 150 cannabis businesses, ranging from family farms to trendy Portland dispensaries, closed in Oregon—where farmers grew three times more weed than the state could consume, according to a state data.

Some growers in the too-crowded market were left with garbage bags full of weed they can’t sell anywhere legally, they told me. Farmers who fold are supposed to get rid of their pot by burning, burying or composting it. Or they can turn it over to state bureaucrats. But, yeah right.

“I’d be surprised if that’s actually happening,” said Donald Morse, chairman of the Oregon Cannabis Business Council. “People have a hard time destroying tens of thousands of dollars’ worth of product.”

“People have a hard time destroying tens of thousands of dollars’ worth of product.”

He added, “Who the hell is going to burn it?”

If state data is right, Oregonians have destroyed at least 186,800 pounds of marijuana—more than the weight of a Boeing 737 airplane—in the past two years, according to the Oregon Liquor Control Commission, which oversees the industry.

But not everyone who claims to trash it really does. Instead, some farmers are returning to the bad old days, hawking weed illegally across state lines for four to 15 times the price, everywhere from Idaho to New York and Texas, law enforcement officials and cannabis industry insiders told me.

“A lot of legit growers can’t turn profit,” said Michael Getlin, 35, one of the founders of Old Apple Farm, a family-run cannabis farm in the Willamette Valley. “They think, why not sell it [illegally] out of state for 15 times the price?”

“TOO MUCH WEED”

It sounds like a fun problem to have: Oregon is drowning in bud. But the oversupply is more than a buzzkill for entrepreneurs who thought they were blazing a trail to big bucks.

In 2017, the state produced 1.1 million pounds of marijuana, roughly three times more than its population of 4.1 million people could possibly smoke, eat or vape, according to state data, which was first reported by the Willamette Week newspaper. The glut of ganja sparked a buyer’s market with joint prices plunging to as low as $1, less than a can of Pabst Blue Ribbon.

It may be pothead paradise—but it’s far from the “green goldrush” business owners foresaw in 2014, when recreational weed became legal in Oregon. These days, growers who once sold a pound of pot for $2,000 are unloading it to wholesalers for just $600, and barely breaking even.

“Oregon just has too much weed,” said Amy Margolis, founder of the Oregon Cannabis Association, a network group for hundreds of businesses. “This is a real problem—and one we should take seriously from a policy perspective.”

It’s a supply-and-demand nightmare. “We oversaturated the market on every level,” said Morse, whose dispensary Human Collective went out of business last January. “We’re seeing a shakeout now. It’s survival of the fittest.”

“Oregon just has too much weed … This is a real problem.”

One problem is that Oregon simply handed out too many weed business licenses. Unlike Washington and Colorado, which capped the number of businesses allowed to open, the Beaver State set no such limit.

As of November 2018, Oregon had 2,065 registered weed business, compared to Washington’s 1,435, according to records from both states. Colorado, by contrast, has just 1,690.

Like farmland, licenses in Oregon were relatively easy to come by and cheap—thousands of dollars less than in California, for example. The license approval process may have also been a bit too, well, mellow, experts said.

“Almost everyone who applied has been able to get a license,” said Margolis. “There were few barriers to entry.”

The boom in bud may have put an unexpected burden on both business owners and regulators, she said. “It’s double what they planned for.”

GROWING PAINS

When Morse’s dispensary went out of business last January, he wasn’t sure what to do with the piles of leftover pot.  He could sell it to wholesalers for bargain basement prices, donate it to another shop, or trash it.

“I ended up taking $7,000 worth of edibles home for safekeeping,” he said. “I wasn’t going to sell it—but I was caught and charged by the OLCC.”

His administrative case is ongoing. “But I could have just said I destroyed it,” he said.

Under state law, growers who log weed as destroyed must record it on their surveillance cameras, said Mark Pettinger, a spokesman for the OLCC. “The product has to remain on the licensed premises for three days after destruction.”

He added, “We do check up on and even witness the destruction of product in person. Our inspectors also check [the software program] and surveillance footage to verify the destruction.”

But that apparently doesn’t always happen. In some cases, nobody shows up—or ever asks to see footage, according to growers.

When Griffin composted his cannabis, he said, no official came. He took photos and video to document it—but nobody from the agency ever asked for proof, he said. (Pettinger declined to comment on how often OLCC officials check up in person.)

Along with a few bad luck factors, Griffin’s business went under because he used the wrong pesticide. He said the organic product had been listed as acceptable by the state at one point—but the company that produced it was later outed for using non-approved ingredients.

“You have to remember most of the people in this industry came from the black market.”

It caused Griffin and other growers’ bud to fail lab tests, rendering their weed legally unsellable.

In the past two years, the state has yanked at least four pesticides from its list of approved products because they misrepresented ingredients, said Dale Mitchell, a pesticide program manager for the Oregon Department of Agriculture.

Other glitches have caused growers to close, too. Ironically, some of the rules created by Oregon lawmakers to prevent drug trafficking are exactly what’s fueling the migration to the black market, farmers told me.

Growers, some of whom are already struggling, are required to install expensive security camera systems. They must tirelessly log every “seed-to-sale” transaction. And they’re required to follow strict distribution rules that make it time-consuming and pricey to get products into shops.

(Vineyard owners, by contrast, aren’t required to follow the same rules, even though they’re overseen by the same state agencies.)

“Four years ago, you had old-time growers decide, ‘OK, I don’t want to buck the system anymore, I’m going to go legal,’” Morse said. “For these guys, a lot of the compliance is a major pain in the ass.”

In the weed industry, “You have to give the appearance that all of [the cannabis] is tracked and not going outside of the system—but the reality is there is no way do that on this scale,” he said.

The regulatory hoop-jumping simply didn’t pay off for some farmers. So they got creative.

“The state produced 1.1 million pounds of marijuana, roughly three times more than its population could possibly smoke, eat or vape.”

“The cost of compliance is astronomical,” said Getlin. “And growers have already been crushed by falling prices.”

“I can think of several farms that have shuttered legal operations and have started shipping over state lines,” he said. “I get approached twice a month by people offering to buy product off the books for 7 to 8 times as much.”

Getlin turns them down because, unlike other growers, his business is still going strong. His farm was self-financed, uses a unique low-cost curation method and avoided start-up costs associated with transitioning from medical marijuana.

Businesses like his could be a boon to the economy. “But money is going to end up flowing out of state—and right out of country,” he said.

For other farmers, it’s a seamless crossover from legit to lawless.

“You have to remember most of the people in this industry came from the black market,” said Erin Zumbaum, general manager of Amberlight Cannabis, which sells top-shelf flower, concentrates and edibles in Portland. “Businesses owners are just hanging on. They’re gonna do what they have to do to pay the bills.”

GRAY MARKET GREEN

State law enforcement, for its part, appears conflicted about how much to care. Marijuana grown with a license—but then sold illegally—isn’t Oregon’s biggest drug-trafficking priority, one official told me.

“It’s more like a gray market than a black market,” said Kevin Sonoff, a spokesman U.S. Attorney’s office in Portland. “There are more illegal sellers who choose not to enter the legal market, either because of over-saturation or because of the arduous process it takes to get a license.”

Kingpins based in Oregon generally never even try to go legal, he said. (Sonoff didn’t return several requests for data on legal growers’ arrests.)

In August, the feds seized 11,000 pot plants, $2.8 million and a yacht in a massive Oregon-grown weed bust. During the raid, officials found 51 firearms, 26 vehicles and pieces of heavy equipment.

But the two Portlanders running the scheme—in which the drug was shipped to Virginia and Texas—had never registered a legal marijuana business.

A few months earlier, Oregon U.S. Attorney Billy Williams vowed to crack down on anyone funneling weed into back-alley markets, and demanded regulators do something about the oversupply problem. Large amounts of Oregon-grown pot have been seized in at least 30 states, he said at a press conference, without elaborating on how much—if any—had been grown legally.

“Oregon has produced an ungodly amount of weed, and it can’t be consumed here, so it needs to leave.”

When state policymakers set aside an additional $1.5 million to beef up marijuana-related law enforcement last year, they also didn’t specify whether it would target legal growers breaking the law.

But state cops in Idaho, which borders Oregon and hasn’t legalized the drug, understand the fallout of the state’s oversupply problem firsthand.

“The amount of marijuana we seized in 2017 was more than the three previous years combined,” said Idaho State Police spokesman Tim Mariano. “You can draw your own conclusions about the timing—and why this is happening now.”

In 2018, the number of busts stayed roughly the same with 1,195 pounds of weed seized, usually during traffic stops, 36 percent of which was Oregon-grown, according to data provided by the police department.

Idaho’s anti-marijuana laws are among the strictest in the country. Anyone caught with more than 3 ounces of pot—roughly enough to fill three mason jars—faces up to five years in prison.

Instead of crossing the border, some Oregon growers ship it via mail, often to weed-starved parts of the East Coast, where a top-shelf pound sells for up to $3,000, sources said. Others hawk it on Craigslist or the dark web.

But shipping it out of state may actually be the right thing to do, one insider told me.

“Oregon has produced an ungodly amount of weed, and it can’t be consumed here, so it needs to leave,” said one dealer-turned-wholesaler, who asked not to be named.

“It’s a good thing. There should be pipelines to underserved areas.”

New York City and parts of Connecticut, for example, have been plagued for years by the cheap synthetic marijuana “K2” or “Spice,” which has caused hundreds of overdoses—including fatal ones—and has left some people writhing and drooling on street corners.

In total, more than 11,000 emergency room visits have been tied to the drug in New York City in recent years, according to the city’s health department.

It’s bizarre to think that 3,000 miles away, Oregonians are throwing away high-quality weed, which is far less harmful and has never been linked to an overdose fatality, the wholesaler said.

“It makes no sense,” he said. “The laws are way behind the times.”

“OPEN UP THE BORDERS” 

Transporting weed across state lines—even from one legalized area to another—remains against federal law.

Once that changes, growers in Oregon will be back in the game, experts and farmers predicted. The state’s temperate climate, with its rolling hills and coastal air, is one of the best places in the country to grow outdoor weed.

But opening up the market could take years.

“Interstate commerce is a great solution, but that’s a little bit of a dream right now,” said Margolis, who is also a lawyer and founder of the Oregon Cannabis Political Action Committee. “It feels insurmountable in the Trump administration.”

In June, Oregon placed a temporary moratorium on cannabis business licenses—but it may be too little, too late, some growers said.

“We desperately need to cap the number of licenses so we can at least stop the bleeding,” Getlin said.  “There’s a real need for an effective and organized cannabis lobby to become reasonably well-funded.”

“People are going to need to fail for the market to stabilize.”

Others suggested more funding for the OLCC so it can function more effectively, and scrapping state rules that aren’t business-friendly.

Regulators are taking steps to combat the black-market problem, Pettinger said. “There have been instances when a licensee is in bad standing and facing license revocation where our staff has taken possession of product to ensure its destruction.”

Meanwhile, the state’s too-much-weed problem may be a cautionary tale for California, which has already issued 10,879 licenses and has a similar regulatory set-up.

Washington is also bracing for the same supply-and-demand dilemma. “Prices here have dropped considerably and many businesses are having a hard time making it,” said Brian Smith, a spokesman for The Washington State Liquor and Cannabis Board.

Washington is conducting a study to probe whether its cannabis industry is too crowded. “We’re looking at diversion—the people who are trying  to find a market for it out of state, and are committing a felony,” Smith said.

Colorado, by contrast, found in a recent study that it “remains a highly competitive marketplace” for weed. The state has 673 licensed growers compared to Oregon’s 1,108. It also harvested roughly 750,000 pounds of pot last year, far less than Oregon.

Ultimately, Oregon’s weed glut may eventually fix itself. “There is going to be a natural attrition—but people are going to need to fail for the market to stabilize,” Margolis predicted.

Griffin’s farm was part of that carnage. “I decided to call it a loss,” he said. “Once I did it, [it] was actually a big relief.”

He expects shuttered businesses like his to keep fueling black market weed—at least until the laws catch up with the times.

“Legalizing it nationally would solve so many problems,” he said. “We need to open up the borders.”

SOURCE: THEDAILYBEAST

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