Cannabis

Wasilla says NO to marijuana shops

WASILLA — Southcentral Alaska’s cannabis business just got more concentrated in Anchorage. A big chunk of the Valley, long a byword for marijuana cultivation, is out. The Wasilla city council voted unanimously on Jan. 25 to ban all commercial marijuana within city limits, further narrowing options for Alaska cannabis industry to enter the newly legal market. The ban prohibits testing, processing, cultivation, and retail sales within Wasilla city limits, and also expressly prohibits consumption anywhere except a private residence with the owner’s permission. A state ballot initiative that passed in November 2014 legalized commercial marijuana activities in February 2015, but the ballot also specified that localities could opt out. In the Mat-Su, the city of Palmer has already banned commercial cannabis activities, and the Mat-Su Borough will have a borough-wide ban on its next public ballot. Industry representatives — who had packed the house alongside marijuana opponents — said the ban is yet another step in a slippery slope of local bans. “I want to puke,” said Midnight Greenery chief operating officer Tina Smith, a Wasilla resident. “This is the first step of banning it at the borough. We have the biggest grow in Alaska, right here. Once we start banning it, our industry is done. The more places opt out, the closer it gets to being closed entirely.” Daniel Bracken, a local pastor who led his congregation in speaking in favor of the ban, said the council made the right decision for the majority of Wasilla voters who voted against Ballot Initiative 2 in 2014. “I’m pleased,” said Bracken. “I think they made the right decision in respecting the will of the voters.” ‘I can do it here, or I can do it in Houston.’ Emotions ran high during public comment, both against the ban and in favor of it. Proponents of the ban had a running concern over providing a wholesome and safe environment for children. The congregation of local King’s Chapel Alaska turned up in force to voice concerns. Bracken implored the council to spare Wasilla’s children from an influence he associates with criminality and vice. A mother, formerly homeless, linked her previous poverty to her young intro to the substance. Like alcohol, said Wasilla man Leland Bogess, marijuana could work its way down to children and “infect” middle school and high schools. Youthful mistakes, others said, lead to lifelong regrets. “Is it fair for boys like these to grow up poor, hungry, uneducated, malnourished, and complete the cycle of their parents?” asked Chris LaCroix. Still other mothers, like pregnant Allie Van Eck, excoriated the council for even considered the “unfounded and unbalanced” ordinance that would take away her favorite anti-morning sickness aid, cannabis edibles. Medical users poured out stories of cancer pains and post-traumatic stress disorder cured by cannabis use. Cannabis industry proponents looked for the nuts and bolts approach to convince the council to vote down the measure. Cannabis industry advocates cited Colorado and Washington to remind Wasilla of the potential tax dollars and the potential tourist trade the marijuana trade could create for the city. Industry hopefuls insisted that regulated business is less a risk than a thriving black market without the security and age requirements of the regulated market. “Why are we possibly saying no to a viable industry here in our home town?” asked Smith, of Wasilla’s Midnight Greenery. “Give us a chance to show you the possibility before you shut us out.” Robert McMasters, who plans to open a 10,000-square foot cultivation facility in Wasilla, said he plans to produce enough cannabis to pay the City of Wasilla $200,000 in excise tax. “I can do that here, or I can do that in Houston.” For a few cannabis advocates, the ban simply amounted to a denial of what they see as an Alaskan right. “I don’t agree with our voted-upon rights being stripped away because one person doesn’t agree with another person’s personal decision,” said Chris Butters. ‘Not in my town.’ Council chose, in the end, to keep to what they said was their city’s will, not the state’s. The council passed the vote unanimously. Mayor Bert Cottle, who only votes in the event of a council tie, put the council’s feelings as a matter of the local popular vote. “In November 2014…48 percent of people in Wasilla voted yes, and 52 percent voted no,” Cottle said. “The same people who elected us every year are the one who voted. I guarantee you, if the vote had gone the other way, the discussion would’ve gone the other way.” Council member Stu Graham earned a roomful of hisses when he equated cannabis consumption with the privilege of driving or alcohol consumption, saying alcohol has little social value and implying neither would marijuana. “The citizens of Wasilla said, ‘not in my town,’” said Graham. “And that’s where we need to be.” Deputy mayor Gretchen O’Barr denied earlier comments from cannabis industry representatives that said a highly regulated market would be a more effective deterrent for underage consumption than the current black market. “Just because it’s a legal business doesn’t mean we can necessarily keep it from children,” O’Barr said. “I don’t see how any drug use in general can go down.” Council member Brandon Well said he sympathized with medical concerns brought up during public comment by medical marijuana users, but said medical usage is not the point. “This isn’t about medical marijuana,” said Wall. “Unfortunately we have a Legislature that’s completely filled with cowards that didn’t want to address medical marijuana when they had the chance. I agree with the notion that there are benefits to medical marijuana you’re not going to get with the big pharmaceutical companies, but what we’re talking about…is retail sales in city limits…I don’t see the win for Wasilla tonight.” Wall also added an amendment that specified marijuana consumption is solely limited to private property with the explicit consent of the property owner. Concerns over the accepting marijuana industry’s federally illegal cash-only market swayed council member David Wilson to vote in favor of the ban. “Being a schedule 1 ban, it is federally illegal, and banking institutions have not stepped up to accept that money,” Wilson said. “With that, it becomes and issue for the city if we were to tax that...I feel the city shouldn’t take on responsibility of those funds.” DJ Summers can be reached at [email protected]

Kenai finalizes pot regulations, doubles schools setback

KENAI — Prospective marijuana businesses in Kenai will have to observe 1,000-foot setbacks from schools, 500-foot setbacks from other sensitive areas — measured two different ways — a list of zones in which they can establish themselves with permission from the Kenai Planning and Zoning Commission, and two zones in which one business type can operate unpermitted. The Kenai City Council amended and unanimously passed the city’s final marijuana regulations during a four-and-a-half hour meeting Jan. 20. At the final meeting in which they could pass law that would be in effect before the state begins accepting commercial marijuana license applications on Feb. 24, the council edited and passed a set of marijuana regulations originally created by the Kenai Planning and Zoning commission. The regulations mandate minimum distances between marijuana businesses and schools, recreation centers, churches, correctional facilities, or drug abuse treatment centers. In the case of schools, this setback is 1,000 feet, measured from the outer wall of the marijuana business’s building to the property line of the school. The 500-foot setback from recreational centers is measured the same way. The 500-foot setback from churches, correctional facilities, and drug abuse treatment centers is measured from the marijuana business’s outer wall to the nearest pedestrian entrance. Five principals from area schools testified at the meeting to their personal support of the 1,000-foot school setback. The setback, which is double the state-mandated 500-foot school setback, was recommended by Kenai City Attorney Scott Bloom, who said it complied with the federal Drug-Free School Zone Act. Marijuana establishments will also be constrained by zone. Of the four state-licensed establishment types, only one will be allowed without planning and zoning permission, and only in two zones. Establishments licensed to test marijuana for contamination and potency will be allowed in Kenai’s light industrial zone — concentrated near the airport and a spot along the Spur Highway at the northern edge of town — and the heavy industrial zone — located near the Kenai River along Bridge Access Road. Holders of the other license types — for marijuana cultivation, retail, and the manufacture of marijuana products such as concentrates and edibles — will have to seek conditional use permits from the planning and zoning commission before opening in allowed zones. The change allowing unpermitted testing in industrial zones was proposed by council member Bob Molloy and passed unanimously. Motions by council member Terry Bookey to also allow planning and zoning-permitted cultivation and retail establishments in the industrial zones failed, with council members Brian Gabriel, Henry Knackstedt, Tim Navarre, and Kenai Mayor Pat Porter voting against both motions. Bookey made a successful motion to allow retail establishments with planning and zoning permission in the central mixed-use zone, where they had been banned under the planning and zoning commission’s draft regulations. The central mixed-use zone is located around the intersection of Bridge Access Road and the Kenai Spur Highway, and north of the Kenai Spur Highway across from Old Town. A resolution passed by the seven members of the Kenaitze Tribal Council requested that the Kenai City Council exempt Old Town Kenai, defined in the Kenaitze resolution as the area between Broad Street and Petersen Way, from all four commercial marijuana license types. The resolution stated “the Kenaitze Tribe has a firm belief that substance use negatively impacts our traditional ways of living, culture, and values” and referred to the tribe’s large presence in Old Town Kenai through its Dena’ina Wellness Center and Tyotkas Elder Center. Although the zone Bookey proposed opening to commercial marijuana lies near Old Town Kenai, it is mostly separated from it by the Kenai Spur Highway, with only a few highway-fronting lots directly bordering Old Town. Bookey said these would be accessible by vehicle from the highway, but not from Old Town. The change was made with opposing votes by Gabriel and Porter. Bookey also made a successful motion to allow small-scale marijuana growers to operate with conditional use permits in residential and limited commercial lots less than 40,000 square feet, which was opposed by votes from Navarre, Porter, and Gabriel. Bookey, who had recently been traveling out of state, said he had seen marijuana regulations at work in Washington and Oregon, and the experience — along with the finalized set of Alaska regulations expected to be signed officially by Lieutenant Governor Byron Mallot on Jan. 24 — had reassured him that marijuana could be commercialized safely. “With the regulation that’s going to be put forth for cannabis, I’m less scared than I was before — and I wasn’t that scared to begin with — about it getting to unintended users,” Bookey said. Reach Ben Boettger at [email protected]

Wasilla bans marijuana businesses

WASILLA — Southcentral Alaska’s cannabis business just got more concentrated in Anchorage. A big chunk of the Valley, long a byword for marijuana cultivation, is out. The Wasilla city council voted unanimously on Jan. 25 to ban all commercial marijuana within city limits, further narrowing options for Alaska cannabis industry to enter the newly legal market. The ban prohibits testing, processing, cultivation, and retail sales within Wasilla city limits, and also expressly prohibits consumption anywhere except a private residence with the owner’s permission. A state ballot initiative that passed in November 2014 legalized commercial marijuana activities in February 2015, but the ballot also specified that localities could opt out. In the Mat-Su, the city of Palmer has already banned commercial cannabis activities, and the Mat-Su Borough will have a borough-wide ban on its next public ballot. Industry representatives — who had packed the house alongside marijuana opponents — said the ban is yet another step in a slippery slope of local bans. “I want to puke,” said Midnight Greenery chief operating officer Tina Smith, a Wasilla resident. "This is the first step of banning it at the borough. We have the biggest grow in Alaska, right here. Once we start banning it, our industry is done. The more places opt out, the closer it gets to being closed entirely.” Daniel Bracken, a local pastor who led his congregation in speaking in favor of the ban, said the council made the right decision for the majority of Wasilla voters who voted against Ballot Initiative 2 in 2014. “I’m pleased,” said Bracken. “I think they made the right decision in respecting the will of the voters.” ‘I can do it here, or I can do it in Houston.’ Emotions ran high during public comment, both against the ban and in favor of it. Proponents of the ban had a running concern over providing a wholesome and safe environment for children. The congregation of local King’s Chapel Alaska turned up in force to voice concerns. Bracken implored the council to spare Wasilla’s children from an influence he associates with criminality and vice. A mother, formerly homeless, linked her previous poverty to her young intro to the substance. Like alcohol, said Wasilla man Leland Bogess, marijuana could work its way down to children and “infect” middle school and high schools. Youthful mistakes, others said, lead to lifelong regrets. “Is it fair for boys like these to grow up poor, hungry, uneducated, malnourished, and complete the cycle of their parents?” asked Chris LaCroix. Still other mothers, like pregnant Allie Van Eck, excoriated the council for even considered the “unfounded and unbalanced” ordinance that would take away her favorite anti-morning sickness aid, cannabis edibles. Medical users poured out stories of cancer pains and post-traumatic stress disorder cured by cannabis use.  Cannabis industry proponents looked for the nuts and bolts approach to convince the council to vote down the measure. Cannabis industry advocates cited Colorado and Washington to remind Wasilla of the potential tax dollars and the potential tourist trade the marijuana trade could create for the city. Industry hopefuls insisted that regulated business is less a risk than a thriving black market without the security and age requirements of the regulated market. “Why are we possibly saying no to a viable industry here in our home town?” asked Smith, of Wasilla’s Midnight Greenery. “Give us a chance to show you the possibility before you shut us out.” Robert McMasters, who plans to open a 10,000-square foot cultivation facility in Wasilla, said he plans to produce enough cannabis to pay the City of Wasilla $200,000 in excise tax. “I can do that here, or I can do that in Houston.” For a few cannabis advocates, the ban simply amounted to a denial of what they see as an Alaskan right. “I don’t agree with our voted-upon rights being stripped away because one person doesn’t agree with another person’s personal decision,” said Chris Butters. ‘Not in my town.’ Council chose, in the end, to keep to what they said was their city’s will, not the state’s. The council passed the vote unanimously. Mayor Bert Cottle, who only votes in the event of a council tie, put the council’s feelings as a matter of the local popular vote. "In November 2014…48 percent of people in Wasilla voted yes, and 52 percent voted no,” Cottle said. “The same people who elected us every year are the one who voted. I guarantee you, if the vote had gone the other way, the discussion would’ve gone the other way.” Council member Stu Graham earned a roomful of hisses when he equated cannabis consumption with the privilege of driving or alcohol consumption, saying alcohol has little social value and implying neither would marijuana. “The citizens of Wasilla said, ‘not in my town,’” said Graham. “And that’s where we need to be.” Deputy mayor Gretchen O’Barr denied earlier comments from cannabis industry representatives that said a highly regulated market would be a more effective deterrent for underage consumption than the current black market. “Just because it’s a legal business doesn’t mean we can necessarily keep it from children,” O’Barr said. “I don’t see how any drug use in general can go down.” Council member Brandon Wall said he sympathized with medical concerns brought up during public comment by medical marijuana users, but said medical usage is not the point. “This isn’t about medical marijuana,” said Wall. “Unfortunately we have a Legislature that’s completely filled with cowards that didn’t want to address medical marijuana when they had the chance. I agree with the notion that there are benefits to medical marijuana you’re not going to get with the big pharmaceutical companies, but what we’re talking about…is retail sales in city limits…I don’t see the win for Wasilla tonight.” Wall also added an amendment that specified marijuana consumption is solely limited to private property with the explicit consent of the property owner. Concerns over the accepting marijuana industry’s federally illegal cash-only market swayed council member David Wilson to vote in favor of the ban. “Being a schedule 1 ban, it is federally illegal, and banking institutions have not stepped up to accept that money,” Wilson said. “With that, it becomes and issue for the city if we were to tax that...I feel the city shouldn’t take on responsibility of those funds.”   DJ Summers can be reached at [email protected]

Anchorage regs would ban pot clubs, pesticides

The Municipality of Anchorage doesn’t exactly trust state regulations, but appears to see the new marijuana industry as a revenue source worth mining. An Anchorage ordinance would ban cannabis clubs and cafes, force retailers to foot the bill for cultivators’ pesticide use, and subject the Anchorage industry to city inspection on top of the required state inspection. Meanwhile, a separate ordinance establishes a retail marijuana sales tax that exceeds the city’s tax cap. The dual licensing ordinance would require Anchorage marijuana businesses to apply for a municipal license as well as a state license. Industry hopefuls say dual licensing is redundant, and along with the sales tax puts undue burden on retail businesses. Industry also fears city inspectors and law enforcement could use their powers to harass retail owners, mirroring concerns brought up during the state Marijuana Control Board rulemaking process.  City officials say they want more involvement with an industry that’s still federally illegal. Officials list “control over industry” in the “pro” column of an early dual licensing discussion paper, and ordinances are geared toward giving the city more control than it would otherwise have if it simply deferred to state regulations. Committee chairman Ernie Hall said the city is still waiting for Lt. Gov. Byron Mallott to approve state regulations on Jan. 24. “We’re still in a kind of never never land,” said committee chairman Ernie Hall. “Until the state regulations come out and the lieutenant governor signs it, we’re still kind of in limbo.” The Anchorage Assembly, however, is expected to vote on the dual licensing ordinance on Jan. 26, leaving only two days for draft revisions. Hall implored the cannabis industry to remember that Assembly process still leaves plenty of room for changes. “I want everybody to understand that this ordinance is being introduced. Don’t panic. There’s a process yet for this,” said Hall. The dual licensing and tax ordinances apply mostly to retail operations.  Municipal attorney Bill Falsey said the city’s intent is to focus on retail marijuana licenses to give Anchorage more control of the industry; much of the cultivation will likely be done elsewhere not subject to the city’s oversight. The ordinance would allow city officials to inspect and levy fines for marijuana business violators — just as in state regulations, which fine violators up to $10,000 — but Falsey said they’ve engineered a staggered fine structure to keep fines smaller for lesser offenses. “Ours will be tailored to different provisions,” said Falsey. “We’re going to have smaller violations with smaller fines, larger violations with larger fines.” Bruce Schulte, the chair of the Marijuana Control Board and ex-officio member of the committee, wondered why the city should have so much enforcement need beyond collecting revenue. “Why wouldn’t we just defer to the state?” asked Schulte. “I’m not sure what value we gain other than money into the city coffers. Or is that the goal?” Falsey said city enforcement should be able to enforce state regulations, as well as its own extra regulations, without having to go through the state board. “As we have municipal code enforcement doing purely municipal things,” said Falsey, “they may stumble on infractions on the licensing and regulatory side. When we have someone in power to do enforcement, they should be fully in power to enforcement.” The state marijuana board already pays half its licensing fees to the locality where the license is held, so the city will charge nothing for the license. The draft ordinance would ban both marijuana clubs and onsite consumption licenses, the latter of which the state specifically allows. Falsey said a ban is only a procedural necessity to bring the issue up when the Assembly meets. “The Assembly has asked that these issues be brought back to it,” Falsey said. “We know these questions are coming back to the assembly one way or the other.” The city already has an indoor smoking ban, but it has workarounds including private smoking clubs. Marijuana club Pot Luck Events has used this comparison frequently in defending its legality as a non-public place where cannabis consumption is permitted. Falsey said the Assembly might want its own ordinances regarding clubs and cafes. The state’s allowance for onsite marijuana consumption was not unanimous in the first place, he said, and the city might differ in opinion. “The onsite consumption and smoking clubs were highly contentious in the state regulatory discussions,” said Falsey. “Alaska is now currently the only jurisdiction anticipating whether or not there are marijuana café. Certainly the more conservative way would be to fall back on the Colorado Washington Oregon approach.” The city infractions mirror some of the state’s licensing requirements, as well as adding others where the city feels the state regulations didn’t address. The city’s hands could reach into other jurisdictions by applying certain rules like a pesticide ban. The ordinance would ban 59 different pesticides for marijuana cultivation, citing Oregon’s recent anti-pesticide provisions. City compliance officers could spot check retailers’ cannabis for pesticides. Since most cultivation will likely be done outside Anchorage, the city sees this as a way to control industry beyond what will likely be a heavily retail-based Anchorage market. Industry agreed with the sentiment, but not with method. The system makes retailers responsible — at $500 dollars a pop — for testing their product for pesticides. The cultivators who used the pesticides, however, would have no responsibility beyond souring business relationships with Anchorage retailers. “Cultivation sends samples, gets it tested,” said Kim Kole, a member of Coalition for Responsible Cannabis Legislation. “Retail has to sit on that product, and send out another sample for the testing facility again? It’s completely redundant and inefficient.” “We want to start the conversation going early,” said Falsey. Apart from fines and possible testing expenses, Anchorage’s marijuana industry will face a stiff tax schedule. The proposed marijuana tax would stick retail marijuana with a 5 percent sales tax, but allow city officials to increase the tax every two years by 2 percent. Conceivably, the tax could rise as far as 12 percent. Localities have already passed their own tax schedules. Fairbanks has passed a 5 percent marijuana sales tax and Bethel a 15 percent tax.    DJ Summers can be reached at [email protected]

The Anchorage Ban on Pot Clubs

City regulators want more control of the state’s marijuana industry than afforded by the Marijuana Control Board regulations. Dual licensing being drafted by the municipality's marijuana taxation and regulation committee would require Anchorage marijuana businesses to apply for a municipal license as well as a state license. Industry hopefuls say the process is redundant, while city officials say they want more control of an industry that’s still federally illegal. The ordinance could possibly outlaw marijuana clubs or cafes in the city, as well as impose additional testing requirements for retailers.  Committee chairman Ernie Hall said the city is still waiting on the finalized state regulations before nailing down the city rules. The Marijuana Control Board finished these in December. Lt. Gov. Byron Mallot is expected to sign them into regulation Jan. 24 after the Department of Law finishes reviewing them. “We’re still in a kind of never never land,” said Hall. “Until the state regulations come out and the lieutenant governor signs it, we’re still kind of in limbo.” The Anchorage Assembly is expected to vote on the ordinance on Jan. 26. “I want everybody to understand that this ordinance is being introduced. Don’t panic. There’s a process yet for this,” said Hall. Municipal attorney Bill Falsey said the city’s intent is to focus on retail marijuana licenses to give Anchorage more control of the industry; much of the cultivation will likely be done elsewhere not subject to the city’s oversight. The ordinance would allow city officials to inspect and levy fines for marijuana business violators – just as in state regulations, which fine violators up to $10,000 – but Falsey said they’ve engineered a staggered fine structure to keep fines light for lighter offenses. “Ours will be tailored to different provisions,” said Falsey. “We’re going to have smaller violations with smaller fines, larger violations with larger fines.” Bruce Schulte, the chair of the Marijuana Control Board and ex officio member of the committee, wondered why the city should have so much control beyond collecting revenue from fines.  “Why wouldn’t we just defer to the state?” asked Schulte. “I’m not sure what value we gain other than money into the city coffers. Or is that the goal?” Falsey said city enforcement should be able to enforce state regulations, as well as their own extra regulations, without having to go through the state board. “As we have municipal code enforcement doing purely municipal things,” said Falsey, “they may stumble on infractions on the licensing and regulatory side. When we have someone in power to do enforcement, they should be fully in power to enforcement.” The draft ordinance would ban both marijuana clubs and onsite consumption licenses, the latter of which the state specifically allows. Falsey said the language is conservative only because the Assembly wanted to discuss the matter. A ban is simply the vehicle to bring the issue up when the Assembly meets, a procedural necessity. “The Assembly has asked that these issues be brought back to it,” Falsey said. “We know these questions are coming back to the assembly one way or the other.” The city already has an indoor smoking ban, but it has workarounds including private smoking clubs, the structure for which existing marijuana clubs already resembles. Falsey said the Assembly might want its own ordinances regarding clubs and cafes. Its take could differ from the state’s, whose allowance for an onsite marijuana consumption provision was not unanimous in the first place. “The onsite consumption and smoking clubs were highly contentious in the state regulatory discussions,” said Falsey. “Alaska is now currently the only jurisdiction anticipating whether or not there are marijuana café. Certainly the more conservative way would be to fall back on the Colorado Washington Oregon approach.” The city’s dual licensing requirement stems, in part, from a desire for local control. The city wants its own enforcement to have authority to penalize marijuana businesses for infractions. This means mirroring some of the state’s licensing requirements in municipal code, as well as adding others where the city feels the state regulations are too lax. “In looking at this, there seemed to be a lot of synergies and efficiencies to be gained mirroring aspects of the state’s regulations already in municipal code,” said Falsey. Under the draft ordinance, city compliance officers could penalize marijuana  business for state issues like security, but also for new infractions. The ordinance proposes a ban on 59 different pesticides in marijuana cultivation. City compliance officers could spot check retailers’ producst to see if pesticides are present. Hopeful marijuana retailers agreed with the sentiment, but not with method. The system makes retailers responsible – at $500 dollars a pop – for a cultivator’s use of forbidden pesticides, and burdens the unwitting retailer with a stock backlog. “Cultivation sends samples, gets it tested,” said Kim Kole, a member of Coalition for Responsible Cannabis Legislation. “Retail has to sit on that product, and send out another sample for the testing facility again? It’s completely redundant and inefficient.” Falsey admitted the final ordinance would have to account for industry advice and said, “We want to start the conversation going early.” The state marijuana board already pays out a portion of its licensing fees to the locality where the license is held, so the municipal license will come at no charge. “The state ballot language requires that half those license fees come to us. Because we are due to receive 50 percent,” said Falsey, “our proposal in this ordinance is to charge nothing.” DJ Summers can be reached at [email protected]

Space is scarce for Anchorage marijuana business

The marijuana industry will have a tough time finding willing landlords for their would-be dispensaries and cultivation facilities, and the Anchorage Assembly may tighten restrictions even further. A land crunch already plagues the Anchorage housing market, and the marijuana industry worries it will whittle storefront options as well. Anchorage is proposing three separate ordinances that would create an additional municipal licensing requirement, a sales tax plan, and a special land use requirement. The land use requirement, industry fears, will hobble the industry’s startup by narrowing already elusive leasing opportunities. The Planning and Zoning Commission recommended a final draft of the land use ordinance to the Assembly on Jan. 4. The Assembly says it hopes to have the ordinances finalized before Feb. 24, when the Marijuana Control Board will accept the first cannabis business license applications. All Alaska cannabis businesses must follow regulations and licensing requirements the Marijuana Control Board finalized in December 2015. Ballot Measure 2, which passed in November 2014 and legalized recreational marijuana and marijuana businesses in February 2015, allows municipalities to craft their own rules, even to the point of banning aspects of marijuana businesses entirely. Industry stakeholders say Anchorage’s proposals are an effective, if not an outright, ban on marijuana business. “It legitimately feels as though they’re making all these ordinances specifically to make the marijuana industry fail,” said Bruce Schulte, chairman of the Marijuana Control Board and hopeful marijuana retailer. “It’s starting to look like death by a thousand cuts. Ultimately, they open themselves up to a legal challenge for making it unreasonably impracticable.” Marijuana business attorney Jana Weltzin said she would be willing to file such a suit if the Assembly approves certain restrictions. The municipality says it has no dark designs to choke the marijuana industry, but is only trying to regulate mindfully. Concerns over federal reprisal, the municipality says, outweigh certain allowances the state Marijuana Control Board made for smaller localities, such as a 500-foot buffer zone for schools. “There’s no hostility to the marijuana industry,” said municipal attorney Bill Falsey. “Our aim has always been to respect the wishes of the voters while coming up with sensible regulations.” Federal Drug Free Zone reemerges After backlash from industry figures during a December meeting, the Planning and Zoning Commission opened up more opportunities than the original draft, but also added additional restrictions for the Anchorage Assembly to vote on. Broadly speaking, the municipality wants to group cultivation and manufacturing facilities in industrial zones, and retail businesses in B-3 zones. The commission made some concessions to industry concerns of an earlier draft. In the new draft ordinance, marijuana bakeries will be able to maintain retail storefronts instead of being locked into industrial zones. The new draft also allows cultivation facilities in B-3 zones as long as they’re co-located with retail shops. This would allow for vertically integrated brewpub-style cannabis businesses. However, the commission also renews the federal Drug Free Zone standard. According to state regulations, schools, playgrounds, youth centers, religious assemblies, and correctional centers all maintain a 500-foot buffer zone from marijuana businesses. In the proposed Anchorage ordinance, schools, playgrounds, and public housing facilities require 1,000 feet from marijuana businesses, the federal standard. The Marijuana Control Board kept a 500-foot school buffer zone in part to recognize Alaska’s unique cityscapes. Smaller towns are often too closely-knit for any retail-zoned businesses to be more than 500 feet from schools or other trigger areas. Localities in Southeast Alaska even requested a 200-foot buffer zone from the board, fearing they could zone out marijuana businesses entirely. Falsey said the municipality still has concerns over the what’s known as the Cole Memo, which outlines the federal government’s marijuana enforcement priorities in states where it’s been legalized. Keeping it out of children’s hands is first and foremost. Falsey said the municipality believes Anchorage has enough space to be more cautious of federal scrutiny. “We’ve taken a hard look at the separation requirements,” said Falsey. “The Cole Memo indicates that federal enforcement may actively challenge local authorities…it’s not clear to us why Anchorage would need the reduced 500 foot school buffer zone that say, Ketchikan, would need.” Ultimately, this buffer zone concentrates marijuana businesses to a few areas. Midtown/Spenard has the most available retail marijuana-zoned space by far, with large pockets of pot-friendly zoning in South Anchorage. Industrial space is largely concentrated in South Anchorage. Downtown areas will be largely off limits unless the Assembly opens up B-2 zoning, which makes up a large share of downtown. Commissioners say the intent is to start low and go slow. It’s easier to loosen regulations than tighten them after the industry has established itself. “I think it is over restrictive,” said Tyler Robinson, chairman of the Planning and Zoning Commission. “The municipality’s policy, from what I can tell, is to be over restrictive out of the gate. Then if you need to open it up, then you open it up.” Willing landlords Businesses have had trouble finding space to occupy, caught between reticent landlords, zoning restrictions, and federal laws. Commercial real estate brokers said they’ve had plenty of marijuana businesses looking for buildings, but had to turn them down. Either the available buildings violate buffer zones, or they’re financed by banks that cannot do business with the marijuana industry. “The way they’ve made the rules, it’s impossible to go anywhere,” said Chad Graham, a commercial real estate expert working with Anchorage company Keller Williams. Graham said he control 45 percent of Anchorage’s industrial rentals, but virtually none is compliant with zoning restrictions. “I don’t have anything for (marijuana businesses),” said Graham. “You’ve got little churches or school next to warehouses everywhere.” According to Graham, industrial buildings in Anchorage have a 98 percent occupancy rate; retail space is looser. Much of the available space is still bank-financed; federally chartered banks refuse to deal in marijuana business, which is still illegal under federal law. Some landlords have offered some buildings, but at triple the going rate for square footage in order to mitigate a perceived, and well-founded, risk factor. In the Lower 48, the federal government has used racketeering laws to prosecute marijuana-related businesses, including landowners and accounting services. “The few that do open up that are lucky enough to find a spot that’s outside the buffer zones and not bank owned and has willing landlords will probably make a killing,” said Graham. “They’re going to have the whole market to themselves.” Other commercial real estate companies and representatives in Anchorage say it’s too early in the industry’s rollout to have much experience and so have no official position but that their landlords may be reticent. “The owners are very conservative in a lot of ways,” said Linda Boggs, an associate broker with Carr-Gottstein, one of the largest commercial real estate brokerage companies in the city. “From the nature of it, that can turn people off. We haven’t really been forced to take a position on it yet.” Marc Dunne, an associate broker with Jack White Real Estate, said real estate companies like Carr-Gottstein are conservative enough to make renting from them a moot choice. “There’s a lot of landlords like them,” said Dunne. “They’re patriarchs, they’re old school. Super visible. They’ll find other tenants with less brain damage associated with them.” Alaska commercial real estate listings turned up 27 available retail spaces between 1,500 square feet and 6,000 square feet, and 19 industrial spaces between 1,500 square feet and 10,000 square feet, not taking buffer zones and bank held buildings into account. Dunne said taking buffers and bank notes into account could whittle the number down to less than five properties for either retail or industrial space.

Retail legalization of marijuana will become reality in 2016

Rules governing the recreational cannabis industry were mostly settled at the state level in 2015, but 2016 will be Alaska marijuana’s true birth. Regulators will issue business licenses; cannabis businesspeople will open doors amid both known and yet-to-be-decided restrictions, and the state will punish, forgive, or ignore a fistful of gray market marijuana operations. In November 2014, voters approved a ballot measure to legalize recreational cannabis for adults over 21 and to create business license types for cultivation, manufacturing, testing, and retail. The Alaska Marijuana Control Board finalized regulations in November, and will open the books to business license applications on Feb. 24, 2016. Cannabis entrepreneurs exist in a state with limited capital, and Feb. 24 will bring creative funding opportunities. Banks will not fund marijuana businesses so private loans are vital. State regulations require investors to meet Permanent Fund Dividend residency requirements: a physical presence in Alaska for a calendar year. This effectively bars any above-board Outside investment in the Alaska cannabis industry for the first year. With expensive startup costs, Alaska’s marijuana industry could either begin underfunded or with a dose of unsavory financial practices to skirt investment regulations. Conversely, the business could turn out a surprising number of private investors from the Last Frontier. Cannabis consumers may be excited about store-bought bud in the coming year, but regulations could push back the first marijuana sale until late summer at the earliest. Licenses won’t be issued until May 24 at the soonest. Regulations require each plant to be tracked from seed to sale, meaning a retail store opening on May 24 wouldn’t have access to legally grown, legally tracked, and legally tested product; growers will have to start their process on May 24 as well. With cannabis’ roughly three-month growing cycle, retail outlets are more likely to have legal product in August or September. Though state regulations are complete, local regulations are still coming out. Some towns such as Ketchikan, Soldotna, and Palmer have already banned marijuana cultivation or sale in their localities. The Anchorage Assembly is currently waiting for zoning recommendations from its Planning and Zoning Commission, due Jan. 4. The assembly requires both zoning restrictions and a conditional use permit for marijuana businesses in additional to a state-issued permit, and is expected to have its own regulations completed by the Feb. 24 license application start. So far the proposed ordinances have been roundly condemned by the industry as overly restrictive. Some business may not make the cut into 2016 at all, depending on a string of trials and potential enforcement actions. In January 2016, four marijuana business owners will go to trial for selling or delivering marijuana without a license. Michael Crites, owner and operators of Absolutely Chronic Delivery Company, Charlene Egbe, owner and operator of the Alaska Cannabis Club, and Larry Stamper and Rocky Burns, co-owners and operators of Discreet Deliveries, were all charged with multiple felonies in October 2015. Each has secured legal counsel except Rocky Burns, who after bouncing between several Alaska attorneys has decided to represent himself in court. Marijuana clubs will also present a legal issue to the State of Alaska in 2016. Pot Luck Events in Anchorage and The Higher Calling Club in Fairbanks currently exist in a hazy gray market; they sell no marijuana, but the state claims their clubs amount to public consumption of marijuana, which is forbidden. The state has not taken any action to shut down either club. Soldotna club Green Rush Events closed in December. Owner Josh Bird claimed he halted operations due to increasing fears of law enforcement from local authorities.

Marijuana industry criticizes city zoning

State cannabis regulations might be finalized, but Anchorage rules are just heating up. The Anchorage Planning and Zoning Commission, which passes zoning recommendations to the Anchorage Assembly, wants to tone down a set of municipal land use rules that make state regulations look laidback in comparison. The Alaska Marijuana Control Board finalized state regulations Dec. 1, but Ballot 2 specified local controls; cannabis businesses in the Anchorage municipality will have to go through a municipal licensing process as well, including an additional operator’s license and a conditional use permit. Proposed zoning rules expand the buffer zones cannabis businesses must follow and assign several license types to scarce and expensive industrial zoning, as well as require community outreach plans for businesses. The commission has a deadline recommend a finalized package to the Anchorage Assembly by Jan. 4, 2016. It plans to make several changes before that date, as commissioners largely agreed with various industry criticisms. Fresh off the state package, Alaska Marijuana Control Board chairman Bruce Schulte told the commission the proposed plan treats marijuana businesses unfairly.  “The proposed zoning regulations could best be defined as hostile to the industry,” Schulte told the commission. “If it is the intent of the municipality is to ban all things marijuana in Anchorage, fine, let’s do that. Let’s not use the zoning process as a backhanded way of doing that.” Erika McConnell, the zoning and planning manager for the municipality, said the Assembly’s staff would rather err on the side of too restrictive than too relaxed. “We have tried to take a conservative approach,” McConnell said. “We’ve taken a conservative approach to see how things go, and then relax the standards later when we see there’s no problem.” Schulte was one of handful of industry stakeholders present who’d been heavily involved with state regulations, either as public commentators or as public officials, who showed up to argue similar points they’d brought up at Marijuana Control Board meetings. Overburdening the industry, some said, could bring in an industry-led lawsuit against Anchorage. “Ballot Measure 2 delegated specific rights to local government but it also stipulated that rules, taxes, and fees could not be so burdensome as to make the lawful industry unfeasible,” said Kim Kole of the Coalition for Responsible Cannabis Legislation. “That could very well leave the municipality of Anchorage open to legal challenge.”   500 feet from parks According to ordinance, business would not be welcome within 500 feet of Anchorage’s 223 parks, encompassing over 10,000 acres of municipal land in total. State rules only order marijuana businesses be kept 500 feet from child-centric establishments, halving the federal Drug Free Zone standard.    “You all know how many parks there are in town,” said Kole. “Once you put 500 feet around all of these additional municipal locations, businesses will essentially be zoned out of existence.” Marijuana business attorney Jana Weltzin said Anchorage’s limited land doesn’t allow for such restrictions as it might in other states like expansive Arizona, where Weltzin formerly represented marijuana business interests. “You should look at the state’s buffer zone list and just adopt those,” said Weltzin. “The topography of our land and the way we’re set up just doesn’t allow for us to sprawl out like other cities.” Commissioners broadly agreed with industry’s complaints. “I don’t feel that the separation from protected land use needs to be any more onerous than the state has them,” said commission vice-chair Anthony Cange.    Industrial vs. commercial zoning The proposal consigns cultivators, testing facilities, and manufacturers to industrial zones, which are both expensive and scarce in Anchorage’s limited land. Retail businesses would only be allowed in commercial zones. Anchorage has a scarcity of industrial property. McConnell said the rationale behind disallowing commercial marijuana sales in industrial land was to save as much of it at possible. Limited cultivators, who by state law are allowed up to 500 square feet of marijuana grow space, fumed at the proposal to stay in industrial zoning rather than commercial or residential.  “You tell me where there’s a 500 square foot industrial space in Anchorage,” said Theresa Collins, owner of Anchorage marijuana club Pot Luck Events. The Marijuana Control Board meant the limited cultivator license to allow for low-scale production; $1,000 for a garage-sized grow instead of the standard, unlimited $5,000 cultivator license. Offering cheaper limited grow operations, the theory goes, will draw the estimated 5,000 Anchorage area small scale black market growers out of the darkness and into the regulated industry. Warehouse space is simply uneconomical for the small growers. Schulte even advocated for a residential allowance for limited cultivators, though admitted the idea is “a tough sell.” The state board chair was uncomfortable with the concept of warehouse requirements for marijuana farmers entirely. “There’s a finite amount of warehouse space suitable for cultivators,” said Schulte. “It almost guarantees a failure of this industry in Anchorage.” Furthermore, the industrial zoning prevents a horizontally integrated business model. Marijuana edibles manufacturers would also be relegated to industrial zones, which thwarts a hard-fought state regulation allowing bakeries to experiment with cannabis confectionary. Retail marijuana businesses may only take place in commercial zones. A cannabis entrepreneur would not be able to open brewpub-style establishments that blend cultivation and retail, nor could they open confectionary establishments that blend retail and manufacturing. Commissioners appeared to agree with industry, questioning the rationale behind zoning restrictions. “I find it hard to wrap my head around separate locations,” said Cange. “I don’t see why retail and manufacturing can’t be co-located.” “Admittedly, we have a problem with industrial land,” said commissioner Jon Spring. “I don’t think allowing commercial marijuana sale in I-1 (industrial zoning) is going to make a big difference.”   DJ Summers can be reached at [email protected] 

Marijuana board reverses itself on residency

In an emergency meeting, the Marijuana Control Board voted unanimously on Dec. 1 to reinstate a stricter residency requirement for marijuana business licensees, following Permanent Fund Dividend rules instead of voter registration rules. The board also tried to loosen rules to allow more access to Outside money, but public process rules will hold that discussion until the board’s next meeting in February 2016. The regulatory package will now move to Lt. Gov. Byron Mallot for approval pending a review by the Department of Law to make sure the regulations follow statute. “This amendment essentially changes the residency requirements back to what were in the draft regulations,” board chairman Bruce Schulte said. This requirement plus the definitions of financial investment satisfies the demands of some in the local cannabis industry and the board’s legal advisers, who respectively fear “Big Marijuana” investors and federal money laundering charges, but frightens others about their prospects in a small market with limited capital. “I’m very disappointed in the inability to seek Outside investments,” said Tina Smith, chief operations officer for Midnight Greenery. “This is going to severely limit the number of licensees (applications) in February. It’s required that you already have a very significant amount of capital to even submit a license that has a chance of opening.” The adopted regulations require a marijuana licensee to be an Alaska resident by Permanent Fund Dividend definitions. Under these rules, non-Alaskans must maintain a physical presence and Alaska address for a calendar year and not maintain residency in any other state. Because of financial regulations, this effectively bars all transparent Outside financial contributions in the Alaska marijuana industry. According to regulations, no one can hold “direct or indirect” financial stake in an Alaska marijuana business without being listed as a licensee. The board’s action follows a last minute amendment at its Nov. 20 meeting that opened the Alaska cannabis market to more Outside presence than stakeholders were comfortable with, and overburdened the board’s small staff. Alaskans declared it the death knell for small Alaska marijuana businesses, and board members regretted the hasty amendment as too slack. That amendment loosened residency requirements to voter registration standards, which only require an Alaska address and a 30-day wait. Outside investors could theoretically become residents without leaving their current state, and board staff would have to verify that licensees have filled all the requirements. “In an effort to meet some of the suggested changes,” Schulte said, “the board may have inadvertently put staff in a position where they wouldn’t be able to execute the regulations.” After the board returned to PFD rules on Dec. 1, board member Brandon Emmett proposed an amendment that would “expand the pool of investment resources” and allow 12.5 percent Outside financial stake or ownership in Alaska marijuana businesses. However, the board had not requested public comment for this change or announced its presence on the meeting agenda. Assistant Attorney General Harriet Milks said the board could not consider the motion without the proper public input, and Emmett withdrew the motion. “I think the most important action today is to sign this and get it off to the lieutenant governor,” said board member Marc Springer. “We can talk about this in February.” The combination of residency requirements and total investment prohibitions are a step in the wrong direction, according to Outside industry figures, who share the same concerns as Smith. “That’s going to be a real problem,” said Kris Krane, former executive director for the National Organization for the Reform of Marijuana Law. “I’m sympathetic to the idea they don’t want outsiders dominating the state’s industry. But these are really expensive businesses to set up. You’d be hard-pressed to find a medium-scale cultivation operation for less than a million bucks. Some of the bigger ones are three, four million. There’s just not that much money in Alaska. How are you going to fund all that?” In other states, marijuana policy makers have bounced back and forth between different residency requirements, trying to fine tune the balance between locals who want to roadblock out of state competitors while still allowing a path for investment dollars. In Oregon, a bipartisan group of state representatives has publicly opposed the two-year residency requirement and 51 percent Oregon ownership regulation proposed in that state. “Our own thinking on these issues has evolved over time,” wrote a group of legislators to the Oregon Liquor Control Commission, which oversees marijuana regulation. “We now believe that broad residency requirements and significant limits on outside investment could do more harm than good.” Vincent Sliwoski, an attorney with Harris Moure, a Seattle firm specializing in corporate law including regulated substances, said strict residency requirements fail to keep outsiders outside. Well-financed investors find legal loopholes. “All residency requirements do is make people find ways around them, then you get people like me,” said Sliwoski. “They’re basically creating a bunch of hoops to jump though. This sort of trade protectionist policy isn’t helpful.” DJ Summers can be reached at [email protected]

Marijuana board finalizes industry regulations

The Alaska Marijuana Control Board accepted its final draft of the regulations that will govern the new industry, legalized by Ballot Measure 2 in November 2014. The new cannabis industry regulations include a concession to marijuana clubs that still leaves a hazy legal area to be sorted out later, maintaining a ban on Outside investment while loosening the residency requirement, revisions to concentration limits, allowances for retail operations and limited cultivator licenses, and clarifications to packaging requirements. The final draft of cannabis industry regulations do not satisfy every public comment, nor do they zip closed every potential legal challenge or hiccup, but Marijuana Control Board chairman Bruce Schulte believes their completion alone is a success, having learned from the mistakes of Lower 48 state regulations. “We’re the fourth state to do this,” said Schulte. “It’s not perfect, but I hope and think it’s as good or better than Colorado or Washington. Even if we’re better than the two who preceded us in regulation, that’s a win.” Lt. Gov. Byron Mallot will have the opportunity to adopt the regulations on Nov. 24. Voter residency adopted The board will hold an extra meeting on Dec. 1 to reconsider a last minute amendment that loosened the definition of residency. The amendment sent some industry members into panic and each of the board members who supported it into regret. “There wasn’t enough time to consider the contents,” said Schulte days after. “What was in the draft might be better than what we passed.” Schulte said the board needs to reexamine the issue of Outside investment for a better fix; if they can’t find one they like now, he said, they need to keep trying until a more creative solution appears. “If you don’t like the solutions you have in front of you, you need to keep looking until you find an angle that gives you better options,” he said. After banning Outside investment in the first half of the Nov. 20 meeting, the board broke open the dam for Outside money at the end of the day. The amendment meant Outside investors are welcome in the Alaska cannabis industry as long as they fulfill the residency requirements of Alaska voter registration and cancel whatever voter registration they hold elsewhere. By voting registration rules, residency only requires an Alaska address, and can be done electronically. Theoretically, a Californian investor could become an Alaskan under voting registration requirements by renting an Anchorage apartment and canceling his San Francisco ballot card. The board voted in favor of the amendment 3-2, with Loren Jones and Peter Mylnarik voting against. Marc Springer, Brandon Emmett, and Schulte voted in favor, but afterward said they mistakenly overshot their goal to allow some Outside financing options while still favoring Alaskans. Some Alaska business hopefuls reacted violently to the amendment, fearing industry domination from Outsiders with capital that dwarfs their own. “Alaskans had value, now they don’t,” said industry attorney Jana Weltzin after the amendment. “You know what they need you for? Employees. You’re all just employees now.” Springer had introduced the amendment following hours of debate limiting Outsider dollars, which industry representative board members Schulte and Emmett had stubbornly resisted. “We’ve systematically removed every source of investment for this industry,” said Schulte. “We’re quickly getting to the point there’s only 15 people who will be able to get into this industry.” Previous regulations specified that licensees must follow Permanent Fund residency rules, which require a full calendar year to establish eligibility as compared to voter registration that requires only 30 days and an Alaska address. Board members opposing the new rule said it would open floodgates to the exact Outside influx the board had spent months trying to avoid. “I really have a problem tying residency to voter registration,” said board member Loren Jones. “I think we’ll end up with an awful lot of owners that aren’t residents. I think that’s what we’re trying to avoid and what we’ve debated about.” Emmett said there would be no other way to turn on the money faucet. “Unless someone is on the license, and within the state, they can have no interest in the business,” said Emmett. “Unless we can go back and change that, we need to support this amendment.” Board director Cynthia Franklin bucked at the idea, saying the board does not have a robust enough staff to verify whether all the applicants have in fact cancelled all other voter registration. Without some Lower 48 money, however, industry stakeholders said it would be a moot point. “I think we’re headed to the point where you’re not going to have any applications to review,” Schulte said.  Marijuana bars in, marijuana clubs not quite out Over 500 pages of public commentary flooded the board by the Nov. 11 deadline, the bulk of it concerned with the same handful of controversial licensing requirements. Marijuana clubs, the hottest topic by far according to board members, will continue to be a gray legal area even if they lose ground to the marijuana retail onsite consumption allowance introduced by Bruce Schulte, which paves the way for a marijuana café-like establishment. Schulte’s amendment struck the previous draft’s prohibition on clubs, acknowledging the board’s inability to prohibit a nonexistent license type, and created a new addition. Subject to approval by the board, marijuana retail establishments can now request “onsite consumption allowances” when applying for a license. Unlike clubs, where paying members bring their own cannabis, retail stores would sell product to the onsite consumers. Retail stores will also now be allowed to sell non-marijuana consumable products such as snacks and beverages and refrigerated products. Though the new definition allows retail onsite consumption, it still doesn’t clear up the legality of existing clubs. Schulte clarified he is not endorsing clubs, simply acknowledging the board’s total lack of authority to prohibit or allow them. “The intent here is to solve a legal ambiguity,” Schulte said. “If we can’t regulate them, we can’t prohibit them.” Pot clubs, which do not sell cannabis but allow on-premise consumption and sharing, walk an unmarked path. The board, industry, and many local governments have openly acknowledged they want some kind of cannabis consumption venue, but Ballot Measure 2 created no such license. The Legislature would have to create the license type in order for the board to regulate clubs, and Schulte doubts that would happen. Creating a license subset in regulation, theoretically, takes pressure off a Legislature beset with a budgetary crisis, AK LNG Project plans, and little stomach to wade back into Ballot Measure 2 territory it established the board to oversee. The board prohibited marijuana clubs in the first draft regulation package to public outcry from industry and legal voices, including marijuana business attorney Weltzin, who directly challenged the Department of Law’s prohibition. Regardless of the new license allowance for onsite consumption, the currently operating clubs will continue. Theresa Collins, owner of Anchorage’s Pot Luck Events marijuana club, said she has no plans to shut her doors. Several arguments will need to be addressed as a result, depending on whether the board chooses to exercise any enforcement against Collins’ establishment or Soldotna’s Green Rush Events. Franklin hinted at some main concerns with marijuana clubs two nights prior, addressing the Alaska Municipal League regarding cannabis regulation. She supports a licensed consumption venue, she said, but not clubs in their current form. Franklin said leaders should discourage the black market, which she claims marijuana clubs enable by virtue of allowing unregulated consumption. If marijuana club users aren’t getting their product from retailers, she said, they could be buying dangerous and untested product from criminal producers. “There’s a danger that marijuana clubs will serve as a great place for black market dealers to move their product,” Franklin told the crowd of municipal officials. The untested product, she said, could cause health concerns. “What happens if there’s marijuana tainted with E. coli, and everybody at the club is passing it around and smokes it?” Franklin also makes an economic argument against clubs, in that they will unfairly compete with licensed establishments. Alcohol regulations prohibit bottle clubs, where people bring their own beverages, on the grounds that they will siphon business from licensed bars that must jump regulatory hoops. “A bigger question for you as local governments, is the effect that clubs have on legal businesses,” Franklin told the league. “The reason bottle clubs are prohibited is so that they can’t compete with licensed liquor establishments.” Clubs will eventually force a decision about what a “public place” entails, which forms the Department of Law’s core argument against clubs. Board member Loren Jones, the only dissenting vote to removing the club prohibition, worried about the same thing even in relation to the new retail consumption allowance. “A retail store is a public place,” said Jones. “It is a restricted public place but it is still a public place.” In response to marijuana-themed events in the summer, the board made an emergency definition of “public place” to cut down on open air smoking. Staff amended the definition to exclude retail establishments granted an onsite consumption provision. “’Public place’ means a place to which the public has access and includes, but is not limited to, streets, highways, sidewalks, alleys, transportation facilities, parking areas, convention centers, sports arenas, schools, places of business or amusement, shopping centers, malls, parks, playgrounds, prisons, and other portions of apartment houses and hotels not constituting rooms or apartments designed for actual residence such as hallways, lobbies, and doorways,” the regulation reads. Franklin and the Department of Law believe this applies to clubs as well, though clubs charge membership fees and only admit adults over the age of 21. Franklin said movie theaters are public places despite charging an entry fee.  “You’re not a member of the movie club when you buy a ticket,” Franklin said. “That’s still a public place.” As of yet, this interpretation has not been challenged or taken to an Alaska court for specific rulings resultant from any prosecutions, or any challenges from other establishments who charge membership or entry fees who otherwise might not be considered a “public place,” such as bars, strip clubs, cigar bars, or private social clubs. No charges have been made against pot club owners or members for public consumption. Club owner Charlene Egbe was indicted for four felonies for operating Alaska Cannabis Club, but each charge was for sale of marijuana, not for allowing consumption in a public place. Public consumption only carries a $100 fine. Franklin said an “enthusiastic prosecutor” could potentially assign all a marijuana club’s consumption onto the owner. Collins said she isn’t afraid of prosecution, because she’s perfectly within the confines of the law and doesn’t fill the definition of a public place. “You don’t pay a membership fee and sign a membership contract at a movie theater,” Collins said.  500 feet buffer remains unchanged The board failed to revise buffer limits for marijuana operations after a proposal to allow them within 200 feet of churches, which would have mirrored alcohol regulation’s church buffer. Regulations maintain a 500 buffer zone from children’s centers, schools, and churches. Schulte said he was responding to public concern. “My amendment is really in response to the communities where we have gotten specific feedback,” said Schulte. Emmett had even proposed Schulte’s original amendment down from 200 feet to 100 feet, an idea he got from the Fairbanks-North Star Borough Assembly itself, but the motion failed 2-3, with Schulte and Emmett in favor. Boroughs and local governments including the Fairbanks-North Star Borough spoke against the 500 foot buffer zone, which is only half the federal Drug Free Zone standard of 1,000 feet. Alaska’s small towns and villages, particularly Southeast Alaska communities with heavy tourism economies, will have difficulty finding child-free space in any of the areas zoned for business. In narrow Ketchikan, churches and daycare centers dot the downtown area on street level and second floors. Representatives from Sitka and other Southeast communities, cruise-based tourist destinations, expressed similar concerns. In Fairbanks, there are worries that the buffer zone will kill the tourism that comes through Fairbanks’ downtown area, which has cramped conditions similar to Southeast Alaska communities. Assistant attorney general Harriet Milks claimed the board’s “first loyalty” should be to the statute, not to public comment. “Anyone can send in 500 comments,” said Milks, “that doesn’t mean the issue is 50 times more important to the board.”  Broker licenses eliminated The board removed the entire subset of a brokerage license with an amendment introduced by member Peter Mylnarik. Brokerage licenses establish go-between options for cultivators and retailers or manufacturers. Under previous drafts, limited cultivators were required to sell only through brokers, causing public backlash from small growers who say the brokerage fees would kill their entire business. Mylnarik said he was aiming for consistency, as the board acknowledged for months that it cannot create a new license type not specified by Ballot 2. Earlier language had specified that broker licenses are a “subset.” Mylnarik argued that they are in fact a totally separate license, as they take no part in any of the activities associated with marijuana cultivation. Potency limits and retail particulars The board also reversed several contentious regulations it had made in earlier drafts regarding what retailers can and can’t do. To an audible cheer from the audience of potential retailers, the board voted 3-2 to allow marijuana licenses to sell branded merchandise. “I think it’s necessary for businesses to be able to brand themselves,” said Emmett. “If we ultimately want to have responsible actors, this incentivizes them to do so.” Schulte also clarified the packaging requirements for retail stores, creating marijuana’s version of a liquor store’s brown paper bag. Marijuana packages may be transparent in retail stores, but all product leaving the store must be in opaque, child-proof packaging. Previous drafts had a complicated array of cultivator requirements for packaging. Childproofing edibles packages was a main concern, but Schulte said children are only the responsibility of their parents, not marijuana licensees. “Ultimately, when someone’s in a home with children, they have to take responsibility for that,” he said. Potency limits also got a rewrite. Previously, marijuana extracts were capped at 76 percent, mirroring Alaska’s 151 proof alcohol limit. Schulte said the number doesn’t translate to alcohol, and the board revised marijuana concentrate to have no upward limit. DJ Summers can be reached [email protected]

Final regs allow Outside investment, marijuana cafes

The Alaska Marijuana Control Board accepted its final draft of the regulations that will govern the new industry, legalized by Ballot Measure 2 in November 2014. The new cannabis industry regulations include a concession to marijuana clubs that still leaves a hazy legal area to be challenged later, a ban on Outside investment, revisions to concentration limits, allowances for retail operations and limited cultivator licenses, and clarifications to packaging requirements. The final draft of cannabis industry regulations do not satisfy every public comment, nor do they zip closed every potential legal challenge or hiccup, but Marijuana Control Board chairman Bruce Schulte believes their completion alone is a success, having learned from the mistakes of Lower 48 state regulations.  “We’re the fourth state to do this,” said Schulte. “It’s not perfect, but I hope and think it’s as good or better than Colorado or Washington. Even if we’re better than the two who preceded us in regulation, that’s a win.” Lt. Gov. Byron Mallot will have the opportunity to adopt the regulations on Nov. 24.   Outside investors welcome if registered to vote in Alaska After banning Outside investment in the first half of the day, the board broke open the dam for Outside money at the end of the day with a last minute amendment. Outside investors are welcome in the Alaska cannabis industry as long as they fulfill the residency requirements of Alaska voter registration and cancel whatever voter registration they hold elsewhere. By voting registration rules, residency only requires an Alaska address, and can be done electronically. Theoretically, a Californian investor could become an Alaskan under voting registration requirements by renting an Anchorage apartment and canceling his San Francisco ballot card. Springer introduced the motion following hours of debate limiting Outsider dollars, which industry representative board members Schulte and Emmett had stubbornly resisted. “We’ve systematically removed every source of investment for this industry,” said Schulte. “We’re quickly getting to the point there’s only 15 people who will be able to get into this industry.” Previous regulations specified that licensees must follow Permanent Fund residency rules, which are much more stringent than voter registration. Board members opposing the new rule said it would open floodgates to the exact Outside influx the board had spent months trying to avoid. “I really have a problem tying residency to voter registration,” said board member Loren Jones. “I think we’ll end up with an awful lot of owners that aren’t residents. I think that’s what we’re trying to avoid and what we’ve debated about.” Emmett said there would be no other way to open up the money in the state. “Unless someone is on the license, and within the state, they can have no interest in the business,” said member Brandon Emmett. “Unless we can go back and change that, we need to support this amendment.” Board director Cynthia Franklin bucked at the idea, saying the board does not have a robust enough staff to verify whether all the applicants have in fact cancelled all other voter registration. “I think we’re headed to the point where you’re not going to have any applications to review,” Schulte said in response Alaskans who had lobbied to keep Outside money Outside are not enthused, fearing a takeover of well-financed Lower 48ers. “Out of state newly transplanted Alaskans will now own a majority of cannabis businesses in Alaska,” said Jessica Jansen, co-founder of CannaFarm Co-op."The board gave away the cannabis industry." Earlier draft proposals had tried to strike a balance between outright banning Outside investment, which could hamper the fledgling industry, and unlimited Outside investment, which could force Alaskans out of the industry by sheer volume of influx dollars. One such amendment had been introduced earlier and would’ve allowed up to 25 percent investment in Alaska marijuana businesses, but was voted down. The intent behind the amendment was to favor Alaskans in the industry, which stakeholders say is beyond a moot point with the new rule. “Alaskans had value, now they don’t,” said industry attorney Jana Weltzin. “You know what they need you for? Employees. You’re all just employees now.” The board voted in favor of the measure 3-2, with Jones and Mylnarik voting against. Even though Springer, Schulte, and Emmett supported the measure, after the meeting each expressed a note of regret. They had been trying to find a middle ground but perhaps overshot the mark, they said. “I really would have preferred to see something in the middle,” said Schulte. "I sort of agree with the effort to keep it controlled, so I'm concerned this could've gone too far."   Marijuana bars in, marijuana clubs not quite out Over 500 pages of public commentary flooded the board by the Nov. 11 deadline, the bulk of it concerned with the same handful of controversial licensing requirements. Marijuana clubs, the hottest topic by far according to board members, will continue to be a gray legal area even if they lose ground to the marijuana retail onsite consumption allowance introduced by Bruce Schulte, which paves the way for a marijuana café-like establishment. Schulte’s amendment struck the previous draft’s prohibition on clubs, acknowledging the board’s inability to prohibit a nonexistent license type, and created a new addition. Subject to approval by the board, marijuana retail establishments can now request “onsite consumption allowances” when applying for a license. Unlike clubs, where paying members bring their own cannabis, retail stores would sell product to the onsite consumers. Retail stores will also now be allowed to sell non-marijuana consumable products such as snacks and beverages and refrigerated products. Though the new definition allows retail onsite consumption, it still doesn’t clear up the legality of existing clubs. Schulte clarified he is not endorsing clubs, simply acknowledging the board’s total lack of authority to prohibit or allow them. “The intent here is to solve a legal ambiguity,” Schulte said. “If we can’t regulate them, we can’t prohibit them.” Pot clubs, which do not sell cannabis but allow on-premise consumption and sharing, walk an unmarked path. The board, industry, and many local governments have openly acknowledged they want some kind of cannabis consumption venue, but Ballot 2 created no such license. The Legislature would have to create the license type in order for the board to regulate clubs, and Schulte doubts that would happen. Creating a license subset in regulation, theoretically, takes pressure off a Legislature beset with a budgetary crisis, AK LNG Project plans, and little stomach to wade back into Ballot 2 territory they’d established the board to oversee. The board prohibited marijuana clubs in the first draft regulation package to public outcry from industry and legal voices, including marijuana business attorney Jana Weltzin, who directly challenged the Department of Law’s prohibition. Regardless of the new license allowance for onsite consumption, the currently operating clubs will continue. Theresa Collins, owner of Anchorage’s Pot Luck Events marijuana club, said she has no plans to shut her doors. Several arguments will need to be addressed as a result, depending on whether the board chooses to exercise any enforcement against Collins’ establishment or Soldotna’s Green Rush Events. Franklin hinted at some main concerns with marijuana clubs two nights prior, addressing the Alaska Municipal League regarding cannabis regulation. She supports a licensed consumption venue, she said, but not clubs in their current form. Franklin said leaders should discourage the black market, which she claims marijuana clubs enable by virtue of allowing unregulated consumption. If marijuana club users aren’t getting their product from retailers, she said, they could be buying dangerous and untested product from criminal producers. “There’s a danger that marijuana clubs will serve as a great place for black market dealers to move their product,” Franklin told the crowd of municipal officials. The untested product, she said, could cause health concerns. “What happens if there’s marijuana tainted with E. coli, and everybody at the club is passing it around and smokes it?” Franklin also makes an economic argument against clubs, in that they will unfairly compete with licensed establishments. Alcohol regulations prohibit bottle clubs, where people bring their own beverages, on the grounds that they will siphon business from licensed bars who must jump regulatory hoops. “A bigger question for you as local governments, is the effect that clubs have on legal businesses,” Franklin told the league. “The reason bottle clubs are prohibited is so that they can’t compete with licensed liquor establishments.” Clubs will eventually force a decision about what a “public place” entails, which forms the Department of Law’s core argument against clubs. Council member Loren Jones, the only dissenting vote to removing the club prohibition, worried about the same thing even in relation to the new retail consumption allowance. “A retail store is a public place,” said Jones. “It is a restricted public place but it is still a public place.” In response to marijuana-themed events in the summer, the board made an emergency definition of “public place” to cut down on open air smoking. Staff amended the definition to exclude retail establishments granted an onsite consumption provision. “’Public place’ means a place to which the public has access and includes, but is not limited to, streets, highways, sidewalks, alleys, transportation facilities, parking areas, convention centers, sports arenas, schools, places of business or amusement, shopping centers, malls, parks, playgrounds, prisons, and other portions of apartment houses and hotels not constituting rooms or apartments designed for actual residence such as hallways, lobbies, and doorways,” the regulation reads. Franklin and the Department of Law believes this applies to clubs as well, though clubs charge membership fees and only admit adults over the age of 21. Franklin said movie theaters are public places despite charging an entry fee.  “You’re not a member of the movie club when you buy a ticket,” Franklin said. “That’s still a public place.” As of yet, this interpretation has not been challenged or taken to an Alaska court for specific rulings resultant from any prosecutions, or any challenges from other establishments who charge membership or entry fees who otherwise might not be considered a “public place,” such as bars, strip clubs, cigar bars, or private social clubs. No charges have been made against pot club owners or members for public consumption. Club owner Charlene Egbe was indicted for four felonies for operating Alaska Cannabis Club, but each charge was for sale of marijuana, not for allowing consumption in a public place. Public consumption only carries a $100 fine. Franklin said an “enthusiastic prosecutor” could potentially assign all a marijuana club’s consumption onto the owner. Collins said she isn’t afraid of prosecution, because she’s perfectly within the confines of the law and doesn’t fill the definition of a public place. “You don’t pay a membership fee and sign a membership contract at a movie theater,” Collins said.   500 feet buffer remains unchanged The board failed to revise buffer limits for marijuana operations after a proposal to allow them within 200 feet of churches, which would have mirrored alcohol regulation’s church buffer. Regulations maintain a 500 buffer zone from children’s centers, schools, and churches. Schulte said he was responding to public concern. “My amendment is really in response to the communities where we have gotten specific feedback,” said Schulte. Emmett had even proposed Schulte’s original amendment down from 200 feet to 100 feet, an idea he got from the Fairbanks-North Star Borough Assembly itself, but the motion failed 2-3, with Schulte and Emmett in favor. Boroughs and local governments including Fairbanks-North Star Borough spoke against the 500 foot buffer zone, which is only half the federal Drug Free Zone standard of 1,000 feet. Alaska’s small towns and villages, particularly Southeast Alaska communities with heavy tourism economies, will have difficulty finding child-free space in any of the areas zoned for business. In narrow Ketchikan, churches and daycare centers dot the downtown area on street level and second floors. Representatives from Sitka and other Southeast communities, cruise-based tourist destinations, expressed similar concerns. In Fairbanks, there are worries that the buffer zone will kill the tourism that comes through Fairbanks’ downtown area, which has cramped conditions similar to Southeast Alaska communities. Assistant attorney general Harriet Milks claimed the board’s “first loyalty” should be to the statute, not to public comment. “Anyone can send in 500 comments,” said Milks, “that doesn’t mean the issue is 50 times more important to the board.”   Broker licenses eliminated The board removed the entire subset of a brokerage license with an amendment introduced by member Peter Mylnarik. Brokerage licenses establish go-between options for cultivators and retailers or manufacturers. Under previous drafts, limited cultivators were required to sell only through brokers, causing public backlash from small growers who say the brokerage fees would kill their entire business. Mylnarik said he was aiming for consistency, as the board acknowledged for months that it cannot create a new license type not specified by Ballot 2. Earlier language had specified that broker licenses are a “subset.” Mylnarik argued that they are in fact a totally separate license, as they take no part in any of the activities associated with marijuana cultivation.   Potency limits and retail particulars The board also reversed several contentious regulations it had made in earlier drafts regarding what retailers can and can’t do. To an audible cheer from the audience of potential retailers, the board voted 3-2 to allow marijuana licenses to sell branded merchandise. “I think it’s necessary for businesses to be able to brand themselves,” said Emmett. “If we ultimately want to have responsible actors, this incentivizes them to do so.” Schulte also clarified the packaging requirements for retail stores, creating marijuana’s version of a liquor store’s brown paper bag. Marijuana packages may be transparent in retail stores, but all product leaving the store must be in opaque, child-proof packaging. Previous drafts had a complicated array of cultivator requirements for packaging. Childproofing edibles packages was a main concern, but Schulte said children are only the responsibility of their parents, not marijuana licensees. “Ultimately, when someone’s in a home with children, they have to take responsibility for that,” he said. Potency limits also got a rewrite. Previously, marijuana extracts were capped at 76 percent, mirroring Alaska’s 151 proof alcohol limit. Schulte said the number doesn’t translate to alcohol, and the board revised marijuana concentrate to have no upward limit.   DJ Summers can be reached at [email protected]

Felony cannabis cases scheduled for trial in early 2016

The State of Alaska is charging four individuals with multiple felonies after each of their cannabis operations fell to Anchorage Police Department undercover work and ensuing raids. Trials won’t be held until January and pretrial hearings will be held in November and December. Rocky Burns, Larry Stamper, Michael Crites, and Charlene Egbe are each alleged by the state to have been operating illicit marijuana businesses in 2015, and were indicted in September. Burns and Stamper co-owned and operated Discreet Deliveries, a delivery service with operations in Fairbanks, the Mat-Su, Anchorage, and the Kenai Peninsula; both men were charged with seven felonies and one misdemeanor. Michael Crites operated Absolutely Chronic Delivery Co. and was charged with five felonies and one misdemeanor. Charlene Egbe, who operated Alaska Cannabis Club, was charged with four felonies and four misdemeanors. All defendants were released of their own recognizance on the sole condition they not sell any marijuana. Crites, Burns, and Stamper have stayed in Alaska, while Egbe has spent time in the Lower 48 on various speaking engagements for cannabis industry media outlets and publicity events. Anchorage defense attorney Keri Brady, who served as Anchorage district attorney from 1997 to 2007, represents Egbe, who uses the name Charlo Greene in public relations. Egbe is scheduled for a pretrial conference with Anchorage Superior Court Judge William Carey on Nov. 18 and trial Jan. 4, 2016. The Public Defender Agency will represent Crites. He is scheduled for a Nov. 23 pretrial conference with Anchorage Superior Court Judge Kevin Saxby and a trial Jan. 11, 2016. Cannabis industry business attorney Jana Weltzin represents Burns, while Anchorage criminal defense attorney Gregory Heritage represents Stamper. Both men are scheduled for a Dec. 8 pretrial conference with Anchorage Superior Court Judge Jack Smith and a trial Jan. 11, 2016. Money matters Lisa Kelley is prosecuting all four defendants. Kelley works from the Office of Special Prosecutions of the Anchorage division of the Alaska Department of Law. John Skidmore, director of the Anchorage Criminal Division of the Alaska Department of Law, said the State of Alaska chose Kelley as prosecutor because the matter is largely about revenue. “Kelley is assigned to cases that are about revenue fraud,” said Skidmore. “From the state’s standpoint, there are significant aspects of these cases that have an economic impact. That’s why they were assigned to Ms. Kelley.” Indeed, the major issue the state has with the defendants’ businesses appears to be a question of revenue rather than public safety. Draft regulations prohibiting both marijuana social clubs and delivery services will not be adopted into code until Nov. 24, and could be amended by the Marijuana Control Board in the meantime. The only certainty is that the defendants engaged in sale prior to the issuance of business licenses, and therefore prior to the existence of taxation framework. This past summer, Marijuana Control Board Executive Director Cynthia Franklin sent cease-and-desist letters to social clubs and delivery services, including Egbe’s Alaska Cannabis Club, Pot Luck Events in Anchorage, Wasilla’s Northern Heights, Kenai’s Green Rush Events, Crites’ Absolutely Chronic Delivery Co., and Burns’ and Stamper’s Discreet Deliveries.  Franklin’s cease and desist letters carried less than bulletproof legal weight because of the nebulous legal status of both marijuana clubs and delivery services, and was taken to be a legal suggestion rather than an order. In the cases of Egbe, Burns, Stamper, and Crites, the Anchorage Police Department conducted undercover operations during which they purchased quantities of marijuana from individuals employed by or operating within each respective organization. Organizations that engaged in no sale, however, have not been charged, though they received the same cease and desist letters from Franklin. Pot Luck Events and Green Rush Events, both social clubs, have been vocal about not allowing sale within their establishments, but only consumption and sharing. Consumption and sharing are legal under Ballot 2 language approved by voters a year ago, though public consumption particulars have yet to be fully fleshed out to apply to publicly accessible clubs. Pot Luck owner Theresa Collins said she never noticed police activity in her establishment, but that it must have happened to some extent. “I’m sure they were there,” said Collins, “but they obviously didn’t discover anything too illegal going on.” Further provisions in draft regulations penalize those who have made money in the marijuana industry prior to business license issuance, currently scheduled for May 24, 2016, at the earliest. “The board will not issue a marijuana establishment license to a person that … operated a marijuana delivery service, a marijuana club, or a marijuana establishment illegally without a license issued under this chapter, or otherwise violated AS 17.38, during the two years before the date the person files the application, unless the board finds that person has diligently worked with the board to comply with all current laws and regulations relating to marijuana,” the draft regulations read. Rocky road Burns adamantly claims he has made every attempt to fully “comply with all current laws and regulations,” and has been trying to get a concrete ruling of his company’s legality since he and Stamper began operating in January 2015. Weltzin argues the charges should be dismissed due to the ambiguity and lack of clarity in statute and regulations. “Nobody knows what’s legal and what’s not legal,” Weltzin said. “And even though he asked time and time again, (Burns) didn’t get any guidance from the state.” Burns filed pro se motions (representing himself) with the court to have his charges dismissed, his bail condition rescinded, and the venue of his trial changed. Burns filed motions Oct. 15, prior to obtaining Weltzin as legal representation. In both Burns’ original motion and Weltzin’s reply to Kelley’s denial of the motion, it is argued that Burns was only transporting and accepting money for marijuana equipment, not marijuana itself, and therefore the Superior Court has no jurisdiction to prosecute. Under Ballot Measure 2 language, the sale of marijuana accessories is legal. The definition includes “materials of any kind which are used, intended for use, or designed for…packaging, repacking, storing, vaporizing, or containing marijuana.” Burns claimed he was only selling vacuum-sealed bags, which only happened to contain a legal gift of one ounce or less of marijuana, which he claims is allowable under Ballot Measure 2. Even if illegal, Burns and Weltzin argue, the matter rests with the Marijuana Control Board, not the Department of Law. Burns claims the only concrete direction he received was a green light of sorts from Alaska Marijuana Control Board chairman Bruce Schulte, who stated during a Fairbanks meeting that Burns could continue operations, and that “nobody is kicking anybody’s doors down.” The board’s word, Burns believes, is the only relevant one. Ballot Initiative 2 put the governance of marijuana business under the authority of the Marijuana Control Board. A grand jury formally indicted Burns on Oct. 8, but information was filed Sept. 18. Because Burns filed his motion to dismiss charges Oct. 5, Kelley called the motion to dismiss “moot.” Kelley did, however, respond to several of Burns’ arguments in her rejection of the motion to dismiss, calling them “inventive interpretations of law and assertions that, at best, can be considered potential defenses” that are not themselves satisfactory to dismiss charges. Kelley argues the Anchorage Superior Court has “original jurisdiction in all civil and criminal matters.” Further, Kelley argues Burns was clearly selling marijuana, not marijuana accessories as he claims. Customers made online orders specifying particular marijuana strains, and the amount charged is greater by far than the cost of the $1.50 bag. “The argument that he was selling ‘mechanically sealed metal bags’ is undercut by the amount of money involved in the transactions,” Kelley wrote. “On Jan. 28, 2015, the officer paid $370, plus a $15 delivery fee, for one ounce of marijuana.” Weltzin filed a reply to Kelley and argued Burns’ main points filed in his motion to dismiss: that he was in compliance with existing marijuana laws and therefore the Marijuana Control Board’s authority. She reinforces Burns’ original argument that he was not selling marijuana but transporting marijuana accessories, as well as marijuana itself in compliance with weight restrictions under one ounce. Payment, Weltzin argues, was to recoup the expenses of delivery service, not in exchange for marijuana itself. She details the costs of Discreet Deliveries operations, and concludes the business was, in fact, operating at a loss. “The costs and expenses of facilitating the transportation of an ounce of marijuana breaks down to approximately $408 per ounce,” Weltzin wrote. “Not only was the real and actual cost of transporting the marijuana and marijuana accessory credible, it was actually delivered at a loss to the company.” In light of this, Weltzin argues, Burns should not be “targeted as a guinea pig for trial and error” by the state as a result of jurisdictional confusion. Undercover officers were charged similar prices for similar quantities of marijuana when they purchased one ounce of marijuana from Absolutely Chronic Delivery Co. for $360 plus a $10 delivery fee. In August, another purchased an ounce for $410. An undercover officer purchased one-eighth an ounce of marijuana from Alaska Cannabis Club for $50, and another purchased an ounce for $450. Weltzin said it is only coincidence that Burns charged an amount similar to the apparent market price of one ounce of marijuana. Weltzin did not comment on Burns’ other motions. Burn’s change of venue motion alleges he would not receive a fair trial in Anchorage, and requests to hold the jury trial in Palmer. “The tainted jury pool created in the Anchorage are through local media, quoting local heroes that are stipulating the current law, create a prejudice against the defendant,” the motion reads. Burns cites, as proof of an Anchorage vendetta against him, the fact his Fairbanks operation was raided by Anchorage Police Department. Burns also claims to have been a “victim of threats from a House of Representatives member, stating that he is a target. That Representative is in the Anchorage Borough Area.” Burns was referring to Rep. Cathy Tilton, R-Wasilla, with whom Burns had an email exchange in September during which Tilton wrote, “Your flippant arrogance has made you a target.” Kelley wrote a brief recommending the denial of Burns’ change of location request. “The majority of charges relate to conduct that took place in Anchorage,” Kelley wrote. “The defendant himself admits to conducting business all over the state. Further, the impartiality of an Anchorage jury has not yet been determined – such a determination can only come after a thorough questioning of potential jurors.”

Alaska a destination for cannabis tourists

Tourist dollars are coming, and it’s up to the Legislature and the Marijuana Control Board to maximize how many Outside greenbacks the Alaska “green rush” will rake in. With nearly 2 million visitors per year dropping $941 per person per visit, Alaska’s $2.42 billion dollar tourism industry could be a vast revenue pool for the marijuana industry and its accompanying taxes, but draft regulations could create hurdles unless changed. As of yet, the tourist industries have not marketed Alaska as a marijuana destination, or taken any kind of regulatory stance, until the industry has grown enough to establish marijuana as a selling point. Alaska Travel Industry Association president and CEO Sarah Leonard said her organization has taken no position on marijuana until local regulations are sorted out. Others are waiting for convincing proof of big bucks to focus on marijuana tourism. “Tourism marketing in Anchorage, and throughout Alaska, is focused on several key messages — mountains, glaciers, wildlife and authentic culture,” wrote Julie Saupe, president and CEO of Visit Anchorage, a tourism industry group. “For marijuana destination marketing to be efficient and effective, the tourism industry would need to see research that convinces us this activity is a key travel motivator for visitors to our state. “Until then, legal marijuana will likely be enjoyed by some visitors with or without specific sales and marketing efforts.” Alaska Marijuana Industry Association vice president Brandon Emmett, also a member of the Alaska Marijuana Control Board, says the industry will at very least hasten the trip for people who already wanted to come to Alaska. “Alaska is almost every outdoorsman’s dream,” Emmett said. “It’ll probably be the push they need to finally book the trip up here, once they know they can come up here and buy and partake in a legal environment.” Tourism professionals from the Lower 48 agree with Emmett, but are more hopeful that people will travel to distant Alaska on the lures of weed. “If there’s anything Washington and Colorado have shown us as a company, it’s that people are willing to travel to a place where it’s legal,” said Chase Nobles, co-founder of Kush Tourism, a Seattle-based company specializing in cannabis tourism information and tour organization in Washington and Colorado. “How many people have always wanted to go to Alaska? Well now they have legalized weed, so it’s ‘let’s go on a fishing trip, let’s go see Denali.’ It’s a great move for a great state.” The regulatory landscape has a few rough patches, however, that could make the tourism part of the industry more difficult. At the top of the list is the contentious legal status of marijuana social clubs. The Marijuana Control Board has prohibited marijuana clubs, which do not sell cannabis but allow on-premise consumption and sharing, in the first draft regulation package. According to Harriet Milks, assistant attorney general and the board’s legal counsel, clubs are outside the board’s authority until the Legislature creates a club license type. The board could potentially rescind the prohibition at its Nov. 20 meeting, or propose alternatives. Like Colorado and Washington, Alaska’s hotels are typically smoke-free. Because public smoking is banned, consumption is effectively limited to private homes, which was already legal under the 1975 Alaska Supreme Court’s Ravin vs. State of Alaska ruling. Social club advocates including Fairbanks North Star Borough worry tourists won’t drop as much money on pot if they have no place to smoke it. Industry voices came out in droves during an Oct. 15-16 public commentary period to ask the board to repeal the prohibition in its next regulatory draft, due Nov. 20. Board chairman Bruce Schulte guessed that comments regarding marijuana social clubs outnumbered all other subjects by a 3-1 ratio. Boroughs and local governments also spoke against the board’s proposed buffer zone, which prohibits any marijuana license from operating within 500 feet of any school, youth center, recreational center, or church where children congregate. “Every municipality that testified said that the buffer zones will kill our industry,” said Emmett. “It was coming from borough attorney, directors of zoning, everyone from Southeast saying ‘We get 2 million tourists a year, we need to capitalize.’” The 500-foot buffer is only half the federal Drug Free Zone standard of 1,000 feet, but Alaska’s small towns and villages, particularly Southeast Alaska communities with heavy tourism economies, will have difficulty finding child-free space in any of the areas zoned for business. In narrow Ketchikan, churches and daycare centers dot the downtown area on street level and second floors. Representatives from Sitka and other Southeast communities, cruise-based tourist destinations, expressed similar concerns. In Fairbanks, there are worries that the buffer zone will kill the tourism that comes through Fairbanks’ downtown area, which has cramped conditions similar to Southeast Alaska communities. “That buffer could kill that tourism industry,” said Emmett, a Fairbanks resident. “Where are these tourists going to go? You’re going to have a lot of young tourists come and be excited about participating in our legitimate market only to find it’s been zoned out.” Beyond finding places to smoke and places to sell, regulations theoretically don’t allow for 2016 tourist business at all due to tracking requirements. Alaska marijuana businesses, including retailers, will be issued business licenses on May 24, 2016, roughly on par with the beginning of Alaska’s short summer tourist season. Draft regulations, however, require a tracking number for every marijuana plant over eight inches in height to make sure they came from a legal, licensed source. Any sale-ready mature plants in May 24 will have come from illegitimate sources, as they’d been grown prior to the issuance of business licenses. This means marijuana retailers and cultivators will have to populate their shelves with eight-inch plants beginning May 24, rather than open a fully stocked retail store. Retail stores won’t likely begin to fill shelves with legally grown product until September, at the tail end of the 2016 tourist season. Marijuana tourism has grown in the Lower 48 states where recreational cannabis has been legalized, though the numbers are contested and the dollar figures hard to nail down. In Colorado, tourists rival in state demand. A 2014 Colorado Department of Revenue report estimated that out-of-state visitors made up 44 percent of retail sales in metro areas like Denver. In rural mountain counties where ski tourism is a main economic driver and local values are still fairly anti-marijuana, non-residents made up 90 percent of marijuana retail purchases.  “The retail demand is derived primarily from out-of-state visitors and from consumers who previously purchased from the Colorado black and gray markets,” the report reads. The report doesn’t analyze how many tourists came to Colorado who wouldn’t have otherwise. Proving a direct causal link between marijuana legalization and tourism increases is difficult, but there’s plenty of evidence to prove a correlation. Hotels.com has kept a running tally of travel searches in Colorado, Washington, and Oregon, and found significant increases in searches, if not travel. After recreational sales became legal in 2014, Denver saw a 73 percent increase in hotel searches for check-ins during the April 20 weekend, the pot smoker’s holiday, compared to 2013. Denver became the 14th-most popular domestic destination for Americans, according to the Hotels.com Hotel Price Index. The entire state of Colorado saw a 51 percent increase in hotel searches from 2013 to 2014. Similarly, Seattle saw a 61 percent jump in travel searches from the first half of 2014 to the second half when marijuana became legal. From a cultural vantage point, marijuana tourism is plainly booming. Companies like Kush Tourism, My 420 Tours, and Colorado Pot Guide offer inside tours of marijuana grows and dispensaries, citywide cannabis-friendly limousine jaunts, recommendations for marijuana-compatible lodging, simple maps of reputable retailers, and even geolocation-based mobile apps that mark nearby cannabis businesses.  Spirit Air formed an entire “The Smoking Sign is Off” marketing campaign around Colorado legalization in 2014, advertising “fares so low they’re barely legal in some states.” The trend extends beyond party buses, for the marijuana consumer of discriminating taste. Oregon dispensaries have begun marketing winery-style tours for cannabis farms, aiming for the existing Oregon wine connoisseur tourism market as a way to differentiate themselves from the state’s numerous retail businesses.

Limits on investment, clubs, potency among draft pot regs

The Alaska Marijuana Control Board released its first draft of regulation proposals for public comment on Oct. 5, speeding towards its Nov. 24 deadline. The public will have the opportunity to provide written comments on the first regulatory draft beginning Oct. 11, and have the opportunity for public comment at the board’s Anchorage meeting Oct. 15-16. The board will make another draft following public comment, and meet a final time on Nov. 20 to make changes before recommending the final package to the Legislature for approval on Nov. 24. Public comment and industry criticism of the draft regulations have focused on several issues, including limits on Outside investment, a prohibition on marijuana social clubs, limits for cultivators and retailers, licensing fees and requirements, and potency restrictions. Outside investment remains one of the most-discussed problems for much of the Alaska marijuana industry, both locally and nationally. Under the draft regulations, the board will not issue a marijuana license unless the shareholders and partners are legal Alaska residents, which requires a full calendar year of residency to establish. Anyone with a “direct or indirect financial stake” in the company must be listed as a licensee, and therefore follow the same residency requirements. The ban on Outside investment started a conversation about big business versus Alaska-first business versus federal drug laws. Due to federal law, Alaska banks and credit unions refuse to handle cannabis-related accounts or loans. Cannabis businesses without their own startup capital have few options for funding beyond bootstrapping or borrowing from private lenders. With high entry costs from license and testing fees, security requirements, and basic business expenses, already-wealthy Alaskans could dominate cannabis business while smaller competitors scramble for startup capital. Outside investment could narrow the gap between Alaska millionaires and mom-and-pop growers and retailers, but also bring in big competitors in the $3 billion national cannabis industry. Regulators, however, fear federal money laundering guidelines, and see Outside investment dollars as a possible route for dirty money from drug cartels or shady investors. Kris Krane, former executive director of the National Organization for the Reform of Marijuana Law, or NORML, said Alaska’s biggest hurdle is to workshop ways to allow Outside industry investment. Attracting the kinds of industry consultants and business opportunities available to Colorado or Washington, he said, depends on it. “By late this year and early next year, a lot of these groups will be looking to come to Alaska,” Krane said. “They won’t if that ban on interstate investment stays.” Alaska has no existing infrastructure of medical marijuana businesses like Colorado, Washington, and Oregon did when they legalized recreational marijuana. As a result of inexperience, Krane said the industry doesn’t fully comprehend the amount of investment capital needed to get businesses up and running. “These are expensive propositions,” said Krane. “If you want to put together a 65,000-square foot cultivation facility, you’re talking in the $5-$10 million range. By way of context, I’ve been part of a working group in California, and there’s some concern that California won’t have enough capital to sustain a full-growth industry. In a state like Alaska, this becomes a huge issue.” Board chairman Bruce Schulte noted that the board hadn’t gotten much input from stakeholders on possible solutions that would favor local licensees while allowing for Outside investment, and hopes to see creative solutions in public comments. The board’s most recent addition to the draft regulations prohibited marijuana social clubs, to public outcry from industry figures. Marijuana clubs, which do not sell cannabis but allow cannabis users to consume and share on premises, have been a legal gray area in Alaska. Use and possession of cannabis is legal, but business licenses for sale and cultivation will not be issued until May 2016. Cannabis clubs do not sell, manufacture, test, or cultivate, which Harriet Milks, assistant attorney general and the board’s legal counsel, said puts the entire business outside the board’s authority. The board voted in favor of the prohibition, meaning clubs will be illegal unless the Legislature creates a license type for them in statue during its next session. Milks characterizes it not as a ban, but as a simple declaration that board can do nothing without legislative action. Marijuana industry attorney Jana Weltzin of the Rose Law Group called Milks’ characterization “legally incorrect,” as the prohibition clearly establishes a penalty for marijuana clubs. Weltzin, however, mentioned no plans about pursuing legal action against the board, echoing Schulte’s cautioning that the industry can’t afford any regulatory tangles on its current schedule. Licensing fees themselves roused some public ire; the board made changes to the fee structure on behalf of small marijuana cultivators. The board will issue four license types, one of which has two subsets. Retail, standard cultivator, and manufacturer’s licenses will all cost $5,000, while limited cultivator and testing licenses cost $1,000. Limited cultivators, however, are also required to perform all sales through a broker, and are forbidden from selling directly to consumers. On top of licensing and testing fees, industry worries the broker requirement will force boutique growers back into the black market as a cost avoidance measure. Potential marijuana product manufacturing licensees voiced concerns about a draft regulation that prohibits commercial kitchens from experimenting with marijuana products. Would-be marijuana confectioners will be required to rent their own commercial space, with the accompanying marijuana license. Manufacturers alone will be allowed to purchase marijuana concentrates with THC levels greater than 76 percent. Anything beyond 76 percent concentration is forbidden to consumers, which board member Brandon Emmett believes is a safety risk. “People are going to try to make their own concentrates if you don’t allow (manufacturers) to make the best quality product,” said Emmett. “They just make hash oil at home, and you’ll see a rise in hash oil explosions.” Along similar edible lines, marijuana manufacturers dislike a proposed regulation that limits marijuana edible serving sizes to five milligrams – half the industry standard of 10 milligrams per serving. Because all edible products are limited to 10 servings apiece, this means customers will theoretically have to buy twice the amount, a boon to retailers but a disadvantage for medical users with high THC tolerances. Marijuana edibles, in fact, will be the only edible products available at retailers, in an effort to prevent convenience stores doubling as pot shops. The board passed draft regulations that prohibit retail cannabis establishments from selling cigarettes, drinks, snacks, coffee, tea, or anything consumable but non-cannabinoid in nature. The intent, according to board Executive Director Cynthia Franklin, is threefold: to keep minors from having a reason to enter the premises, regulate on-premise consumption, which would be made difficult by selling snacks alongside cannabis-infused edibles, and prevent “confusion to customers about which things contain marijuana and which things don’t.” DJ Summers can be reached at [email protected]

Board decides Legislature must authorize marijuana clubs

When Nov. 24 comes around, the only legal place to consume newly legal Alaska cannabis will be your home. The Legislature will have to decide whether or not to allow cannabis social clubs in Alaska, following a highly contentious Marijuana Control Board ruling on Sept. 24 that prohibited clubs. “A person may not maintain a place where marijuana or marijuana products are received or kept,” the regulation reads, “or to which marijuana or marijuana products are brought for consumption by the public or by members of a club, association, or corporation unless the person is authorized to do so under this title.” The board took this language straight from Alaska alcohol regulation; in alcohol, this language bans bottle clubs. The bottle club comparison was used as the basis for cease and desist letters board director Cynthia Franklin sent to Pot Luck and Alaska Cannabis Club in Ancorage, and to Northern Heights in Wasilla and Green Rush Events in Kenai. Franklin’s cease and desist letter carried less than bulletproof legal weight because of the nebulous legal status of marijuana clubs, and was taken to be a legal suggestion rather than an order. Pot Luck Events has continued operation. The board’s prohibition didn’t ban existing clubs, at least not functionally. Nothing changes in the day-to-day operations of Anchorage’s main social club, Pot Luck Events, whose manager, Theresa Collins, said the club would continue operating until Nov. 24. The regulations are still in draft stage, not yet approved by the Legislature. If the Legislature accepts the proposed language, however, the clubs will be prohibited when regulations take effect. In the clubs’ best-case scenario, they will have to discontinue operations between Nov. 24, when regulations enter effect, and May 24, 2016, when the first business licenses are to be issued. In the worst case, they won’t be allowed at all. This leaves questions as to the board’s authority: whether it has the power to preemptively prohibit a license type before it is even created, whether it has the authority to regulate anything at all regarding marijuana clubs, and whether it could have created a license type for clubs and spared the headache. Board authority Marijuana clubs, which do not sell cannabis but allow cannabis users to consume and share on premises, have been a legal gray area in Alaska since a 2014 ballot initiative legalized cannabis consumption and possession as of Feb. 24. Clubs do not sell marijuana, nor do they grow, manufacture, or test, which are the four cannabis business license types specified by the ballot initiative. The Marijuana Control Board, however, will not issue business licenses for commercial marijuana operations until May 2016, making all commercial cannabis activity illegal until then. As recently as Sept. 14, several Alaska cannabis delivery services and businesses were issued felony charges over their activities. At the board’s Anchorage meeting on Sept. 24, Assistant Attorney General Harriet Milks and director Franklin advised the board to accept a social club prohibition into the draft regulations. Both said the Alaska Department of Law declared the board to have no authority to regulate marijuana social clubs until the Legislature creates the license type. “The Department of Law has already decided the board doesn’t have the authority,” said Milks. “It’s not your problem to fix. The Legislature has to take the initial steps.” Franklin said later she recognizes the need for them, but only in the confines of a regulated license type. “I think we ought to have social clubs,” said Franklin in an interview. “How do you know whether or not they’re operating according to regulation? That’s the problem of leaving it in this gray area. You’re creating an unregulated segment of the market.” Franklin said opposition to the board’s decision is not representative of the entire industry, and that clubs in their current unregulated form defy the will of the voters who voted for a regulated industry. “The industry are people who are going to follow the rules,” said Franklin. “(Marijuana clubs) are getting all the benefits of marijuana commerce, and none of the costs. That’s not what the people voted for.” Collins said she doesn’t buy the Department of Law’s argument, or the interpretation that the prohibition is not a ban. “If they don’t have the authority to approve them, then how do they have the authority to prohibit them?” Collins said. Responding to concerns later, Milks said the prohibition is not intended as a ban, but rather a clarification that until the Legislature creates the license type, it simply can’t say anything. “It’s not a ban; a ban requires some affirmative action,” said Milks. “The regulatory board is not banning social clubs. It’s just not saying anything about them, because it can’t.” Jana Weltzin, a business attorney representing the Alaska marijuana industry, said Milks’ characterization ignores its own language. “(The provision) is titled ‘Marijuana clubs prohibited,’” wrote Weltzin in an email. “Not only do the regulations mention clubs, it outright prohibits them and usurps authority to regulate and control this type of business by requiring authorization pursuant to title 17.38. Further, the regulations do contain an affirmative action mechanism to enforce this provision. (The measure) states, ‘A person violating this section is subject to a civil fine as provided in 3 AAC 306.840.’ (Milks’) statements are legally incorrect.” Board member Brandon Emmett, vice president of the Alaska Marijuana Industry Association, also disagreed with the Department of Law’s advice, arguing the board was able to create a brokerage license despite not appearing in the ballot. “We’re saying here that we don’t have the authority to craft another license type, but nowhere in the initiative did it state broker, and that’s a license type we decided to create with relative ease,” said Emmett.  “Broker licenses are a subset of a cultivator license,” responded Milks to Emmett. “Marijuana club is a completely different animal. It is a circumstance of using, selling, distributing marijuana that is not authorized by the Legislature at this time.” Broker licenses allow certain actors to arrange marijuana distribution between cultivators and retailers. Milks said the initiative specifies verbs associated with brokerage actions: harvesting, packaging, distributing, and selling. Nowhere in the initiative, she said, are there any verbs concerning marijuana social club activities, such as providing a venue for consumption. Legislative concerns Whether or not the board members support social clubs, each wants to pass the right message to the Legislature. “We’re pretty well on record saying we need some legislative guidance on this,” said board member Mark Springer. “We need to not dance around it, but right now, say that they’re not, knowing there may be some action by the legislature to authorize the board to authorize marijuana clubs.” Emmett voiced concerns that the prohibition language is too strong, and will misinform the Legislature the board doesn’t support marijuana social clubs. “If we accept this, it will send a message to the Legislature that we’ve already made our minds about how we feel,” said Emmett. “I do encourage there be some legislative discussion. Clearly this is very important for the success and economic welfare of the industry.” Emmet also feared the matter will be forgotten, or willfully withheld, if left to the Legislature. “If we look at the last session, very little got put out on the marijuana issue besides the bill that created this board, and this might be something that slips through the cracks,” he said. “I don’t see it a far stretch to create a marijuana club provision.” Board Chairman Bruce Schulte highlighted the fact that several municipalities, including North Star Borough, have drafted letters of support for marijuana clubs, and lamented the fact that the board has no authority to remedy a “chicken and the egg situation.” Schulte said the board will attempt to craft policy statements expressing the board’s support of marijuana clubs’ existence, in an attempt to inform legislators of the public and board support for such businesses. “The best way I think advocates and supporters to make it happen is to give legislators every reason to embrace them,” said Schulte. “Ballot 2 passed, but only by a small margin. Legislators are paying close attention to that 47 percent who didn’t support it.” For his own part, Schulte took an unpopular route in search of legislative approval, voting in favor of the prohibition. Board member Loren Jones, a Juneau Assembly member, recused himself from the vote, leaving only four voting members to accept or deny the prohibition. Brandon Emmett was the only board member who voted against the prohibition; Schulte, Peter Mlynarik, and Mark Springer all voted in favor. Had Schulte voted against, the prohibition would have failed on a tie 2-2 vote. Social club supporters lambasted Schulte on a social media in response, which Schulte said is understandable. However, Schulte said he engineered his vote to show proper political deference to the Legislature and not press a controversial issue past the board’s authority. At this point in the marijuana game, he says, it is more important to tread lightly with lawmakers in a state where 47 percent of voters voted against cannabis legalization. “I have always advocated in favor of (marijuana clubs), but as soon as the first one opened its doors, it drew negative public scrutiny and our Legislature and local elected officials are sensitive to that,” said Schulte. “I still think clubs, lounges, cafes — whatever we end up calling them — are still a great idea, but they were never mentioned in the voter initiative and it’s disingenuous to suggest otherwise.” Industry representatives in favor of social clubs have not challenged the board’s decision, saying the litigation process would be far too cumbersome and time consuming in marijuana’s regulatory environment. Further, Schulte said stakeholders need to be patient or risk too much negative backlash that could damage the legalization movement. “That is exactly what prohibitionists want,” said Schulte. “To delay implementation as long as possible so that the initiative can be repealed by the Legislature in 2017.” Alaska legislators like Rep. Harriet Drummond, D-Anchorage, argue in favor of social clubs, specifically in relation to the tourism industry. “I support marijuana clubs,” said Drummond, “if only for the reason that tourists can’t consume in their hotel rooms and they can’t consume in public. Where are they supposed to consume it?” The national perspective Nationally, marijuana social clubs exist in the same kind of regulatory turmoil as Alaska, varying from state to state. “The social club issue is usually like what you’re seeing in Alaska,” said Kris Krane, former associate director of the National Organization for the Reform of Marijuana Law. Krane said he doesn’t expect the Legislature to allow them, but thinks they ought to be allowed. “I think the idea of social clubs, or at least clubs that allow consumption on site, is a good idea,” said Krane. “We have bars. Particularly when you’re talking about the tourist market, that’s an important allowance. I would strongly encourage the state to do it, but I wouldn’t expect it.” In Colorado, clubs are semi-legal; a scant handful exists to differing degrees of public outcry and support. Like Alaska, Colorado laws outlaw public consumption of marijuana. Also like Alaska, the definition of “public,” and whether a private club meets that definition, is under discussion. “Last month’s debut of Colorado’s latest marijuana smoking lounge — iBake Englewood, 3995 S. Broadway — quickly ran afoul of city officials,” reports the Denver Post. “Last week, the Englewood City Council passed a six-month emergency ordinance prohibiting additional pot-smoking clubs. The city probably will create permanent rules against on-site consumption in the coming months.” In response, the Denver marijuana industry is attempting a ballot initiative for the 2016 election that would expand city marijuana consumption to bars and clubs. In Washington, legislators banned marijuana clubs in July 2015. The new law makes operating “a club, association, or other business, for profit or otherwise, that conducts or maintains a premises for the primary or incidental purpose of providing a location where members or other persons may keep or consume marijuana on the premises” a Class C felony. Oregon, which will have its first recreational marijuana sales beginning Oct. 1, allows clubs, provided they don’t sell cannabis and the drug is consumed out of public view. DJ Summers can be reached at [email protected]

Marijuana Control Board finalizes first draft of regulations

The Alaska Marijuana Control Board has reached the end of an arduous first draft of proposed regulations for the cannabis industry. After another round of public comments, which will open in early October, the Legislature will have the opportunity to adopt them or change them as it sees fit. The final leg of the race dealt with marijuana testing facilities, through which all cannabis products will have to pass before being licensed to sell. The board also crafted proposals for a five-milligram cannabis edible serving size and packaging requirements, which now include warning labels. The board’s staff will make the necessary changes to the document and release it to the public either Oct. 2 or Oct. 5. The public will have the opportunity to provide written public comment on the first regulatory draft beginning Oct. 11, and have the opportunity for spoken public comment at the board’s Anchorage meeting Oct. 15-16. The board will make another draft following public comment, and meet a final time on Nov. 20 to make changes before recommending the final package to the Legislature for approval on Nov. 24. Testing facility independence Much of the discussion centered around a ban on license stacking with testing facilities, which prohibits families from holding certain license combinations. Licensees may stack retail, manufacturing, and cultivation licenses, but no testing facility licensee may hold any other license type, or hold a direct or indirect financial stake in any other license type. This translates to a ban on intermarriage license stacking, as spouses must be listed as license affiliates, according to previous draft regulation regarding licensure requirements. In practice, this means a husband may not own a retail license while his wife owns a testing facility. Some public comment expressed dissatisfaction with the rule, saying it would prevent interfamilial entrepreneurship within the industry, particularly in rural areas where capital is likely to be concentrated within families. Board director Cynthia Franklin explained a strong desire to eliminate conflicts of interest and potential testing corruption. “It was our great hope that the board keep testing facilities pristine,” said Franklin. “The idea behind keeping testing pristine is you don’t have someone who owns a cultivation facility, and the wife own the testing facility and maybe the wife’s testing facility has very favorable tests.” Board member Brandon Emmett, vice president of the Alaska Marijuana Industry Association, said he understood the concern, but wanted to allow for families to diversify their interests with separate licenses. “I’d like to give the industry the benefit of the doubt,” Emmett said. “Where we’re encouraging people to diversify their portfolios. If a family wanted to get into business…we want to give these people the opportunity to invest as they see fit.” Emmett proposed an amendment that would allow ownership of testing licenses by spouses, but disallow the testing licensee from testing any product they have an indirect or direct interest in. The vote failed 2-3. Board members Emmett and chair Bruce Schulte, the industry appointees, voted in favor, while Mark Springer, Peter Mlynarik, and Loren Jones voted against, saying that the potential for predatory testing would still exist. “I think it’s very clear in the original language that you can’t have a financial interest in a any facility outside of testing,” Jones said. “The reason being, even if you don’t test your own, you’re still testing competitors.” “Given the importance that testing is going to be for the industry,” said Springer, “I rather would have a laboratory that’s not only not conflicted but not distracted.” Fears of random inspections and police Board enforcement agents may conduct random sampling tests at the cultivator’s expense. Random inspections have been a theme of the draft regulation in each of the four license types, each time rousing concern that the board director and enforcement agents could use the process to harass and harm marijuana businesses. As before, however, the board clarified that the public will have to trust that the board and its director are not enemies of the industry, and the industry will have to display the same faith in the board’s good will that the board has in the industry. “If we are going to keep this language vague, let’s make it clear that it’s the intention of this board to work with licensees, and not thwart the will of the voters,” said Emmett. Schulte said he believes the board is adequately on record stating that the board and its director have no intent to abuse testing allowances. The section passed unanimously. The board’s allowance for police inspections brought up similar concerns. The board unanimously accepted draft language that allows “a peace officer acting in official capacity” to inspect testing facilities, giving local police authority to enforce the board’s regulations if needed, depending on whether the local chief of police feels it necessary. Public comment strongly objected to the measure, fearing harassment. “We’re trying to encourage a historically illegal industry,” said Schulte. “Encouraging law enforcement to enter these premises sets up tension. I’m concerned we may be blurring the difference between law enforcement and regulation.” Franklin explained the board’s limited resources, and the occasional necessity to rely on local police for enforcement simply due to budget constraints and Alaska’s sheer size. “We have to rely on local PD every once in awhile,” Franklin said. “I understand people being upset and paranoid, but if the only people permitted to enter are the six (enforcement) officers we have employed, we very much are limited.” Board member Peter Mlynarik, the chief of the Soldotna Police Department, reminded the board that officers wouldn’t be entering testing facilities uninvited or apropos of nothing. They would only have the authority to do so in response to a criminal complaint, which would require a warrant, or at the board’s request to perform inspections. “We still can’t go in carte blanche through cabinets and whatever else without a warrant,” said Mlynarik. Board member Mark Springer agreed. “Where it says official capacity…doesn’t that imply that they’re actually there in response to a call or a complaint?” said Springer. “And even then, they have the constraints of probable cause. I don’t think anybody has to worry about police officers using the color of (this regulation) to say, ‘yeah, I’m going to go jack these guys up and keep them honest.’ I have enough faith in law enforcement in this state.” Testing operational procedures Much of the public comments concerning testing facilities concerned the difficulty of rural communities to sustain them, in a state where even attracting licensed nurses can be problematic for the bush. According to the accepted proposal, testing facilities must have oversight from a clinical director with a combined 10 years of academic and on-site experience; a doctorate in chemical or biological sciences plus two years of experience, a master’s degree with four years of experience, or a bachelor’s degree with six years of experience. Nothing in the language prevents a laboratory director from overseeing operations as a contractor, or voluntarily out of a sense of civic duty, according to Franklin. The board also voted to leave out any language requiring testing certification, which could have bumped back the first retail cannabis sale. According to Franklin, initial conversations with the Alaska Department of Environmental Conservation, which certifies such operations, said the certification itself would not be complete until up to six months after sales become legal in May 2016. Certification of equipment and testing is not required, but testing itself is still mandatory for all cannabis products sold in Alaska. Tests for potency, communicable diseases, and pesticides will all be mandatory. If a randomly tested sample of a given batch of smokeable or edible marijuana product fails, the mother bath must be destroyed. Failed batches, however, are entitled to appeal for a retest. Revisited items The board reviewed certain items that had been tabled from earlier meetings. Among the most concerning to industry was a limit on edible product dosage size, cultivator packaging requirements, and cannabis concentration limits. Dosage limits for edible cannabis products were set at 5 milligrams per serving, half the standard 10 milligram serving size specified in other states where marijuana is legal. Board members argued medicinal marijuana consumers, who have a high tolerance, would suffer most directly from the regulation, as they’d be forced to purchase twice as much product. Franklin argued that the conservative limit comes from widespread concerns about edibles in Colorado and Washington. “Particularly in Colorado, there were significant issues after recreational marijuana was legal, a disconnect between high potency and large serving sizes designed for medical uses, and novice users,” said Franklin. “They also developed a campaign called ‘start low, go slow,’ recommending the five milligram starting serving.” Packaging requirements still remain ragged as far as regulatory language goes, but the intent is that product cannot be identified upon leaving the retail store. Edible products must be packaged in heat-sealed, resealable packages to prevent children from getting into them. Bud and flower products must be placed in opaque packaging either by the cultivator or by the retailer. The board amended an earlier regulation that had limited all marijuana concentrates to 76 percent. Under the new language, concentrates must be limited to 76 percent only if sold directly to a consumer. If sold to another cannabis business licensee, concentrates have no upward limit. Most directly, this applies to manufacturing licensees, who may want to use high concentration levels in edible products to better gauge for dosage levels and taste. DJ Summers can be reached at [email protected]

Arizona-based Rose Law Group enters Alaska cannabis scene

The Alaska cannabis industry has a new gun in town. Rose Law Group, an Arizona business law firm, has sent an attorney to the Last Frontier to represent marijuana industry interests, including lobbying during the 2016 legislative session. The move is a new stage in development for Alaska cannabis businesses. Much of the current legal representation for industry leaders draws from criminal practice, rather than business. This includes Lance Wells, an Anchorage attorney who represents marijuana club Pot Luck Events and who started the Alaska Cannabis Law Group LLC in partnership with attorney David Schlerf. California criminal and medicinal marijuana attorney Ben Adams has branded himself “Alaska’s pot attorney,” and has aggressively courted industry since Nov. 2014. Jana Weltzin, a Fairbanks native who recently moved to Anchorage from Rose Law’s Scottsdale, Ariz., headquarters, said her firm has what Alaska’s budding industry needs most: business expertise and political savvy. “I’m not a criminal lawyer,” said Weltzin. “I’m a business lawyer, a client advisor. I structure businesses so they make sense. A criminal lawyer sees an action as legal or illegal. I have to look at it and say, technically, maybe it’s not illegal, but is it politically smart? I have to weigh those considerations. There’s a huge difference between something being legally allowed and politically smart.” Rose Law entered the marijuana industry in 2010 after Arizona legalized medicinal marijuana. Since then, the firm has built a cadre of cannabis business attorneys specializing in marijuana cultivation land development, zoning for cultivations and dispensaries, cultivation management agreements, and business transactions. “We structure their business to maximize profits and minimize risk,” said Weltzin. “There are things we point out you should have.” Weltzin said Alaska industry, which has no existing marijuana business infrastructure, can benefit from Rose Law’s Arizona expertise and experience. “The market’s not fleshed out here,” Weltzin said. “At Rose Law, we’ve gotten to see how that industry works. If you haven’t seen that firsthand, it’s really difficult to conceptualize.” Founded by Jordan Rose in 2000, Rose Law specializes in real estate and business law, practicing in land use, zoning, renewable energy, government relations and lobbying, administrative law, transactional real estate, employment law, water law, Native American relations, infrastructure finance, special districts taxation, business formation/corporation issues, and business litigation. Rose Law has an extensive clientele list in the Southwest and a solid reputation for representing marijuana interests. “They’re quite successful,” said Kris Kane, former associate director of the National Organization for the Reform of Marijuana Law. “They’re very politically connected in Arizona and a very influential firm in the state. Their reputation on (marijuana) has been very positive. One of the biggest complaints I hear about them is they’re very expensive and bill aggressively, but you can say the same about any good law firm.”

Marijuana board to ban cannabis clubs

The Alaska Marijuana Control Board accepted draft regulatory language on Sept. 24 that would ban cannabis social clubs, unable to establish any regulations around a license type that was not specified in the ballot initiative that legalized cannabis. The existence of cannabis social clubs will now depend on the Alaska Legisature to establish the license type, informed by a planned policy statement from the board. Marijuana clubs, which do not sell cannabis but allow cannabis users to consume and share on premises, have been a legal gray area in Alaska. Use and possession of cannabis is legal, but business licenses for sale and cultivation will not be issued until May 2016. Because cannabis clubs do not sell, they do not fall under regulatory authority, which either prevents the board from allowing them or from prohibiting them, depending on who you ask. In July, Anchorage cannabis social club Pot Luck Events received a cease and desist letter from board director Cynthia Franklin, along with Alaska Cannabis Club, Northern Heights, and Green Rush Events. Franklin’s cease and desist letter carried less than bulletproof legal weight because of the nebulous legal status of marijuana clubs, and Pot Luck Events has continued operation. Pot Luck manager Theresa Collins said the club will continue to operate until Nov. 24, when the Legislature must adopt, reject, or alter the recommended regulations the board has written. The state’s legal department argued that the board has no authority at all the regulate cannabis clubs, as there is no license for them in the first place. The Alaska Department of Law had advised the board that it does not have the authority to create new licenses or even to craft regulations around nonexistence license types. The ballot initiative only specified four license types: cultivation, manufacturing, retail, and testing. According assistant attorney General Harriet Milks, said the Legislature must create the license type in statute before the board can regulate it. “The Department of Law has already decided the board doesn’t have the authority,” said Milks. “It’s not your problem to fix. The Legislature has to take the initial steps.” Collins said she doesn’t buy the argument. “If they don’t have the authority to approve them, then how do they have the authority to prohibit them?” Collins said. The board has already made it apparent that it needs legislative action before ruling one way or another on marijuana clubs. “We’re pretty well on record saying we need some legislative guidance on this,” said board member Mark Springer. “We need to not dance around it, but right now, say that they’re not a license, knowing there may be some action by the Legislature to authorize the board to authorize marijuana clubs.” Board member Brandon Emmett, vice president of the Alaska Marijuana Industry Association, disagreed with the Department of Law’s ruling, arguing the board was able to create a brokerage license despite not appearing in the ballot. Some of the public agreed with Emmett. “I don’t see how you can prohibit and not create,” said Lee Haywood, a local cannabis business consultant for Pot Luck Events, as he stormed out of the room. “Broker licenses are a subset of a cultivator license,” responded Milks to Emmett. “Marijuana club is a completely different animal. It is a circumstance of using, selling, distributing marijuana that is not authorized by the Legislature at this time.” Emmett voiced fears that the Legislature would not have the time or attention to even take up the matter during session. “If we look at the last session, very little got put out on the marijuana issue besides the bill that created this board,” said Emmett, “and this might be something that slips through the cracks. I don’t see it a far stretch to create a marijuana club provision.” Emmett also voiced concerns that a ban would be too strong, and misinform the Legislature that the board doesn't support their existence. "If we accept this, it will send a message to the Legislature that we’ve already made our minds about how we feel," said Emmett. "If you look at the public comment, this has been arguably the most popular and controversial section in some time." Board chairman Bruce Schulte highlighted the fact that several municipalities have drafted letters of support for marijuana clubs, and lamented the fact that the board has no authority to remedy a “chicken and the egg situation.” Schulte said the board will attempt to craft policy statements expressing the board’s support of marijuana clubs’ existence, in an attempt to inform legislators of the public and board support for such businesses.  “The best way I think advocates and supporters to make it happen is to give legislators every reason to embrace them,” said Schulte. “Ballot 2 passed, but only by a small margin. Legislators are paying close attention to that 47 percent who didn’t support it.” DJ Summers can be reached at [email protected]

Marijuana board accepts cultivation draft regulations

The Alaska Marijuana Control Board met Sept. 14 in Kotzebue and Sept. 16 in Anchorage to accept the next round of draft regulations, which are to be recommended to the Legislature and approved by Nov. 24. The board focused on marijuana cultivator regulations, one of the four designated marijuana business licenses included in regulations, along with processors, retail stores, and testing facilities. Three issues dominated discussion both in Kotzebue and in Anchorage: whether cultivator employees can consume cannabis on premises, limited cultivator operations, and product packaging. Leif Abel, executive director of the Coalition for Responsible Cannabis Legislation, said he was actually encouraged by the topics’ relatively tame nature compared to the more heated security, zoning, and operational discussions for retail marijuana businesses in prior meetings. The fact that they’re arguing over smaller potatoes, he said, shows progress. “All things considered, it’s good that we’re arguing over some these kind of smaller issues,” he said. “It shows just how far we’ve come since the beginning. There’s more understanding now.” Samples and packaging Draft regulations are confusing about packaging requirements, though the intent is clear: all products should leave the store in opaque packaging. “The intent is that you can’t leave the store with visible product,” said board chair Bruce Schulte, “though I’m not sure how clear we were able to make that point.” This is similar to Colorado laws, which demand all product leaving shops, whether edible or smokeable, to either be packaged in or placed in opaque and child-resistant bags. Colorado cannabis businesses struggled to find packaging when the requirement was instituted in 2013, but special packaging products are now being made specifically for compliance with regulations. Industry representative board members argued in favor of clear or partially clear packaging, as cannabis has a visual factor key to successful sales. “We’re underestimating the aesthetic value of the product,” said Schulte. “It may seem odd, but that could have significant economic value.” In regulation, the matter is much less clear. Schulte said once the first draft has been approved the board will try to make the regulations clearer and less cumbersome. As currently written, the regulations apply to cultivator packaging. All product, whether large or small, salable quantities, must be opaque. Operationally, retail stores could have clear packaging for marijuana in the store, but require a separate opaque package for the final exiting purchase, much like the familiar brown paper bag in liquor stores. Cultivators are allowed to provide samples to retail stores for in-store display in clear jars with screens over the top. The original draft regulation specified that cultivators may only provide up to two grams of samples. Board member Brandon Emmett introduced an amendment to change the allowance to 28 grams, or one ounce, with no more than 28 grams of product given as samples per month, in order to accommodate cannabis concentrate manufacturers. “Two grams isn’t going to do it for someone looking to make extract,” Emmett said. Schulte argued that he simply couldn’t defend allowing non-commercial gifts of up to one ounce while limiting intracommercial interactions more tightly. “It offends my sense of perfection that we would give a lesser amount to professional cultivators and more to non-licensees,” Schulte said. Small growers As a concession to mom and pop cannabis growers, the board will offer a limited cultivator license, which costs $1,000 rather than the $5,000 for a standard cultivator license. Several of the smaller growers are concerned with limited cultivator regulations, including size limits and operational requirements. Limited cultivators can only sell to retail facilities through cannabis brokers, rather than through direct relationships with retailers. Brokers will extract fees and percentages and make the process less profitable, according to Jessica Jansen. “It’s already an expensive operation,” said Jansen, who is executive director of the Alaska Cannabis Growers Association and co-founder of CannaFarm Co-op. Jansen said she doesn’t understand why the board wouldn’t make limited cultivator brokerage an option, rather than a requirement. Furthermore, limited cultivators will be held responsible for a broker’s unpaid taxes. Excise taxes on every ounce of cannabis must be paid prior to sale. If brokers don’t pay the taxes, the responsibility falls to the cultivator. “It’s the secondary liability concept,” explained board executive director Cynthia Franklin. “We can expect that when the tax division comes out, it will beef this up. You can’t profit from a product that hasn’t paid its taxes. It happened with cigarettes. It’s the Al Capone rule.” Schulte worried the measure would create a barrier for market entry for small growers who would otherwise simply remain in the black market. “Why wouldn’t the state simply go after the broker in the same way?” asked Schulte. “This might give potential limited cultivators pause.” A limited cultivator license requires a maximum of 500 square feet, which growers say is too limited. The board, however, has no larger number on which to base its regulations. “You have to remember that this has been a black market operation,” said Schulte. “We don’t exactly have the best statistics when it comes to what the size of the average home grow is.” Random product testing All cultivators will be subject to inspection and sampling by board enforcement “from time to time,” which must be done at the cultivator’s expense. Industry is concerned with that a board director could potentially abuse the “time to time” allowance. Public comments feared that the board director, whether Franklin or a later director, could use random sampling to bankrupt and harass growers out of spite or personal grudge. “I feel that this board and this director is not hostile to the industry, but that might not always be the case,” said Emmett. “The way this is written, regulation can be used against an unpopular individual.” Franklin answered that random sampling is used in alcohol without any such behavior, and that administrative law would allow complaints of rogue directors to the board itself. She said industry needs to start trusting the administration the same way the administration will learn to trust the new industry. “It has been working very well in alcohol for 35 years,” said Franklin. “In 35 years we haven’t seen the scenarios presented in these comments. What really has to change is the industry coming into regulation has to have some baseline faith in the staff.” Board member Loren Jones said the chance of a hostile director’s random sampling abuse would depend on “the stars aligning.” “’From time to time’ it creates a situation where if the starts did align, which is more common in politics than in astronomy, then you could have some serious problems,” said Emmett. Emmett introduced an amendment that would specify only one sampling per quarter, but the amendment failed. Emmett was the only vote in favor. No growing while high The board left a possible loophole for onsite marijuana consumption at cultivator operations, which is expressly forbidden in all other licensed cannabis operations. In Kotzebue, the board had changed draft regulation language to allow a designated spot in marijuana cultivator facilities for employees to consume cannabis. Public comment said the original draft language, which prohibited cannabis consumption within 20 feet of a cultivation facility, frustrates product sampling and discriminates against employees who need medicinal marijuana to function. In Anchorage, however, the board reversed its Kotzebue decision and reinstated the ban on marijuana consumption within 20 feet of a cultivation facility. Insurance was the biggest objection to allowing on site cannabis consumption. As per regulation, marijuana businesses must carry insurance. Allowing onsite consumption could make businesses hard to insure, and give a poor public impression regarding marijuana cultivators’ professionalism.  “I believe I approached you about the professionalism of the business of ability of the businesses to consume marijuana on cultivation premises, the difficulty in procuring insurance, the problems it could bring,” said Franklin in Anchorage. After considering its Kotzebue decision, members of the board seem to have reconsidered their original positions. “Maybe 20 feet isn’t that far to have to walk, if in fact you’re using it for what you perceive to be a therapeutic benefit,” said board member Mark Springer. “Bars, liquor stores, distilleries don’t have a recreational drinking room. I guess I would not have any opposition to going back.” Schulte, president of the Alaska Marijuana Industry Association, said he prefers to leave insurance eligibility to business sense rather than regulation, but nonetheless voted in favor of rescinding the Kotzebue allowance. “I would prefer it be up to the business owner,” said Schulte. He said the board will have the opportunity to revisit regulations later, however, and a potentially problematic issue needs more caution. “I’m inclined to take a more conservative approach now.” Only Emmet, the vice-chair of the Alaska Marijuana Industry Association, voted against reinstating the onsite consumption ban. “I still believe if you allow alcohol licenses to sample their product, marijuana licenses should be allowed to do the same thing,” said Emmett. The cultivator ban on onsite employee product use could be inconsistent with other draft regulation allowances, and complicate retail sampling processes. Part of the same section allows onsite cannabis testing. In regulation, this means specifically running your product through a battery of state-licensed tests that measure purity and biohazards, not the product’s effect during consumption. Schulte, however, floated his interpretation on the record that testing could possibly include product effect. This would still ban employee consumption, but could allow for retail stores to sample the product onsite prior to purchase. The matter will depend on later application and interpretation. DJ Summers can be reached at [email protected]

BOEM releases Hilcorp's Liberty development plan for public

The U.S. Bureau of Ocean Energy Management released the Hilcorp Alaska development plan for the Liberty offshore oil field on Friday. A 60-day public comment period began with the release as one of the initial steps in a multi-year permitting process. According to Hilcorp’s filing, Liberty is the largest delineated but undeveloped light oil reservoir on the North Slope. It is located about 5 miles offshore in Foggy Bay where the water is about 19 feet deep. Hilcorp proposes to construct a gravel island and transport oil to shore via an underwater pipeline that will connect to the existing Badami pipeline and from there to the Trans-Alaska Pipeline System. At peak production, Hilcorp estimates 60,000 to 70,000 barrels per day and that the reservoir holds between 80 million and 150 million barrels of oil. The company estimates it will take two years to reach peak production. According to Hilcorp’s proposed development plan, a record of decision in September 2017 would allow for the project to begin that winter, with first oil coming in the first quarter of 2020. Hilcorp acquired 50 percent of Liberty from BP last November, along with three other North Slope properties. BP previously submitted a development plan for Liberty that would have used extended reach drilling from onshore to reach the field, but withdrew that plan in November 2012.  

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