Alaska’s cannabis industry needs to get enforcement off its back if it wants to develop quickly enough to take advantage of the summer tourism season, but that will depend in large part on the ongoing process of clarifying regulations.
“I think these are the growing pains of the new industry,” said Alcohol and Marijuana Control Office chief enforcement officer James Hoelscher. “This is something we’re going to have to deal with. Regulations need changing after we see them in action, evaluate them from the beginning to the end…then we can bring it forward to the board for them to clarify. I don’t think there’s an easy way around that.”
Hoelscher and industry leaders agree there is a vicious cycle at work.
In response to short staff at the Alcohol and Marijuana Control office and foggy Marijuana Control Board regulations, business owners will sometimes interpret regulations to the best of the own ability — which often leads to violations, which can take anywhere from four hours to two weeks worth of time for AMCO to investigate, Hoelscher said.
The already slowly developing Alaska industry gets set back even further when AMCO and the Marijuana Control Board take time sorting through the complications.
The Alaska industry is slowly but steadily growing. There are now 72 operational cultivators, retailers, testers and manufacturers in the state, with more on the way.
Explanations for the pace of Alaska’s cannabis industry development — which lags behind the booms of Lower 48 states that legalized marijuana — range widely, with a kernel of truth in each. Alaska’s unique geography and transportation hurdles contribute, along with a lack of easily accessed in-state capital, an understaffed AMCO and local opposition from towns and municipalities.
At the most recent Marijuana Control Board meeting on April 5-6, stakeholders spent the first hours begging the board to hold a May meeting. The industry needs every supply advantage it can get, they said, or the black market will pick up the slack when tourists flood Alaska’s coasts and towns come June.
Growers, many of whom are still sorting through kinks after the first growing cycle, need time to develop crops. Industry attorney Jana Weltzin even suggested waiving renewal fees for licenses not in an active status to spur growth.
“When the tourism season hits, we’re going to leave a big gap for the black market,” she told the board. “There are black market actors who have no intention of slowing their operations …they are going to be putting in large orders from the United States.”
Shortly after, Hoelscher spent several hours with the board sorting through a range of regulatory violations issued to businesses who seemed to misunderstand rules about transportation, manufacturing, and packaging.
Regulations and interpretations
Clarity is at the heart of much of the regulatory confusion. Getting people to follow the rules, Hoelscher said, means making the rules understandable.
“What I’m talking about is making them easier to understand,” Hoelscher said. “Any regulations written by anybody should be easy to understand. We should not have the opportunity for people to operate in gray areas.”
Cary Carrigan, executive director of the Alaska Marijuana Industry Association, said the industry simply hasn’t sorted through the regulations yet.
“The process has moved so ponderously in the past two years” he said, “that we’re getting to a point where we have regulations and we have to make sure they’re workable. People rather than waiting are trying to interpret them to the best of their ability. The amount of time that went between when they made these regulations and now, there was no time for interpretation.”
The board spent a fair deal of time of April’s meeting sifting through the regulations and proposing rewrites where needed.
Transportation continues to be a problem for Alaska’s geographically disparate marijuana industry.
Hoelscher mentioned several citations. Some manufacturers have picked up product from cultivators, which the regulations do not allow. Transportation through air cargo is still a problem, with companies using federal airspace, and federally-funded municipal airports like Juneau, to ship cargo throughout the state.
Other regulations needed clarity following citations. Cultivators had been cited for selling keif — marijuana dust often produced in the trimming process — which the regulations say is reserved for manufacturers only.
Packaging and advertising still needed clarity as well. AMCO has cited businesses owners for advertising through social media without appropriate warnings and for advertising free or discounted products.
AMCO had also observed companies selling cannabis products in child-proof, re-sealable packages inside brown paper bags, which meets regulatory requirements, but only after a demonstration from retail shop Arctic Herbery and a discussion.
Hoelscher made it clear that the enforcement staff’s job is to follow the letter of the law; interpretation is for the board and for legal counsel.
“Unless the law is clear, many make the assumption that operation within gray areas without staff or board clarification is an acceptable practice, which it is not,” explained Hoelscher. “If licensees are unsure of the statutes or regulations, they should contact our office for clarification.”
Contacting the office, however, is not a viable option in the thick of business operations, stakeholders said.
Nick Miller, a board member, retail shop owner and president of the Anchorage Cannabis Business Association, said reaching AMCO staff for clarification isn’t always possible.
“When I get into that situation, it’s because I’m in the middle of doing something and it’s unclear, and I need a timely answer,” he said. “I have nothing to do but go ahead with my plan. I relate it back to the staffing issue. If someone is planning something, or wants a clarification … there should be a hotline you can call.”
A hotline, though, won’t likely come too soon. AMCO is already under budgeted for what it says it needs, and has repeatedly requested additional staffing funds from the Legislature. Until then, leaders are trying to put together help for business owners. Miller said ACBA recently established a committee to create a reference handbook for businesses, comprised of the lessons more experienced members have learned.
Similarly, Alaska Marijuana Industry Association executive director Cary Carrigan said his organization wants to help with clarity.
“If people have problem with interpretation of regulations, we ask them to contact us,” he said. “We’re trying to make sure all the corners of the state know what’s going on.”
History of violations
The Alaska cannabis industry has racked up a long history of stepping through blurry lines. The board and AMCO have spent arguably as much time dealing with controversies and regulatory violations as writing regulations or reviewing and issuing licenses.
Before the Marijuana Control Board was even established, the state was faced with the alleged pot delivery services Discreet Deliveries and ACDC (which is currently advertising on radio for deliveries), along with former broadcaster Charlene Egbe’s alleged unlicensed dispensary Alaska Cannabis Company.
Shortly after the Marijuana Control Board was created, a new gray area arose with cannabis social clubs like Green Rush Events and Pot Luck Events, where patrons pay a membership fee to bring their own cannabis to consume on site.
This demanded a hasty rewrite of code, several board meetings and missives, and requests that the Legislature step in to help — which it has not done.
Later, enforcement ran into more problems as green crosses started popping up across the state, allegedly signs of unlicensed pot dispensaries.
More recently, Alaska gained national attention when AMCO enforcement seized several retail shops’ CBD oil products imported from Colorado, not tested or packaged or tracked in Alaska.
Owners received violations and each claimed that they assumed the import and sale were legal, though none verified this with AMCO staff before importing or selling the products. Companies began selling pre-rolled joints, which again demanded board time and a regulation rewrite to determine whether they should be classified as a manufactured product.
The summer of 2017 needs to grease as many skids as it can not only in getting the industry up and running but in avoiding federal scrutiny.
President Donald Trump’s administration sent shockwaves of fear through the industry when both press secretary Sean Spicer and Attorney General Jeff Sessions made comments hinting at increased enforcement of federal marijuana laws.
In this light, enforcement officials say it’s probably better to err on the side of caution.
“It is a heavily regulated industry, and it’s done that way for a reason,” said Hoelscher. “If they’re trying to rely on their own understanding … they might be doing more harm than good.”
Alaska’s cannabis entrepreneurs do have support from their congressional delegation and from their governor.
In an April 3 letter, the governors of Alaska, Colorado, Oregon and Washington addressed Sessions and U.S. Secretary of the Treasury Steve Mnuchin about the perceived threat of an uptick in federal marijuana prosecution in states where marijuana is legal.
Together, the governors asked the Trump Administration to “engage with (them)” before changing the way the federal government enforces marijuana laws.
“We understand you and others in the administration have some concerns regarding marijuana,” reads an April 3 letter cosigned by the governors of Alaska, Colorado, Oregon and Washington. “We sympathize, as many of us expressed apprehensions before our states adopted current laws. As governors, we have committed to implementing the will of our citizens and have worked cooperatively with our legislatures to establish robust regulatory structures that prioritize public health and public safety, reduce inequitable incarceration and expand our economies.”
To date, 29 states and the District of Columbia have legalized either adult use or medicinal cannabis. Colorado and Washington legalized adult use of marijuana in 2012, while Oregon and Alaska legalized it in 2014. In 2016, another four states did the same.
DJ Summers is a correspondent for the Journal currently working on a book on cannabis due out in 2018. He can be reached at [email protected]
and followed on Twitter @djsummers87.