In the weed(s)
In the weed(s)
Notes from the world of freelancing for a marijuana mag.
Happy Friday, Alaska!
In this edition: One of my freelance gigs is writing for the Fairbanks Daily News-Miner’s pot-focused magazine, The Alaska Cannabist. In this edition, I wanted to take a deep dive into several of the big stories I’ve been tracking for the magazine: The ongoing anger over how a loophole in the federal farm bill has opened the door to unregulated potent edibles; the industry’s growing pains with a tax system that has gone largely unchanged since legalization; and an ongoing battle to ease the challenges created by old marijuana convictions. Also, some weekend watching.
Current mood: 😶🌫️
Hemp-derived THC skirts Alaska’s pot laws, driving the industry mad. That could change.
Much of the talk in the last legislative session about the state of the legal marijuana industry revolved around Alaska’s outdated tax rate, but the industry has another burning concern: Potent edibles that dodge the state’s regulated and tax system simply because they come from hemp.
Many growers and retailers have complained at recent meetings of the Alaska Marijuana Control Board, pleading for the state to act against edibles that have been popping up in gas stations and head shops without the same oversight or barriers to entry of the legalized industry. That’s because they come from industrial hemp rather than recreational cannabis, taking advantage of a loophole in the federal farm bill.
They can also be sold without any age limit.
The frustration boiled over at a hearing of the Alaska Marijuana Control Board earlier this year, with several growers and manufacturers warning that unregulated edibles could put the future of the legalized industry at risk.
“As a licensee, I don't know what my future holds. I don’t know if I’m going to renew or not," said Cade Inscho, the co-owner of Cold Creek Extracts, who noted that he faced severe threats from regulators early on in his business despite following the rules. “Five years later, here we are. There’s unregulated THC on the market. I’m beside myself. I’m a bit frustrated with how this has gone. … I don’t know what the answer is right now, but it’s very scary as a licensee with everything on the line.”
The way hemp-derived THC works is this: Under the federal farm bill, hemp products can have a very small amount of THC by weight. Where flower on the recreational market can range from the high teens to 30% and beyond, hemp produced through the industrial hemp program is limited to a THC content of no more than 0.3% of the total dry weight.
If you’re looking to get high off hemp rope, you’d have to smoke a lotta rope.
Where people have got creative is in the frontier of THC concentrates. Throw all that low-THC hemp through one of the many available distillation processes, and you’ll get pure THC. To be clear, it’s a slightly different kind of THC than what you’ll find in regular recreational marijuana, but it’s still intoxicating. Manufacturers can then take that pure THC and add it to edibles, where it doesn’t take all that much sugar, flour and gelatin to get the proportion of THC content down to an allowable limit while still packing a potent punch. The federal law only checks for the percentage of the THC content when it goes into sale.
At an Alaska Marijuana Control Board hearing more than a year ago, Alaska’s leading marijuana industry attorney Jana Weltzin explained to regulators that a 15-gram sugar cookie would be illegal for having 50 milligrams of THC—a very strong dose—under the farm bill, but the law would see it as a harmless hemp product no different than a barely palatable hemp granola bar once you add a couple of grams of frosting.
“When one thinks of industrial hemp, several products pop into your head: Rope, hempcrete, paper, a pack of intoxicating 50mg delta-9 gummy bears with no age restriction. Wait! One of those things doesn’t fit. … There’s no child-resistant packaging, there’s no AMCO approval, no AMCO warnings,” she said. “If they’re going to be allowed, they should only be in licensed marijuana retail establishments.”
But that federal farm bill was a tricky issue to deal with.
At that same hearing, Alcohol and Marijuana Control Office Director Joan Wilson lamented that it wasn’t entirely clear what could be done legally to limit the sales of the hemp-derived THC edibles given their legality under federal law.
“There’s no legal reason to deny that product under statute or regulation,” she said. “There’s a great reason to deny it as a public safety threat.”
The proposed fix: Now that could be coming to an end, though, with the Alaska Division of Agriculture’s proposed regulations that would block any hemp-made products from containing intoxicating ingredients. It would also transfer the authority for THC-containing products to the Alaska Alcohol and Marijuana Control Office for regulation alongside the recreational industry.
That solution was put out for public comment in mid-June as regulations that would bar products that go through the state’s industrial hemp program from having intoxicating ingredients and specifically shift the authority to regulate those kinds of products to the AMCO office. If ultimately approved, the regulations could be in effect later this summer.
The regulation is welcome news to Brandon Emmett, a member of the Alaska Marijuana Industry Association and co-chair of the governor’s task force on recreational marijuana. Along with addressing the state’s tax system, the task force called for action on intoxicating edibles using hemp-derived THC. He said the issue has quickly come to the forefront of concerns as businesses, including Good Titrations that he co-owns, have started to feel the pinch.
“We didn’t realize it was such a big issue until it was,” Emmett said. “They’ve really started to erode the market share for edibles in the AMCO system. It comes to light that those products, they’re not regulated, they’re not age-gated, and they can technically be sold anywhere. It was really the businesses that brought this to light. We can’t compete with these products.”
Asked about the time it took from when it became an issue with the industry to now—more than a year—Emmett acknowledged that it’s a complicated issue that has taken time to educate people and find a workable solution.
“Bureaucracy is never quick to act, so it’s taken quite a while to get all the stakeholders on the same page,” he said and thanked businesses for flagging the issue.
Unwelcome competition and industry growing pains: There’s a load of rules on Alaska’s recreational marijuana industry dictating packaging, safety plans, transportation and just about anything else you can imagine. It’s a steep learning curve for most and an expensive investment for all. Emmett told me that there are certainly gripes with how the state regulates the industry, but those are the rules you have to play by if you want to play. The presence of unregulated hemp products and the black market continue to frustrate those investing in the system.
“Not only have businesses invested millions of dollars into this thing, but there’s also many of us both on the industry side and the bureaucratic side who’ve invested thousands of hours of time over these years,” he said. “It’s tough to see the system we’ve all paid into and built essentially have the rug pulled out from under it because of a loophole in the federal farm bill.”
On the legislative side of things, House Labor and Commerce Committee Chair Rep. Jesse Sumner told me that there’s still interest in a legislative fix but that he’s comforted to see the regulations coming into place now.
“We all realize that we need to do something about the Delta-9 situation. It’s from out of state, it’s entirely unregulated, there could be contaminants in it, and there’s really not good age-gating on it,” he said. “The administration is doing some regulatory work on it, but a legislative fix will be necessary at some point.”
Sumner said the priority for the next legislative session when it comes to marijuana is addressing the tax system.
Changes to the marijuana tax system gain steam, but the rate remains undecided
Largely unchanged from the original voter initiative, Alaska’s marijuana tax is charged at the wholesale level at $50 per ounce regardless of quality or final sale price. That’s created a firm floor in costs for growers as the market grows increasingly competitive and sophisticated in a way that industry advocates say is pinching businesses and driving some to the edge.
Finding a workable tax system—and tax rate—was the main task of a task force put together by the governor late last year, which put together a set of recommendations that were crafted into a bill for this legislative session.
To that end, the governor’s task force recommended a move to a sales tax that would better reflect the diverse quality of marijuana as well as capture the additional value created by making edibles or concentrates. But that change also coincided with a steep drop in the tax rate and, thus, the tax revenue. In specific terms, the legislation would have dropped the wholesale tax rate from $50 to $12.50 per ounce as they gave the state the time to stand up a sales tax system for marijuana.
The drop in revenue would be significant. The fiscal notes for the bill’s initial version anticipated that about two-thirds of the nearly $30 million annual tax revenue would disappear. Some in the industry argued that it would encourage more consumption and a wider variety of products, which could help offset the losses, but with revenue on the mind of many legislators, it was a problem.
“I recognize there’s an issue on the tax front,” said House Labor and Commerce Committee Chair Rep. Jesse Sumner, who has taken the lead on shaping marijuana tax legislation in the House. “Perhaps the production tax is inferior to a retail-facing tax for a lot of reasons, but one of the things we got hit with is the spring revenue forecast and the fiscal note on the tax change. Essentially, we thought the drop in the tax would be completely unpalatable. ... We felt we had to raise the retail tax rate to make it a little more revenue neutral.”
That meant going from a 3% sales tax rate to a 10% sales tax rate. Sumner acknowledged that the change caused “a lot of grief” and planned to hold additional hearings on the issue this interim to study the issue further and work with the industry to find a solution for everyone.
Still, he said getting something advanced next session will be a priority.
Asked about the changes, task force co-chair Brandon Emmett said he stood by the recommendations from the working group for a 3% tax rate. He stressed that it’s not only important to update the overall tax system from the wholesale to a retail level, but there’s a problem with the taxes being too high. He said it’s ultimately about sustaining the health of the legalized industry in a way that competes with and pinches the black market.
“While many of us feel a tax at retail is obviously going to be a better-fit tax than a tax at wholesale, we’re really looking for tax relief,” he said, explaining many of the headaches businesses have when it comes to handling regulations and federal taxes (where they’re barred from deducting most of their costs). “This isn’t sustainable anymore. ... You start crashing into the price floor where you have the guy who’s going out of business competing with the guy who’s going out of business.”
Marijuana records bill cleared the House
While measures aimed at helping the Alaska Marijuana industry are still in the early stages in the Alaska Legislature, a measure directed at people who fell under the sights of the state’s old marijuana laws found progress.
House Bill 28, legislation limiting access to old marijuana convictions by Anchorage Republican Rep. Stanley Wright, passed the House in the final days of the 2023 legislative session with unanimous support and is well-positioned to become law when legislators return to work in 2024.
Wright, a freshman legislator from East Anchorage, brought the legislation because he said too many people are facing challenges finding work and housing over convictions for conduct no longer illegal since the state legalized marijuana.
“I stand before this body on behalf of Alaskans, Alaskans who have paid their debt to society and deserve to pursue their dreams without fear of discrimination,” he said, talking about the decision of Alaskans to legalize recreational marijuana. “This left many individuals with previous low-level marijuana convictions facing significant obstacles to employment and housing opportunities. With this measure, we can provide a crucial second chance to those who would not be considered criminals in the eyes of the law today.”
The measure would specifically make permanent a new court rule that prevents convictions in cases of marijuana possession for people 21 and over with no other attached crimes to be removed from the court system’s online case management database. People could also request to have such convictions removed from some background checks conducted by the Department of Public Safety.
Rep. Kevin McCabe, R-Big Lake, proposed an amendment requiring individuals to pay a $50 fee to seal their records. A bipartisan group of legislators on the House Finance Committee axed a similar attempt to attach a fee to the service at $150. At that hearing, Fairbanks GOP Rep. Frank Tomaszewski called the fine “egregious,” noting that struggling people shouldn’t face more artificial barriers.
The $50 amendment was also broadly opposed on the House floor, as were several other proposed changes that would have softened the legislation’s impact.
The legislation ultimately passed the House on a unanimous vote. It now awaits action in the Senate.
“This is not a matter of condoning criminal behavior. It is a matter of recognizing that people have made mistakes in the past and have already faced the consequences of their actions,” Wright said of the bill. “It’s time for us to remove unnecessary barriers that are preventing folks from rebuilding their lives and contributing to our society. As legislators, we have a responsibility to make sure that our laws and policies are fair and just. By passing this bill, we can demonstrate our capacity for forgiveness and make sure that our justice system reflects our value as Alaskans.”
Weekend watching
In the early days of Reddit, marijuana enthusiasts set up shop in a community named Trees. Now, /r/trees is for marijuana enthusiasts and /r/marijuanaenthusiasts is about trees. Anyway, to honor that, here’s a video about a famous tree, the golden Sitka spruce known as Kiidk’yaas, from the Pacific Northwest.
Have a nice, mellow weekend, y’all!