Growing pains: License delays, enforcement issues irritating marijuana businesses

KENAI — Two years after the state’s first cannabis entrepreneurs received their licenses, business owners are still wrestling with hangups in the regulatory system.

Long waits for licenses, complex enforcement questions and expensive requirements are common in Alaska’s cannabis business, frustrating some entrepreneurs. For some, it boils down to what they consider unreasonable obstacles to commerce, and wasn’t what they pictured when Proposition 2 passed in 2014 to legalize recreational cannabis.

As of Aug. 15, about 80 would-be licensees were waiting on review through the state Alcohol and Marijuana Control Office. Though state statutes says they should be granted in about 90 days, most of them will likely be waiting for three to five months to even be reviewed, according to a director’s report from AMCO Director Erika McConnell to the Marijuana Control Board for its upcoming Oct. 16 meeting.

For Dollynda Phelps of Nikiski, who co-owns limited cultivation business Peace Frog Botanicals, that time is money.

She’s been waiting on a standard cultivation license for six months now, and every one of those months, she has been paying rent on a facility for the standard cultivation business, which she’s required to prove she has as part of a complete application.

“I put in my application in March and I’m still waiting, and the whole time I’m paying rent and insurance on a building I’m not using,” she said. “There are hundreds of us now, waiting.”

The license wait is unacceptable, she said. After the first round of licenses were approved in June 2016, the wait time has steadily increased, occasionally topping a year.

Some of that comes down to manpower. Both McConnell and her predecessor, former AMCO director Cynthia Franklin, have cited heavy workloads on a limited staff contributing to wait times. AMCO agrees that the wait is too long.

In her director’s report, McConnell wrote that license examiners are spending “an inordinate amount of time” going back and forth with licensees to hammer out pieces of applications that are missing or incomplete.

“This can mean that an examiner and an applicant go back and forth on their application documents multiple times,” she wrote. “Sometimes an applicant is resistant to the advice from the examiner, although the examiner is only trying to help the applicant be successful, as the examiners pay attention to what the board comments on in applications.”

Staffing has been an issue since the very beginning for the marijuana licensing office, which was born out of the office and staff that previously only managed alcohol licenses and enforcement.

A separate board was created, but the director and the staff remained the same with promises of future staff additions. Those staff members haven’t yet materialized, leaving the existing staff with double the work they had before, said Cary Carrigan, the executive director of the industry group the Alaska Marijuana Industry Association.

Securing more staff for the office has been one of the association’s goals for a while, he said. Though the industry is raking in money and the program is supposed to cover the office and board’s expenses, the approximately $12.8 million in tax revenue collected from cultivators by the state goes to the general fund and has to be appropriated by the Legislature to the individual departments, so it doesn’t go specifically to AMCO for administering the marijuana program.

So frustration mounts on both sides, with unreasonable workloads for the staff and compounding expenses for businesses still waiting on licenses, he said.

“It’s my opinion and the opinion of the AMIA board that the (licensing wait time) is an undue burden,” he said. “But what’s the fix?”

Licensing isn’t the only thing keeping AMCO busy, though. With the proliferation of businesses and activity, the enforcement side — which covers both alcohol and marijuana licensees — has been busy, too.

At an industry meeting among Kenai Peninsula cannabis business owners and employees, many commented that current regulations are unclear, and enforcement agents award notices of violation for items the owners or employees may not have known were against the rules. Obtaining too many violations can result in penalty actions from the board or issues with renewing licenses in the future.

The majority of inspections don’t result in a notice of violation, according to a report from AMCO Enforcement Supervisor James Hoelscher to the Marijuana Control Board for the Oct. 16 meeting.

The number of them is declining as more business owners learn the rules and the board process, but the amount is still concerning, Carrigan said — if the federal government looks at those numbers and considers them a sign of an unruly cannabis industry, it could jeopardize the state’s control, he said.

Cannabis has only been legal for recreational use in the state for a little less than four years, so public opinions are still changing, industry participants are still learning to trust regulators and enforcement officers after being illegal operators for decades, and regulators are still feeling out the best practices for monitoring the industry, Carrigan said.

“(The industry members) just need to be sure we’re being heard with one voice,” he said. “A dozen people yelling form the rafters is just a cacophony … We’re trying to move incrementally forward.”

The Kenai Peninsula operators have a small laundry list of other issues as well, including increased retention time for security footage, enforcement opposing the exchange of seeds — which cultivators want to use to expand their grow operations and diversify their strains — and plan to request a review of the board’s recently passed requirement for testing on all cannabis trim.

The change increases costs for operators by requiring an additional testing fee. Most trim is reprocessed into another product that will also be tested for quality and safety, so the operators feel it’s unnecessary.

Phelps said the burden will affect limited cultivation operations significantly, as they don’t have the economy of scale to absorb the cost. And when they can’t swallow the cost, they go under or pass the cost to consumers, which pushes prices up and may encourage them to go back toward the black market for cannabis, where it is not tested or tracked.

The Marijuana Control Board will meet Oct. 16-17 in Kenai at 145 Main Street Loop.

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Elizabeth Earl can be reached at [email protected].

Updated: 
09/19/2018 - 10:21am

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