In just a few weeks, the first legal pot shops in Alaska will open their doors.
In the two years since voters approved Ballot Measure 2, prospective business owners and state regulators have worked to create a new industry that’s as complicated as it is contentious. But major issues are still unresolved, including how to legally transport marijuana from any community that’s not on the road system.
The legal gray zone in Alaska is likely to serve as a test case for interstate commerce of a product that’s still federally banned.
Mark Malagodi is the CEO of CannTest, a marijuana testing facility in an industrial patch of Anchorage tucked between the port and the railroad. Though they’ve been in the building a year, you’d never know it from the blank walls and near-empty rooms, each devoted to pieces of lab equipment that look like photocopiers and Toyo stoves.
“The machine that’s on the right, which is called the head-space sampler, basically just heats the product up really really hot, and that puts all the gases up into this tiny little tube,” Malagodi explained during a recent tour of the lab.
Testing facilities like this are an essential piece of Alaska’s commercial cannabis industry. Whether one is growing organic bud, making pot brownies, or manufacturing concentrates, a portion of each batch needs to be brought to a lab. Then, Malagodi’s machines will test for potency, mold, and bacteria like E. coli.
These facilities are extremely expensive to set up and to staff. Malagodi didn’t want to share specifics about purchase costs for the equipment itself. But when I asked for a price range on a just one particular chromatography system he said it was somewhere between a car and a house.
“More than an RV,” he laughed.
The full capital costs are much higher.
“We’re talking hundreds of thousands of dollars,” Malagodi said, speaking generally.
State regulations prohibit cultivators or retailers from also owning testing facilities; the goal is to avoid a fox-guarding-the-hen-house situation. But that adds another layer of difficulty for rural pot businesses, because it’s unlikely most small communities can support their own capital-intensive testing labs. That means they’ll be relying on the ones in the state’s population centers.
Right now, there are two such testing facilities racing to open, and both are in Anchorage. A third lab in Juneau is several weeks behind. Malagodi expects his business to begin testing samples as soon as an Outside company finishes accrediting the lab.
“That’s one of the questions in Alaska right now,” Malagodi said. “What’s the volume going to be?”
The vast majority of pot businesses are in the Railbelt. For them, the transportation system is theoretically worked out. A grower can drive samples to a lab like CannTest, and, for $70 to $220, have it certified.
If that grower doesn’t want to make the 14-hour round-trip drive from Fairbanks, or if businesses want added security, a private firm called Valkyrie is the only transportation company with contracts to move cannabis. Valkyrie’s armed guards are licensed by the Department of Public Safety, and hired from the ranks of former military and law enforcement, according to CEO Larry Clark.
But this system won’t work if you’re James or Giono Barrett, two brothers who are “three or four weeks” away from their first legal crop of marijauna at their business, Rainforest Farms. Which is in Juneau.
“We’re still trying to figure out the transportation issue,” Giono said. “It really depends on which law you’re dealing with.”
That’s the conundrum for the Barrett brothers, and for other Alaskans who have started the long and expensive licensing process in Nome, Dillingham, Sitka, or anywhere else off the road system: you can’t ship your product to get tested without sending it by mail, air, or sea. All of those are regulated by federal agencies, which still treat marijuana as a controlled substance.
The Barretts will use the local lab in Juneau when it opens, but until then, they’re considering moving samples over water onto the road system, then driving it to Anchorage. That doesn’t break any state laws. But it would be a problem if the Coast Guard decided to take an interest.
“You want to make sure you make the right decision, because you don’t want your property seized,” Giono said. “Maybe there won’t be a charge out of it, but it’s definitely a big inconvenience if your property is seized — especially if it’s everything you’ve been working for.”
The Barretts are open about this because they’re confident that in the big picture, they’re on the right side of the law. As justification, they point to the Cole Memo, a 2013 document from the U.S. Justice Department that says the Federal Government isn’t interested in bringing charges against people in the commercial pot business, provided they’re obeying state laws. Over the last few years, as states have legalized cannabis, regulators have used the Cole memo as guidance when there are inconsistencies between federal and state laws. And that’s exactly what the Barretts are counting on.
“At some point it’s about interpretation and attitudes,” James said, “So I think we should be saved by that.”
Alaska Public Media contacted several agency representatives about transportation. The Federal Aviation Administration, the U.S. Postal Service, and the Alaska State Troopers all said something along the same lines: We know what’s legal and illegal, and if we see it, we’ll take action. But we’ve got bigger fish to fry.
The U.S. Justice Department declined to comment, other than emailing a copy of the Cole Memo.
In the words of one federal agency representative, “if there’s no knowledge, there’s no problem.”
State regulators are banking on the Cole Memo to shield Alaskans from federal prosecution. At an April 27 meeting of the Marijuana Control Board, Cynthia Franklin, head of the regulatory body in charge of commercial cannabis, laid out the state’s thinking.
“Whether you’re talking about postal police, or Coast Guard, or any kind of law enforcement associated with that transport, they all end up at one place for their prosecution, which is the U.S. Attorney’s office,” Franklin said.
And in Franklin’s interpretation of the Cole Memo, U.S. attorneys have no interest in prosecuting licensee-to-licensee transfers as long as businesses are meeting state laws.
Back in at the CannTest office, Mark Malagodi said after two years of work to get his business up and running, he can finally see the light at the end of the tunnel. He’s excited that he’s helped start a whole industry from scratch, but he’s disappointed that between the expense and the absence of clear laws, rural Alaskans are locked out — unless they’re willing to break federal laws.
“As far as the spirit of what’s been done here, it’s frustrating,” Malagodi said. “It was opened up to Alaska, and then denied to many.”
For the time being, Malagodi is trying to finalize his lab’s accreditation so they can start accepting samples by Halloween.