Frustration with hemp-derived THC boils over at control board meeting

To hear it from the testifiers at the Alaska Marijuana Control Board’s March meeting, Alaska’s cannabis industry is near its breaking point with hemp-derived THC products that use gaps in federal law to skirt the state’s legal recreational industry.

Growers, manufacturers, retailers and industry advocates filled up the board’s public hearing during the March 8 and 9 meetings in Fairbanks, telling the regulators that something needs to be done quickly about hemp-derived THC products that are starting to pop up in Alaska — outside the reach of the state’s marijuana laws and regulations — that are undercutting the legalized recreational industry.

First, some background on the issue:

Under the federal farm bill, farmers can grow hemp and make hemp-derived products if the THC remains below a certain low threshold. While that would normally be no problem when it comes to flower because it’d require someone to smoke a ludicrous amount of hemp to get high, it has become a problem when it comes to concentrates and edibles.

Some manufacturers around the country have figured out that you can run the hemp through the same kind of techniques the legalized industry uses to extract concentrated THC from cannabis to extract concentrated THC from hemp, creating what’s called delta-8 and delta-9 THC (which are slightly different than what you’d find in traditional cannabis but still have intoxicating effects). While those concentrates would be illegal to sell on their own, the federal law only watches for how much of the final product’s weight is THC. Add the hemp-derived THC to cookies or gummies or just about any other edible, and boom, you have potent edibles that are entirely legal in the feds’ eyes.

That not only means that they skirt local laws and regulations on the cannabis industry — including Alaska’s taxation system — but they can also flow across state lines. In addition, they can be easily bought online and, critically, sold without age restrictions. While the state’s hemp program is supposed to oversee these products and requires licenses for those selling them, industry advocates say that enforcement has been incredibly light from the Division of Agriculture.

Industry outrage

To many in the industry, the situation has been a red-alert all-hands-on-deck moment that threatens to undermine the legalized market that’s already feeling the pinch of an outdated tax system that doesn’t take into account the potency or final sale price of the product, meaning growers struggle to make a profit on many crops and the cost of cannabis has generally stayed high much to the frustration of manufacturers, retailers and consumers.

Introducing cheap, hardly regulated and untaxed alternatives has pushed many to the point where they’re starting to rethink their place in the industry.

"It's everywhere. We've seen, today, you can go find them in almost every head shop, many marijuana stores," said Brandon Emmett, co-owner of Good Titrations in Fairbanks. "As a manufacturer of edibles, I cannot compete with Delta-8 and Delta-9 products from hemp. ... What is my economic incentive to continue to participate in the AMCO program for the edible market? I can understand vape pens or high-THC marijuana, but for this specific but significant sector of the industry, why should I go through the hassle? I've crunched the numbers … and we could order Delta-8 or Delta-9 products in finished packages from the Lower 48 for the same price or cheaper than I can produce them myself as a semi-vertically integrated facility.”

Similar math was on the mind of many people in the industry who called into the meeting.

“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. "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."

As far as solutions, several suggested bringing the hemp industry under the purview of the state’s cannabis regulations by reclassifying hemp and marijuana under a single label. That suggestion is part of the recommendations generated by the governor’s special task force on marijuana, which were introduced to the Legislature in mid-March as House-sponsored legislation.

In the immediate term, though, solutions could be clearer.

At the board meeting, some suggested that it would be wise for a business facing these troubles to entirely abandon the state’s recreational cannabis framework and sign up for the much-cheaper hemp licenses from the state and work within that realm, avoiding the state’s tax structure altogether.

And some others even went as far as to suggest that the state’s regulated marijuana industry should get the same light touch that has been afforded to the hemp industry, lifting the entire regulatory framework altogether and lifting age restrictions.

Uncertain solutions

The members of the Alaska Marijuana Control Board seemed generally taken aback by the situation. There were many questions about whether the Alaska Alcohol and Marijuana Control Office had any legal authority over the hemp program in the Division of Agriculture.

AMCO Director Joan Wilson told the board that they’re still struggling to understand the legal framework of the issue. Still, he said she believes it results from an intentionally designed loophole in the federal farm bill.

"We are not alone. We are all struggling,” she said, noting that several other states are struggling to figure out what to do with hemp-derived edibles. “There was discussion of whether this is a loophole. I think it is completely it was an intended loophole. I think people knew what was happening and took advantage of it," she said. "It's not this room; we’re talking nationally."

The board discussed the issue on the second day with some officials from the Division of Agriculture, who also expressed frustration with the limits of the law, and ultimately approved a letter asking for Gov. Mike Dunleavy and the Division of Agriculture to consider a handful of regulatory changes.

“The Marijuana Control Board has become aware of a concerning trend in products being produced and/or imported under the auspices of the Alaska Hemp Program,” explained the letter. “Specifically, products containing hemp-derived THC are being marketed and sold through a variety of retail outlets without being tracked or taxed, and without any age restrictions for purchase. In most cases these products are being sold without proper final form potency or contaminate testing that is required of Marijuana Retailers licensed under AMCO's authority. The result is that high-potency products are available to any Alaskan — including minors — with little or no controls or accountability. We feel that this represents a significant Public Health concern and are asking the Governor's office to intercede and to ask Division of Agriculture to issue Emergency Regulations.”

The letter outlines five specific changes to regulations:

· Require child-safe packaging similar to those required by the cannabis industry

· Limit the potency of any package of hemp-derived edibles to a maximum of 3 milligrams of THC (it’s currently allowed up to 50 milligrams, though you can find higher doses at some stores)

· Enter into an agreement between the Division of Agriculture and AMCO to allow AMCO to use its existing investigative resources to enforce the laws and regulations on hemp products

· Two changes that put stricter limits on the concentration of delta-9 THC in hemp products by reworking how that concentration is calculated

As of early April, Alaska Marijuana Industry Alliance President Ryan Tunseth said he was still waiting for any news about the letter or the state’s response.

He said the whole process, which he described as the “greatest onion-peeling exercise,” has been deeply frustrating for the industry. But, in the big picture, he said the existence of a lightly regulated hemp industry producing intoxicating THC edibles calls into question the heavy-handed regulations on the cannabis industry where security cameras, transfer of product and locations of businesses are all highly monitored.

He said he understood the industry members’ frustration and said that the industry association would continue to put pressure on regulators, state officials and the Legislature to find some solution.

“It’s not going to go away,” he said. “It’s absolutely not going to go away.”