ALASKA STATE LEGISLATURE  SENATE STATE AFFAIRS STANDING COMMITTEE  February 3, 2015 9:02 a.m. MEMBERS PRESENT Senator Bill Stoltze, Chair Senator John Coghill, Vice Chair Senator Charlie Huggins Senator Lesil McGuire Senator Bill Wielechowski MEMBERS ABSENT  All members present COMMITTEE CALENDAR  CONTINUING DISCUSSION OF THE IMPLEMENTATION OF BALLOT MEASURE NO. 2 (13PSUM) - AN ACT TO TAX AND REGULATE THE PRODUCTION~ SALE~ AND USE OF MARIJUANA" PREVIOUS COMMITTEE ACTION  See State Affairs minutes 1/22/15, 1/27/15, and 1/29/15 WITNESS REGISTER JAY C. BUTLER, MD Chief Medical Officer, and Director Division of Public Health Alaska Department of Health and Social Services Anchorage, Alaska POSITION STATEMENT: Provided a medical perspective on marijuana. JEFF ROGERS, Manager Division of Administrative Services Alaska Department of Environmental Conservation Juneau, Alaska POSITION STATEMENT: Explained the Department of Environmental Conservation's oversight for marijuana production. ELAINE BUSSE FLOYD, Director Division of Environmental Health Alaska Department of Environmental Conservation Anchorage, Alaska POSITION STATEMENT: Explained the Department of Environmental Conservation's oversight for marijuana production. MAJOR DENNIS CASANOVAS, Deputy Director Division of Alaska State Troopers Department of Public Safety Anchorage, Alaska POSITION STATEMENT: Detailed marijuana criminal enforcement by the Alaska State Troopers. CYNTHIA FRANKLIN, Executive Director Alcoholic Beverage Control Board Department of Commerce, Community, and Economic Development Anchorage, Alaska POSITION STATEMENT: Explained the Alcoholic Beverage Control Board's involvement and oversight for marijuana licensing. ACTION NARRATIVE 9:02:12 AM CHAIR BILL STOLTZE called the Senate State Affairs Standing Committee meeting to order at 9:02 a.m. Present at the call to order were Senators Wielechowski, Coghill, Huggins, and Chair Stoltze. ^Continuing Discussion of the Implementation of Ballot Measure No. 2 (13PSUM) - An Act to Tax and Regulate the Production, Sale, and Use of Marijuana" Continuing Discussion of the Implementation of Ballot Measure  No. 2 (13PSUM) - An Act to Tax and Regulate the Production,  Sale, and Use of Marijuana"    9:02:34 AM CHAIR STOLTZE announced that the committee is continuing its discussion about seeking some direction on the citizen's initiative that was approved by the voters on November 4, 2014. 9:05:01 AM JAY C. BUTLER, MD, Chief Medical Officer, and Director, Division of Public Health, Alaska Department of Health and Social Services (DHSS), Anchorage, Alaska, noted that he provided testimony the previous week on the health effects of the recreational use of marijuana. CHAIR STOLTZE asked Dr. Butler to review the recommendations he submitted to the committee. DR. BUTLER addressed what the legalization of marijuana means for policy development and implementation with regard to public safety and public health. He noted that Alaska can learn from Colorado and Washington regarding how marijuana "edibles" are prepared and marketed. The states' allowed Tetrahydrocannabinol (THC) concentrations in edibles are very high with a fairly vague definition for "serving;" THC serving sizes have been reported to be as high as 200 milligrams in a single cookie. He disclosed that an appropriate THC serving size is somewhere in the range of 5 to 10 milligrams, a range that a feeling of intoxication begins. He stated that packaging is also of concern. He revealed that packaging with humorous connotations confuses children when logos are almost identical to other commercial products. He stated that sometimes edible products really seem to be marketed to children where brightly colored packages can look like candy, particularly for a child who cannot read or is grabbing a snack in a hurry. He asserted that marijuana edibles are best addressed by defining a serving size in addition to identifying child-proof containers that have limited quantities or a single serving. He stated that he has no recommendation whether one of those approaches is better than the other. 9:08:14 AM CHAIR STOLTZE noted that dosage is an issue where the initiative's sponsor indicated that safety regulation was an appropriate role for the state. He asked how dosage is supposed to be determined if the Alaska Department of Environmental Conservation (DEC) cannot provide recommendations because marijuana is an illegal product on the federal level. He inquired how dosage will be determined if state entities that are constitutionally responsible to protect public health and the regulation do not provide guidance. He asked if the Governor should come out with a dosage recommendation or if the Commissioner of the Department of Health and Social Services should provide some guidance. He noted that he verified that the state has a constitutional responsibility and the departments that were created are given that charge. 9:09:12 AM SENATOR MCGUIRE joined the committee meeting. DR. BUTLER responded that the dosage question is fairly complex. He asserted that data and science indicates that a smaller dosage range is an appropriate serving. He said identifying who would actually do the product testing to document what is claimed is not an easy question. He added that one of the department's sister agencies indicated that testing resources are not currently present due to shrinking resources. He stated that packaging with labeling and dosage identification is important. CHAIR STOLTZE noted that his comment was not a singular request to Dr. Butler, but rather a broadcast message to other agencies and the Governor's office. He said the committee is trying to get regulatory assistance to draw the fine lines that direct traffic. He asserted that the state gets one shot at regulation. He pointed out that alcohol is government regulated and monitored. He summarized that the Legislature needs more involvement and direction from the Administration before the Legislature can move forward with confidence. 9:13:19 AM SENATOR MCGUIRE commented that there is a right to privacy in the Alaska Constitution for personal use in the privacy in your own home under the Ravin Act. She noted that for public health and public safety reasons, marijuana has been regulated as a controlled substance and now the state is moving into an area that is a little bit murkier. She asserted that Dr. Butler's testimony and work is going to be very important to the Legislature regarding the state's compelling interest for a right to privacy. She pointed out that any modifications made to the initiative with respect to minors, public consumption, and dosages will be subject to legal challenge. She said a court of law is going to look specifically at Dr. Butler's testimony as the Chief Medical Officer and to the data that the committees collect to see whether or not that test has been met. She asserted that she is only interested in regulating individual adult rights up to the place where a person's individual liberty begins to ebb into someone else's, a point that she will determine from medical and health data. SENATOR COGHILL noted that dosage is a big deal in Colorado and Washington. He said the Legislature will continue to address what a dosage means as well as proper packaging and legible labeling. He asked Dr. Butler if he has given some consideration to a symbol that might indicate the dosage. He noted that alcohol uses "proof" to identify the percentage of alcohol. 9:16:32 AM DR. BUTLER answered that there are a number of proposals and he has no recommendation in terms of what may be best. He agreed that going the direction of a recognizable logo is the direction to take fairly quickly, even though there may not be a lot of data regarding logo recognizability and communication. SENATOR COGHILL said the Legislature will look to the Division of Public Health for assistance. He noted that Dr. Butler gave a clear recommendation on impairment levels and remarked that DEC and other regulatory agencies might be able to assist with the dosage symbol. He reiterated that a dosage symbol will identify a healthy dosage level that is similar to alcohol using "proof" to indicate alcohol percentage. He said dosage identification sends a clear signal, especially to people under 21. 9:18:06 AM CHAIR STOLTZE thanked Senator Coghill and stated his appreciation for Senator McGuire's references regarding the importance of the public record. He pointed out that the marijuana industry advocates have not just suggested, but promised lawsuits. He asserted that prior to moving the bill through all of the committees, there ought to be some clear public record about the suggested warnings and not strictly on the regulatory process. He opined that the public has an expectation for the Legislature to get marijuana regulation right irrespective of the complexities. He asked for confirmation that Dr. Butler has not been given authority by the Administration to speak on all of the policy aspects of marijuana with recommendations. DR. BUTLER agreed that was a fair assessment. CHAIR STOLTZE stated that the committee will take Dr. Butler's testimony as DHSS's medical testimony with some of the highlighted concerns. He asked Dr. Butler to verify that he is not prepared to make policy recommendations at this time and somebody else probably will. DR. BUTLER clarified that DHSS has a mandate from the electorate to implement the voter initiative. He added that there are a lot of details to sort out so that an appropriate balance is maintained between access to legal marijuana and protecting public safety and public health. 9:20:50 AM JEFF ROGERS, Manager, Division of Administrative Services, Alaska Department of Environmental Conservation (DEC), Juneau, Alaska, introduced himself. CHAIR STOLTZE called attention to previous testimony that DEC is fully capable of regulating marijuana's food safety aspects, but noted that drug content provides DEC with a conundrum. MR. ROGERS explained that DEC's challenge is whether or not marijuana is a food, drug, or both. He said if marijuana is a drug, DEC would probably have next to nothing to do with regulation. If marijuana is a food, it would fall within DEC's existing regulatory regime. He said given that marijuana will be some part both food and drug, or a drug additive to food, marijuana is replete with regulatory challenges for DEC. CHAIR STOLTZE asked if DEC has the testing facilities and what is the fiscal impact for DEC to provide the oversight to regulate marijuana as a drug or infused product. 9:22:48 AM MR. ROGERS deferred to Director Busse Floyd to address the question. CHAIR STOLTZE stated that his question will not be answered today and noted his expectation that DEC will huddle as a department to address it later. MR. ROGERS asserted that DEC's Environmental Health Laboratory (EHL) can perform or certainly has the expertise with the proper equipment to perform the necessary testing on marijuana as a product. He added that DEC has an agency that can act as a referee lab for certifying private laboratories. He pointed out that DEC Commissioner Hartig explained in a recent letter to the committee that EHL has an official governmental capacity that normally looks toward standards that have been adopted by other government agencies, the federal government, or by a commonly accepted scientific practice for certifying to a standard. He pointed out that marijuana standards do not exist so DEC would be developing a scientific standard for marijuana testing. CHAIR STOLTZE asked Mr. Rogers if he was comfortable with outsourcing a health related issue to private labs. MR. ROGERS replied that he does not have any particular recommendation from the department. CHAIR STOLTZE stated that testing should be addressed by DEC. MR. ROGERS noted that private testing labs in the state do a lot of testing on air, water, and other materials that are regulated by DEC. He stated that DEC and EHL do not have any interest in filling a role that private industry can fill. He revealed that EHL certifies private laboratories with the knowledge that results are reliable and scientifically accurate. CHAIR STOLTZE asked that DEC define its position as to whether the Administration wants to outsource the health and safety testing to the industry itself. He asserted that DEC's role is an important policy consideration. 9:25:50 AM MR. ROGERS agreed. SENATOR COGHILL called attention to a letter from DEC that addressed a regulatory scheme for marijuana. He pointed out that DEC will have to address policy matters on inspection, time frames, sanitary growing, and if there are discharges from a growing field. He stated that DEC is basically dealing with a whole new manufacturing industry for its food service issues. He remarked that DEC will be working closely with the Alcoholic Beverage Control (ABC) Board on regulations. MR. ROGERS replied that DEC is definitely participating in the workgroup led by the ABC Board's Cynthia Franklin. He stated that Ms. Franklin is an expert that is leading the regulatory effort. He opined that as more becomes clear for the working group, DEC will be able to offer more to the committee on specific legislation. SENATOR COGHILL said DEC will be asked to come back and address how it expects to inspect facilities and regulate possible discharge. CHAIR STOLTZE asked for a closing statement. MR. ROGERS stated that Director Floyd may have some comments about food safety and the lab. CHAIR STOLTZE remarked that he believes the committee has a handle on food safety. SENATOR COGHILL asked how the potency levels of edibles will be measured. He encouraged DEC to work with the Division of Public Health to come up with a way to clearly indicate potency levels in edibles. He said he is concerned that people will have a problem reading the fine print on packaging. He pointed out that alcohol clearly and legibly indicates potency levels with the term "proof." 9:29:33 AM CHAIR STOLTZE pointed out that the Administration and the state's public health entities must determine and explain why potency levels and dosages are appropriate. He said there is going to be litigation and having a clear public record of what is driving potency levels and dosages are not arbitrary numbers. He remarked that creating an arbitrary number would not be responsible. He said he does not want to guess just because Colorado has 10 milligrams. He asked that DEC and the Division of Public Health provide a clear record in writing on why public safety and health standards were set, especially for public awareness. SENATOR MCGUIRE added that the Senate Judiciary Committee is addressing the term "edible" in the marijuana criminal bill, a concern that has been expressed by Cynthia Franklin and by the public. She asked that the working group provide refined testimony on specific concerns about edibles and what will be helpful to include in its definition. 9:32:48 AM CHAIR STOLTZE announced that the committee will not just rely on the testimony of state agencies. He said the marijuana industry as well as the public will certainly weigh in. He asserted that public testimony will be a robust part of the process. He noted that the committee requires a bill for public testimony. He said taking public testimony prior to a bill would be unfair. 9:34:36 AM ELAINE BUSSE FLOYD, Director, Division of Environmental Health, Alaska Department of Environmental Conservation, Anchorage, Alaska, stated that Mr. Rogers has done a terrific job in summing up DEC's concerns and capabilities. She explained that DEC is working closely with fellow state agencies to carve out different roles. She asserted that DEC is very capable in handling food safety and processed food inspections. She pointed out that certifying commercial laboratories addresses DEC's ability or necessity to actually be the tester. She remarked that private labs are new commerce and a great opportunity. She noted that Colorado and Washington do not test, but certify private labs to do the potency testing. Both states started with potency testing and slowly worked towards testing microbial, residual solvents, and metals. She revealed that Colorado has approximately 15 private labs and noted the necessity to drive product to the testing labs. She pointed out that transporting product for testing will be a big challenge in Alaska. CHAIR STOLTZE asked her to clarify that the transportation issue was a federal obstacle or requirement. MS. BUSSE FLOYD responded that she agreed. CHAIR STOLTZE reiterated that the transportation issue is not a roadblock that the Legislature is putting up through state regulations or statutes. 9:37:30 AM MS. BUSSE FLOYD summarized that meetings are scheduled between DEC and the ABC Board, allowing for DEC to specify its role and make recommendations. CHAIR STOLTZE pointed out that DEC's challenge is working within the department to prepare a preliminary fiscal commentary of what DEC believes the costs will be. He asserted that even with outsourcing, DEC will have department costs. MS. BUSSE FLOYD replied that DEC can do what Chair Stoltze requires. SENATOR HUGGINS called attention to the possibility for a cleanup fund for the marijuana industry. MS. BUSSE FLOYD replied that there are a lot of ways funding could be used. SENATOR HUGGINS pointed out that an added tax is used in the petroleum industry to address cleanup, a concept that might have to be considered for marijuana. CHAIR STOLTZE noted that Senator Huggins' suggestion sounds like an impact fund. He asked who the members are for the working group. 9:41:24 AM MS. BUSSE FLOYD detailed that the group consists of Lacey Wilcox from the Governor's office, Cynthia Franklin, Major Dennis Casanovas, several people from the Department of Revenue, Dr. Butler, and herself. CHAIR STOLTZE asked that the committee receive a working group members list. He inquired if the working group meetings are open to the public. MS. BUSSE FLOYD answered that she did not know. CHAIR STOLTZE pointed out that a level of transparency and openness was promised. He opined that the first lawsuit will address the working group's policy development recommendations. He stated that the working group might as well get it out right now. MS. BUSSE FLOYD stated that Cynthia Franklin or Lacey Wilcox would know. She added that the Department of Law also attends the working group meetings. 9:43:41 AM MAJOR DENNIS CASANOVAS, Deputy Director, Division of Alaska State Troopers, Department of Public Safety, Anchorage, Alaska, introduced himself. CHAIR STOLTZE stated that one of the major roles Major Casanovas will have is on the issue of impairment. He noted that Washington State seems to be the leader on establishing impairment policies and asked if Major Casanovas recommended using Washington as a prototype or a guide for Alaska. MAJOR CASANOVAS replied that he is not extremely familiar with what Washington has other than both Washington and Colorado have a 5 nanograms per millimeter (5 ng/ml) per se limit for THC in blood samples of subjects that are driving. He stated that Alaska could entertain 5 ng/ml or one that is less. CHAIR STOLTZE asserted that potency levels will be an important policy issue and one the committee will need prior to finality. He stated that the Department of Public Safety is going to have to make a specific recommendation. He remarked that every Legislature he has been a member of has had an incredible deference to the opinion of the Department of Public Safety. He stated that DPS has a responsibility to provide the Legislature with its expert testimony on the appropriate public policy approach because the State Troopers and local constabularies are going to implement whatever the Legislature decides. He asserted that the Legislature is going to need a lot of help to draw clear statutory lines. He assumed that litigation is just a default position and is going to occur. He noted having a discussion with an individual from the Washington State Patrol who indicated that they had a pretty good handle on marijuana and alcohol regulation. He stated that there are critics in the marijuana industry of Washington's approach. He asserted that the Legislature is going to expect a more detailed interaction with the Department of Public Safety's objective policy thoughts and recommendations. 9:47:17 AM CYNTHIA FRANKLIN, Executive Director, Alcoholic Beverage Control (ABC) Board, Department of Commerce, Community, and Economic Development, Anchorage, Alaska, noted that the committee requested in a previous meeting that the ABC Board work on a document from the Administration to address the ABC Board's positions on many issues, including serving sizes. She revealed that some recommendations do not contain or cite references to any scientific studies or information the committee was seeking from Dr. Butler. The ABC Board is working with its fellow agencies to compile information about specific topics that relate to the various agencies' work. 9:50:02 AM SENATOR WIELECHOWSKI asked for a review of the initiative's timelines as far as personal use, sale, and other timelines. MS. FRANKLIN specified that the act becomes effective on February 24, 90 days after election certification. Personal marijuana use and possession in AS 17.38.020 will take effect on February 24. The ABC Board expects to seek one emergency regulation on February 24 to get a definition of "public" in place. She stated that the ABC Board believes the emergency regulation process was created for just the scenario previously noted where the public and law enforcement are in need of a law clarification that is taking effect essentially in the middle of Session. She revealed that the ABC Board cannot statutorily enact the emergency regulation process until February 24 due to the ABC Board's authority over alcohol and not marijuana. She specified that the marijuana rulemaking timeline is February 24 to November 24, as designated in AS 17.38 for the ABC Board or the Marijuana Control Board to work on the 9 areas of rulemaking set forth in AS 17.38.090. She said the next significant period of time is February 24, 2016, the ABC Board or the Marijuana Control Board are expected to begin taking license applications set forth in AS 17.38 to be issued by May 2016. He detailed that initiative set forth the timeline, but noted that one bill moving through the Legislature purposes to change the timelines with regard to marijuana concentrates. 9:53:54 AM SENATOR WIELECHOWSKI noted a news report about an organization in Anchorage that will start marijuana dispensing on February 24. He said there seems to be some confusion in the public about what can happen on February 24. He asked if an organization can start selling marijuana on February 24 or is just possession legal on February 24. MS. FRANKLIN answered that the ABC Board has made it very clear that no one can start legally selling marijuana on February 24. She said there are a couple of individuals in the Anchorage and Wasilla area who seem to be insisting on making their own rules, noting that one of the businesses was busted by the Anchorage Police Department in the last couple of weeks. She summarized that AS 17.38.020 becomes law on February 24. She explained that less than one ounce of marijuana is allowed for personal use and possession in addition to personal growing to some extent. AS 17.38.020 codifies rules that the Alaska Supreme Court has had in place for years. She affirmed that the law absolutely does not create a situation where there is any kind of legalized market before the rules are written by a combination of the Legislature and whatever regulatory agency is assigned the job. 9:57:09 AM SENATOR WIELECHOWSKI asked what date marijuana can be legally sold in the state of Alaska so that people of Alaska can understand. MS. FRANKLIN answered that the date is going to be when the first licenses are issued, possibly May 2016. She emphasized that the first marijuana sold legally is going to have to be marijuana that was grown legally. She noted that other states have awarded licenses to growers prior to dispensaries for a proper rollout. CHAIR STOLTZE asked if the stated goal is to regulate marijuana like alcohol and that alcohol requires a license for sales. MS. FRANKLIN answered yes. She specified that Title 4 states that selling alcohol without a license is a Class A misdemeanor, punishable by up to a year in jail and a $10,000 fine. CHAIR STOLTZE remarked that regulating marijuana like alcohol is what the marijuana industry asked for. 9:59:21 AM SENATOR WIELECHOWSKI asked that Ms. Franklin talk about the permits. He noted that there is a provision in AS 17.38.090 that says the application fee will be $5,000 unless the regulatory board determines a greater fee is necessary. He inquired if Ms. Franklin believes it will be necessary to charge more than $5,000. MS. FRANKLIN answered that licenses will depend on what types of licenses are established. She noted that licensing for smaller communities may have challenges due to issues with transportation. She said there may be situations where license "stacking" may be required in smaller communities for different types of licenses. She noted that Colorado has a system where a business can apply for, receive, and hold more than one type of license. She detailed that businesses in smaller communities might need to hold multiple licenses due to federal transportation prohibition via plane or ferry. She remarked that the $5,000 fee is in line with the type of fees that the ABC Board charges for alcohol or liquor related licenses. She revealed that half of the license fees goes back to the municipalities and noted the ABC Board has a similar fee sharing or refund system for alcohol with the idea that some law enforcement will fall to local law enforcement. 10:01:35 AM SENATOR WIELECHOWSKI noted that some alcohol licenses can sell for hundreds of thousands of dollars and asked Ms. Franklin if she envisioned a scenario where that can happen with marijuana. He inquired if there is any way to ensure Alaskans get licenses or receive priority over large, outside corporations that plan on coming in. MS. FRANKLIN explained that the secondary liquor license market was created by the ability for licensees to transfer their licenses. She explained that one of the easiest ways to avoid a lot of headaches is to make marijuana licenses nontransferable and have the licenses return to the state. She noted that the money from the secondary liquor license market does not go to the city or the state of Alaska. She revealed that a secondary market value is due to limited licenses based on population. SENATOR WIELECHOWSKI noted that he was concerned about new individuals coming in for licenses and forever being prohibited in getting one. He addressed "Alaskans first" and asked if there is a way to see that Alaskans get the licenses instead of large, outside corporations. 10:04:01 AM MS. FRANKLIN answered yes. She noted that both Colorado and Washington have residency requirements associated with their licenses. She stated that the ABC Board believes that residency requirement is a good way to keep the marijuana business as Alaska-based businesses. She said residency verification could be relatively easy to designate, similar to PFD qualifications or requirements for fishing and hunting licenses. She noted that recent legislative testimony and anecdotal information has indicated that most marijuana currently available in Alaska is grown in Alaska. She mentioned that some questions will come up in terms of corporations and noted liquor licenses have corporate owners. She suggested that marijuana licenses designate ownership percentage and transfer rules as to how much of a corporation can be moved about without causing a business to surrender its license. She noted that the ABC Board has a lot of precedent with regard to liquor licensing and a way to approach residency and corporate transfer issues. She opined that because of transportation issues and how far the state is from the rest of the country, Alaska is unlikely to become a mecca for big marijuana businesses. She said in terms of a combination of residency requirements and the impracticality of moving marijuana to Alaska from other states, diverting marijuana must absolutely be made illegal. She asserted that marijuana must be grown and sold in the state without diversion from another state in order to comply with the Cole Memorandum regarding federal enforcement rules dictated by the Controlled Substance Act. 10:07:15 AM CHAIR STOLTZE asked her to confirm that there are no interstate commerce prohibition by nature of the initiative, only instate. MS. FRANKLIN agreed. She noted that the Cole Memorandum outlines the federal areas of priority for marijuana enforcement, including any type of diversion between states. She summarized that the federal government has essentially said that it is not going to bother a state regulated business if it is complying with state regulations; however, the federal government will be involved with marijuana moving across state lines. CHAIR STOLTZE commented that there was a directive to regulate marijuana like alcohol from the initiative. He noted that the initiative's sponsors directed the regulatory agency by default as the ABC Board. He remarked that one challenge the Legislature should take is not to regulate marijuana like alcohol. He opined that federal alcohol laws and regulations have so much embedded interest for the industry and how it is sold. He pointed out that Senator McGuire recounted the challenges from the brewpub statutes. He opined that the push for the commercialization of marijuana that "regulate it like alcohol" was a political statement campaign, not a directive to take all of the bafflingly confusing and almost nonsensical ways that protectionism is embedded in alcohol regulation and statute throughout the country. He stated that he is going to ask the sponsors to come back briefly to give the Legislature guidance and recommendations. He summarized that public testimony will depend on a bill coming to the committee. 10:12:02 AM There being no further business to come before the committee, Chair Stoltze adjourned the Senate State Affairs Standing Committee hearing at 10:12 a.m.