Post-vote, cannabis businesses bloom on peninsula

Every time brothers Chase and Dylan Griffith make a business decision, instead of shaking hands, they bump fists.

It’s par for the course in their family-owned business, Permafrost Distributors, a cannabis cultivation and retail operation based in Nikiski and Sterling. Another of their brothers helps with cultivation, and a high school friend of Chase Griffith’s works in the store in Sterling.

But just because the group is friendly doesn’t mean they don’t take their business seriously. The Griffith brothers funded their original limited cannabis cultivation operation in Nikiski with no outside financial help and expanded to Sterling in June. All the cannabis products in the retail shop in Sterling are made from their own harvests, and though they don’t manufacture the shatter themselves, it’s made from their plants’ trim.

“We like to send our own in and get our own out,” said Dylan Griffith.

The move to Sterling in June was a somewhat risky investment at the time. Less than four months later, Kenai Peninsula Borough voters would decide whether commercial cannabis operations in the borough outside the cities should be legal. Voters in the borough outside the cities soundly defeated the proposition by a 28.5 percent margin, leaving commercial cannabis operations legal.

Chase Griffith served on the steering committee for the Keep Cannabis Legal campaign, the industry-organized political group opposing the proposition. He said they were fairly certain it wouldn’t pass but had a backup plan if it did.

Luckily for them, they’ve been able to press on. They’ve been hard at work on testing their own strains in their limited grow operations and eventually plan to look at their own manufacturing license. They’re getting themselves established in the neighborhood, too — none of the neighbors in Sterling seem to mind them being there, Chase Griffith said. With the protections within regulation requiring cannabis business licensees to be Alaskans, it helps keep some of the money from the industry in the state, too, he said.

“We got no objections to any of our licenses,” he said. “On this street, everyone’s been really supportive.”

Many cannabis business owners are now going forward full steam toward opening on the Kenai Peninsula. Across the Kenai Peninsula, 26 cannabis businesses are currently operating, with some businesses holding multiple licenses, like Permafrost Distributors. Another 21 licenses are pending at various points in the application process.

One of those is Nicole Chistensen’s license. She started the application process for her business, a cannabis product manufacturing facility near Soldotna called Fire Eater, about a year ago and has been working her way through the process since. Though she and her family currently live in Anchorage, they chose to base their business on the peninsula because the area’s zoning restrictions were less complicated than Anchorage’s rules, she said in an email.

“(The Municipality of Anchorage’s rules) in regards to location caused a lot of struggles finding an appropriate spot,” she said. “We had one that was all lined up we initiated our license and then the location fell through. The landlord had an issue arise (nothing that could have been anticipated) it was just a huge heartbreak and set back to have to start over. While on the peninsula we started talking to some of the local businesses there and decided that since we were planning to relocate anyway let’s just move that timeline up. We just happened to stumble into a location that works well for us.”

She said she was happy to see the voters in the borough chose to keep commercial cannabis legal, though with the recent investigation and repeal of Fairbanks edible manufacturer Frozen Budz’ license due to untested cannabis, she said she anticipated stricter regulations for edibles.

Her business and another Soldotna-area licensee, Lady Grey Gourmet Medibles, will be the first cannabis manufacturing facilities on the peninsula. That’s something the Griffiths said would help the industry — closer facilities for manufacturing as well as future testing facility.

Homer

Since Alaska started the licensing process for legal commercial cannabis, only three Homer-area licenses have been issued. All are for cultivation facilities and outside city limits. Two retail shops have moved to the delegated status — the second-to-last step in the Alaska Marijuana Control Board licensing process — and plan to open in 2018.

Remodeling of Uncle Herb’s on Ocean Drive continues, said owner Lloyd Stiassny of Anchorage. Construction of Alaskan Cannabis Outfitters on the Sterling Highway near Green Timbers Road will start in 2018, with a possible opening in the summer, said William Bear of Homer, an affiliate with corporate owner Great White Bear, LLC of Anchorage.

“We’re still a little ways out,” Bear said. “In a perfect world we’ll be open mid-season next year.”

The Alcohol and Marijuana Control Office has asked for a few tweaks to Uncle Herb’s application and is waiting for approval from the fire marshal, AMCO director Erika McConnell said in an email.

Stiassny said he had no firm date for Uncle Herb’s, located in a building next to the Homer Farmers Market. The Homer City Council gave its approval to Uncle Herb’s in September, the first marijuana retail store application to come before the council. The remodeling process involves new doors, security cameras and other renovations, Stiassny said.

“We have a really good plan. We know what we’re doing. We have to plug away and execute and hope all the pieces fall in place,” he said.

Stiassny said some people interpreted his delay in opening a pot shop as having to do with the attitude “that Homer somehow didn’t want to embrace the industry,” he said. That’s not the case.

“It’s really more about why it took me longer to initiate the license,” he said.

Licensing is in the initiated status for a third retail store, 420 on Main Street at the site of the former Homer Cleaning Center. “Initiated” is the first step in the long process of applying for and getting approval for commercial marijuana businesses. “Delegated” means “board approval has been delegated to the AMCO director pending completion of certain requirements.”

After AMCO started taking commercial cannabis applications in February 2016, the city of Homer passed an ordinance regulating by zoning district growing, manufacturing, testing and selling marijuana. The city council considered banning all commercial marijuana, but votes to do so failed. A citizens group also attempted to ban by initiative commercial marijuana in the city of Homer, but they failed to get sufficient signatures to put it on the ballot.

The three active, licensed marijuana operations are all cultivators: Talisman Farms on Crossman Ridge, a limited cultivation facility license; Cannaboyd on Lowbush Avenue, also a limited cultivation facility, and Hunter Greens and Purples, a standard cultivation facility. A limited cultivation facility has less than 500 square feet of plants being cultivated.

Kenai

Kenai’s first and thus far only marijuana retailer — Red Run Cannabis, which opened in November 2016 — is planning expansions while two other retailers plan to join it.

One, the medically-oriented Majestic Gardens, is seeking a state license after a long effort to find a legal location in Kenai. Though it initially applied for a city permit in May 2016, its first proposed location was rejected by the city’s planning and zoning commission for failing to meet setback requirements. Its owners, Ron and Deniece Isaacs, now plan to build their shop on the property formerly occupied by the bar and restaurant Larry’s Club which burnt down in the early 1990s.

Planned marijuana retailer East Rip also had its location in a central Kenai strip mall initially rejected by Kenai planning and zoning commissioners. The planning and zoning commission later reconsidered, with a slightly different set of members in attendance, and granted East Rip its permit.

As for Red Run, after a little over a year in business, it’s planning to expand into not only into a larger cultivation space product — in July Kenai’s planning and zoning commission permitted it to grow in the building that formerly served as Kenai’s Moose Lodge — but also into product manufacturing, said Red Run store manager and cofounder Marc Theiler.

When Red Run opened, a small number of marijuana cultivators were supplying a great demand, putting retailers in a glut-and-famine buying situation. In its early weeks of business, Red Run occasionally closed when its supply was sold out. Now that the industry has become established enough for a number of large growers to take root, Theiler said those days are over.

“Basically it was the retailer being proactive and trying to suck up what it could,” Theiler said, describing the market in early 2017. “Deals were made on that end. Now it’s completely turned on its head, to where we’re getting emails from cultivators contacting us on a frequent regular basis for supply.”

A change in the size, as well as the number, of cultivators has also affected the retail market. When Red Run opened, co-founder Roger Boyd said that limited cultivators — who are licensed to grow on 500 square feet or less, and are often small business people growing at home — were important for retailers building their stock. Now, Theiler said, larger businesses with standard cultivator licenses — which have no space limit and are often held by growers with larger dedicated farms — are starting to dominate the supply with their economies of scale. However, he doesn’t say limited cultivators are being pushed out of the market.

“For our retail, I always see a niche for the small limited cultivator,” Theiler said. “We’re really into the organic, really high-end flowers. Those will still, in my opinion, command a healthier price above and beyond what I call ‘mids’, where it’s all a commodity… I think a lot of the bigger cultivators will go that route — they’re trying to serve the market that way, while there’ll be cultivators who will be able to craft it small and stay alive in the market.”

Whether or not they’re in direct competition with larger growers, limited cultivators are continuing to enter the market — most of the prospective Kenai marijuana businesses now seeking state permits are limited cultivators.

A budding market — Soldotna

The city of Soldotna decided in September to end a two-year moratorium on commercial marijuana, sending the administration into planning mode as they decide when and how marijuana will come to Soldotna.

The moratorium ended after former mayor Pete Sprague broke a 3-3 tie, voting down an ordinance that would have indefinitely extended the prohibition of commercial production, testing and sale of marijuana within city limits.

The ban was enacted in 2015, following the 2014 legalization by the state, to allow the city to gauge how commercial marijuana would impact the local area and how it was regulated by the state, borough and surrounding cities before seeing what role the business would play in Soldotna.

“We did pass a moratorium two years ago,” Sprague said after the vote. “But, the reality is that marijuana is here, the cannabis industry is here and it’s not going away.”

Since voting to end the ban, administrators have been meeting and discussing what Soldotna’s regulations will be. The only decision made, though, was to further extend the moratorium for a few months. The ban was set to expire on Jan. 1, 2018, but at its Dec. 13 meeting, the Soldotna City Council voted to extend the ban by an additional 45 days to give the city more time to refine regulations.

“Basically what’s happening is we’re trying to figure out what to do with marijuana in the city and this allows us to buy a little bit more time before we have to make a decision,” Mayor Nels Anderson said at the meeting.

The ordinance was described as a safety net by interim City Manager Stephanie Queen, who said that people have expressed interest in starting a commercial marijuana business within city limits.

“It’s meant as a safety net for potential business owners so they have a clear understanding of all the regulations potentially before they invest in locations,” Queen said.

The administration is expected to bring forward recommendations regarding marijuana regulations in the new year and have regulations in place by the time the extended moratorium expires on Feb. 15.

Homer News editor Michael Armstrong contributed reporting. Reach him at michael.armstrong@homernews.com. Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com. Reach Ben Boettger at ben.boettger@peninsulaclarion.com. Reach Kat Sorensen at kat.sorensen@peninsulaclarion.com.