What happened to the promise of pot cafes in Alaska?

The only business in Alaska where you can watch a football game inside, order a smoothie and spark up a joint is in a former Chili’s restaurant in Fairbanks.

“We have groups of people coming in to watch basketball, watch rugby, watch the Olympic wrestling team, and smoke a doobie,” said Brandon Emmett, one of the owners of Good Titrations, which operates the state’s lone cannabis cafe.

And it is a cafe: The lounge offers a full coffee and restaurant menu, and “just so happens to sell marijuana,” Emmett said.

Though Good Titrations had other cannabis ventures up and running already, the lounge didn’t open until April 20 of this year. Getting to that point wasn’t easy. Emmett said the business spent around $375,000 modifying its building to meet all the requirements spelled out in state rules governing on-site consumption, including a costly air filtration system.

All across the state, entrepreneurs and businesses have spent years hoping to ultimately open pot cafes where cannabis can be consumed on site. But in the nearly seven years since Alaskans voted to regulate cannabis like alcohol, on-site consumption has remained stubbornly out of reach, even as other aspects of the industry matured and normalized.

The biggest reason? Regulations and zoning at the local level.

“There’s just so many restrictions,” said Bruce Schulte, who serves on the Marijuana Control Board.

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Beneath the state framework for setting up an on-site consumption operation is a ban on smoking in workplaces passed in 2018 by the Legislature. While it has carve-outs for cannabis businesses, there are significant barriers, according to Schulte. He said only a handful of operators have applied for the license from the state so far. (A state website listing cannabis businesses does not include a way to query for on-site consumption endorsements.)

Emmett, with Good Titrations, was in the unique position of having served a term on the Marijuana Control Board as the body was crafting the intricate rules for indoor cannabis consumption.

“As the regulations were being formed, I knew what was coming,” Emmett said. “I could see the trajectory.”

Cannabis businesses are highly regulated, and local rules on zoning and land-use have ended up playing a major role in where businesses have managed to set up shops and cultivation facilities.

“Particularly in Anchorage, zoning is a significant impediment,” Schulte said.

One of the state’s indoor smoking carve-outs is that the facility be in a free-standing building, which excludes shops in strip malls, where many cannabis retailers currently operate. And because the industry is in a gray zone when it comes to federal legality, businesses have to use real-estate properties that are owned outright, not mortgaged through a bank. Those tend to be older buildings, necessitating even costlier upgrades to set up high-grade air filtration systems that state statutes require.

Schulte said that while there will certainly be exceptions, the combination of elaborate regulations and obstructive local policies mean pot cafes will remain scarce even if a few open in the years to come.

“We’re not gonna have that Amsterdam effect in Alaska, probably for the foreseeable future,” he said.

Across the country, other states that have legalized recreational cannabis are in a similar position when it comes to on-site consumption. Specifically: a confusing morass of local, state and federal rules that are frequently at odds, leading business owners and entrepreneurs to test boundaries with inventive models for letting patrons consume on site while waiting for more comprehensive regulations.

Started in 2019, Original Cannabis Cafe in West Hollywood, California, is widely cited as the first cannabis lounge to open in the U.S., with a full farm-to-table restaurant operation run in parallel. Nevada is poised to license up to 20 businesses for on-site consumption after a statewide framework was approved by lawmakers this summer, which could result in several cafes or clubs opening their doors before year’s end. In Colorado, a wide variety of business models are in place to let people consume indoors, from private lounges collecting membership fees to cannabis-friendly bed-and-breakfasts to The International Church of Cannabis.

Another unforeseen obstacle that scrambled industry plans for pot lounges in Alaska is COVID-19.

“As soon as the on-site program launched and their regulations were formulated, on-site consumption wasn’t feasible because we had this pandemic,” said Jana Weltzin, a lawyer who represents a number of cannabis businesses across the state, including Good Titrations.

Businesses that had spent 2019 studying the new on-site consumption rules were quickly confronted in 2020 with closures, hunker-down advisories and bans on indoor gathering.

The other 2020 curveball was a local ballot measure in Anchorage that asked voters to decide whether or not cannabis retailers should be eligible for an exemption from the city’s firm indoor smoking ban. The proposal was rejected by a wide margin, meaning that even if a business did open for on-site consumption, customers wouldn’t be allowed to smoke or vape cannabis products.

“You could do on-site edibles, but I just don’t think anyone’s gonna do that,” Weltzin said. “From my perspective, it’s gonna be tough to make that make money-sense.”

That was Jane Stinson’s conclusion, too.

“It’s so restrictive that it’s not worth investing money into,” said Stinson, one of the owners of Enlighten Alaska in Anchorage. She said no one in the municipality’s cannabis business community whom she has spoken with is thinking of pursuing an on-site endorsement.

“They only allow us to have edibles in Anchorage. So who wants to sit and go have 5 milligrams of a cookie or something and just sit there?” Stinson asked. “We need smoking.”

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Outside of the city, some cannabis retailers are still figuring out how to make an on-site operation work. In particular, businesses that see an influx of summer tourists think the financial math could work to their benefit once COVID-19 concerns ease and travel-hungry outsiders start flocking back to Alaska.

“We’re just gonna have such a high volume moving through there that a lounge was always part of my business plan,” said Joe McAneny, owner of High Expedition, a cannabis shop in the heart of Talkeetna.

Just before the pandemic hit, McAneny planned to start building a new structure on an empty lot near the shop that he owns. He put his plans on hold but aims to start constructing a two-story structure next spring that can host live events. The building would also include a more laid-back lounge with a museum aesthetic, capturing some of Talkeetna’s history and place in mountaineering, and large windows offering a clear view of Denali.

That construction, decoration and adherence to strict state regulations for indoor pot consumption will not come cheap. McAneny is budgeting in the neighborhood of $500,000 for the project.

His strategy is similar to what many in the cannabis industry hope for in Southeast Alaska, where cruise ships dump passengers into downtown shopping districts that have cannabis for sale — but nowhere to legally use it.

“I think if you’re in a tourist location like me, it’s paramount for your business plan,” McAneny said.