Legislature(2001 - 2002)

04/06/2001 03:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 152-BREWPUB LICENSES                                                                                                       
                                                                                                                                
[Contains discussion of HB 153]                                                                                                 
                                                                                                                                
Number 0542                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI announced  that the  committee would  hear HOUSE                                                               
BILL NO. 152, "An Act relating to brewpub licenses."                                                                            
                                                                                                                                
REPRESENTATIVE HALCRO, speaking as the  sponsor of HB 152, made a                                                               
motion to  adopt the proposed committee  substitute (CS), Version                                                               
J [22-LS0354\J,  Ford, 4/6/01], as  the work draft.   There being                                                               
no objection, Version J was before the committee.                                                                               
                                                                                                                                
KEVIN HAND,  Staff to Representative Andrew  Halcro, Alaska State                                                               
Legislature, explained that this  new, highly successful industry                                                               
in  Alaska continues  to have  substantial growth,  and is  a new                                                               
source  of employment  and benefits  to local  communities around                                                               
the state; it provides diversification  for the state's otherwise                                                               
mono-modal economy around the state.   Breweries and brewpubs are                                                               
providing positive  economic enhancements in almost  every region                                                               
of Alaska,  including many  different communities  from Southeast                                                               
to the Interior.  Positive  effects include tax revenue for local                                                               
communities,  employment, and  subsequent  positive side  effects                                                               
for such things as employment insurance.                                                                                        
                                                                                                                                
Number 0320                                                                                                                     
                                                                                                                                
MR. HAND remarked  that current brewpub law - a  portion of which                                                               
was  supplied for  the  committee -  caps the  amount  of beer  a                                                               
brewpub is allowed to brew  annually at 75,000 gallons.  However,                                                               
businesses are impeded by that limitation.   A few years ago when                                                               
this legislative body  considered these laws, he  told members, a                                                               
cap  was  arbitrarily  put  in   place;  according  to  committee                                                               
testimony,  there  was  nothing   substantive  that  led  to  the                                                               
creation of the cap at that level.                                                                                              
                                                                                                                                
MR.  HAND  said  there  are companies  which,  after  bumping  up                                                               
against that  cap, are  faced with the  decision of  moving their                                                               
operations  elsewhere -  where  they would  be  unlimited in  the                                                               
amount of beer they  could brew.  It is much  cheaper to take all                                                               
of the aggregate products that  are required to brew beer, bottle                                                               
them elsewhere,  and ship  them to Alaska  as a  finished product                                                               
than to do it here.                                                                                                             
                                                                                                                                
MR.  HAND  told the  committee  [Alaska]  has alcohol  laws  that                                                               
oversee the  industry for good  reason.  Regardless of  where one                                                               
stands on  the issue  of alcohol  enforcement, he  suggested that                                                               
everyone  would  agree  that the  government  should  not  stifle                                                               
private  industries,  especially  [industries]  that  would  help                                                               
diversify the Alaskan economy.                                                                                                  
                                                                                                                                
MR.  HAND,  referring to  Version  J,  explained  that it  is  an                                                               
agreement considered  by many different interests  in the alcohol                                                               
industry, and  incorporates provisions to ensure  their interests                                                               
and  financial  obligations; much  dialogue  has  taken place  to                                                               
bring this proposed legislation to the table.                                                                                   
                                                                                                                                
MR.  HAND said  [Version  J]  levels the  playing  field for  all                                                               
breweries  and brewpubs,  allowing  all  participants to  operate                                                               
under   the  same   basic  structure   and  to   have  the   same                                                               
opportunities.  It is the closest  that this industry has come to                                                               
equal access  to the market.   Any current brewery that  wants to                                                               
utilize these   statutes to convert  to a brewpub would  be doing                                                               
so under the  same laws and conditions as  any other competitors,                                                               
which is the basis for competition in the private sector.                                                                       
                                                                                                                                
Number 0086                                                                                                                     
                                                                                                                                
MR. HAND explained Version J.   Section 1 [paragraph (1)] removes                                                               
the  production cap  of 75,000  gallons  annually and  authorizes                                                               
anyone with a  brewpub license to manufacture beer  in the state.                                                               
Paragraph  (2)  removes  the  collocation  clause  regarding  the                                                               
location of  manufacturing facility versus a  retail location; it                                                               
allows  a brewpub  to have  its  brewing facility  in a  separate                                                               
location from its retail outlet.   It also provides that brewpubs                                                               
may not hold more than  two beverage dispensary licenses, meaning                                                               
they can only  have a maximum of two retail  locations from which                                                               
to supply themselves with their  product.  A brewpub can continue                                                               
to  open more  locations  utilizing  a regular  restaurant-eating                                                               
place license,  but would  have to  buy its  own product  via the                                                               
normal distribution channels and at wholesale.                                                                                  
                                                                                                                                
MR. HAND  noted that paragraph (3)  authorizes the sale of  up to                                                               
five  gallons a  day  to [an  individual who  is  present on  the                                                               
licensed premises].                                                                                                             
                                                                                                                                
TAPE 01-50, SIDE A                                                                                                              
                                                                                                                                
MR. HAND, referring to paragraph  (4), said free samples could be                                                               
provided  on the  manufacturing premises  during a  brewery tour.                                                               
He  concluded   with  Section  1,   noting  that   paragraph  (5)                                                               
authorizes  brewpubs to  sell beer  to a  wholesaler.   Section 2                                                               
repeals  subsection (d)  of  the statute,  which  is the  portion                                                               
written  a few  years ago  when  the legislature  went over  this                                                               
issue.  In  an effort to level the playing  field, it repeals the                                                               
section  that   was  currently  employed  regarding   a  specific                                                               
operation.                                                                                                                      
                                                                                                                                
MR. HAND remarked  that the Brewers Guild of  Alaska (BGA), which                                                               
includes  [representation]   from  most  of  the   breweries  and                                                               
brewpubs in  the state, recently  passed a resolution  in support                                                               
of HB 152, Version J.  A  great deal of public testimony has been                                                               
received by  Representative Halcro's office  in just a  few short                                                               
weeks, from  all portions of  the state, and from  every district                                                               
in Anchorage.  He emphasized that  99.9 percent of [the input] is                                                               
greatly in support of revisiting the brewpub limits.                                                                            
                                                                                                                                
Number 0192                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO  remarked  that  all  of  the  green  card                                                               
[questionnaires piled  on the table]  were supportive.   Although                                                               
three  cards  were  received  in   opposition,  one  was  from  a                                                               
gentleman who will be testifying  before the committee today, and                                                               
who is [now] in support of the bill.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG asked  Mr. Hand why he'd  said the volume                                                               
cap   [set  by   the  legislature]   wasn't  based   on  anything                                                               
substantive.                                                                                                                    
                                                                                                                                
Number 0299                                                                                                                     
                                                                                                                                
MR. HAND replied  that he had derived that from  the testimony he                                                               
got from the Bill Action and Status Inquiry System (BASIS).                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG indicated  there was  truth in  what Mr.                                                               
Hand  had  said,  but  added   that  he  thought  a  brewpub  was                                                               
envisioned to have  a beverage dispensary license  and would brew                                                               
the beer  on the premises.   He  mentioned the uniqueness  of the                                                               
Moose's  Tooth situation,  which qualified  under a  provision of                                                               
law enacted  at the same  time as the 16,000-gallon  [limit] was,                                                               
when  taverns   were  legalized  in  the   state;  Representative                                                               
Rokeberg said he  had sponsored a law to outlaw  that, and - with                                                               
a few exceptions  in the state - all of  those licenses are gone.                                                               
Unfortunately, he said, another provision  in law was a financial                                                               
interest  section   that  prohibited  a  brewer   from  owning  a                                                               
restaurant  license, and  subsequently that  bill was  changed to                                                               
make sure they were brewpubs  under a beverage dispensary license                                                               
with which that business conformed.                                                                                             
                                                                                                                                
Number 0458                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG continued,  saying when  that was  done,                                                               
the cap was put  on it.  When the revision was  done, there was a                                                               
glitch in the  "fix" made to AS 04.11.135(d), which  is trying to                                                               
be repealed  now.  He asked  whether the sponsor wants  to repeal                                                               
that section because the Moose's  Tooth is operating as a brewpub                                                               
under the holder of a beverage dispensary license.                                                                              
                                                                                                                                
MR.  HAND replied  affirmatively.   He thought  there might  have                                                               
been  some   unintended  inconsistencies  if  the   statute  were                                                               
prohibited under that subsection (d), he added.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG said subsection  (d) was formed almost as                                                               
special-interest legislation  to allow [the Moose's  Tooth] to be                                                               
able to  operate.   When the bill  was drafted,  however, someone                                                               
forgot to tell [the drafters]  that its brewery was separate from                                                               
the premises.   He expressed concern about  repealing that unless                                                               
he is  100 percent certain,  and said he  would like to  know the                                                               
position   of  CHARR   (Cabaret  Hotel   Restaurant  &   Retailer                                                               
Association)   and  ARBA   (Anchorage  Restaurant   and  Beverage                                                               
Association), rather  than the position  of those who  serve food                                                               
along with brewing beer.                                                                                                        
                                                                                                                                
MR. HAND replied  that he believed subsection (d) to  now be moot                                                               
because  the   Moose's  Tooth,  for   which  the   provision  was                                                               
originated,  no  longer  operates  under   it;  it  gave  up  its                                                               
grandfathered right and now operates  under a beverage dispensary                                                               
license.                                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if both [Moose's  Tooth] locations                                                               
hold beverage dispensary licenses.                                                                                              
                                                                                                                                
MR.  HAND  responded  affirmatively  and  said  he  believed  the                                                               
proprietors of the business were online to answer questions.                                                                    
                                                                                                                                
Number 0629                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  said he believed the  [proprietors] had to                                                               
procure a  beverage dispensary  license to  open and  operate the                                                               
second  location.    Two  years ago,  the  committee  rewrote  an                                                               
Alcohol Beverage Control (ABC) liquor  law; one of the provisions                                                               
in HB 67 required that if  these brewpubs wanted to open a second                                                               
location,  they  had   to  spend  $150,000  to   buy  a  beverage                                                               
dispensary license.                                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  objected to that  statement.  He  said a                                                               
brewpub  by  law  has  to have  a  beverage  dispensary  license.                                                               
[Alaska]  has taverns,  he pointed  out,  and there  were only  a                                                               
couple in operation.                                                                                                            
                                                                                                                                
REPRESENTATIVE   HALCRO   emphasized   that   [the   legislature]                                                               
instituted a provision that mandated  that if a brewpub wanted to                                                               
open a second location, it  had to purchase a beverage dispensary                                                               
license, at a  cost of $150,000, that would allow  the serving of                                                               
hard alcohol, even  though there was no intention  of serving it;                                                               
this was  pushed by  competitors who were  fearful of  the growth                                                               
and competition  that was being  presented.   He said it  was his                                                               
standpoint two  years ago that it  was unfair to make  a business                                                               
spend money  on an  unnecessary license  instead of  putting that                                                               
money into capital  improvements.  House Bill  152 addresses that                                                               
investment and levels the playing field.                                                                                        
                                                                                                                                
Number 0771                                                                                                                     
                                                                                                                                
LINDA THOMAS,  Chief Operations Officer, Alaska  Brewing Company,                                                               
came forth  on behalf  of Marcy and  Jeff Larson,  co-founders of                                                               
the brewery,  who were unable  to attend  the hearing.   She said                                                               
the  [Alaska  Brewing  Company]  doesn't  support  this  bill  as                                                               
currently drafted  and requests postponement to  analyze changes.                                                               
The  BGA resolution  was passed  at noon  today, and  [the Alaska                                                               
Brewing Company] has not had time to analyze it, either.                                                                        
                                                                                                                                
CHAIR  MURKOWSKI   mentioned  a   portion  of  the   BGA's  faxed                                                               
statement, which read [original punctuation provided]:                                                                          
                                                                                                                                
     The Brewers Guild of Alaska  (BGA) supports the raising                                                                    
     of  the production  capacity  on  Brewpubs from  75,000                                                                    
     gallons   to  150,000   gallons   with  the   following                                                                    
     restriction  in  place.     Any  Brewpub  requesting  a                                                                    
     production capacity increase  (above 75,000 gal.) would                                                                    
     be  prohibited  from  wholesaling  any  of  their  beer                                                                    
     offsite.                                                                                                                   
                                                                                                                                
MS. THOMAS responded affirmatively.   In response to a comment by                                                               
Representative  Rokeberg,   she  said  CHARR  had   endorsed  the                                                               
original bill.                                                                                                                  
                                                                                                                                
Number 0953                                                                                                                     
                                                                                                                                
SEAN   BECK,   President,   Specialty  Imports,   testified   via                                                               
teleconference.  He  stated that [Specialty Imports]  is a wholly                                                               
owned Alaskan distributor of fine wine  and beer, and also is the                                                               
distributor for the Moose's Tooth.   [Specialty Imports] supports                                                               
HB 152 and believes it is  vital for the economic interest of all                                                               
the brewers in the state.                                                                                                       
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  Mr. Beck  if he  believes in  the                                                               
three-tiered  system  under  Alaska Statute  that  regulates  the                                                               
industry.                                                                                                                       
                                                                                                                                
MR. BECK  said he believes in  the taxation issues of  the three-                                                               
tiered  system.   When asked  if the  Moose's Tooth  is the  only                                                               
brewpub in Alaska  with a stand-alone brewery, he  said he wasn't                                                               
certain,  but knows  of other  breweries, like  Bear Creek,  that                                                               
went out  of business because  they didn't  get into that  end of                                                               
the business  or weren't allowed to.   He said he  thought others                                                               
would as well.  He added that  a number of breweries in the Lower                                                               
48  have  brewpubs  onsite  or off-site  and  are  selling  their                                                               
products in Alaska; it could  be an economic hardship for brewers                                                               
here if they aren't allowed to do the same.                                                                                     
                                                                                                                                
Number 1075                                                                                                                     
                                                                                                                                
GLENN BRADY,  President, Silver Gulch Brewing  Company, testified                                                               
via teleconference in opposition to  the proposed CS [Version J].                                                               
He  said this  would  be  a sweeping  change  to the  legislation                                                               
affecting how  [brewers] operate  in the state.   He  agreed with                                                               
the statement  made by the  Alaska Brewing Company that  the bill                                                               
hearing  needs   to  be  postponed  for   further  consideration,                                                               
although he said it is a step in the right direction.                                                                           
                                                                                                                                
KAREN  BERGER,  Owner,  Homer   Brewing  Company,  testified  via                                                               
teleconference  in opposition  to [Version  J].   It is  sweeping                                                               
legislation,  she  explained, and  there  has  not been  time  to                                                               
understand the  ramifications.  She  expressed concern  about the                                                               
$150,000  for  a beverage  dispensary  license  because in  Homer                                                               
there aren't  any for sale now.   It would most  likely be double                                                               
that price,  which is  prohibitive for  small breweries  in small                                                               
towns.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  HALCRO asked  whether Ms.  Berger's objection  is                                                               
more about the  cost and availability of  the beverage dispensary                                                               
license than the  issues of competition and being  able to "grow"                                                               
one's business.                                                                                                                 
                                                                                                                                
Number 1240                                                                                                                     
                                                                                                                                
MS. BERGER  replied that although  the playing field needs  to be                                                               
leveled, she  doesn't agree that this  is the best [method].   In                                                               
speaking to the Washington Alcohol  Board this morning, she found                                                               
that [brewers in Washington] enjoy  a different set of rules that                                                               
she agrees  with more.   Once  again, [all  brewers] have  to sit                                                               
down and come to an agreement.                                                                                                  
                                                                                                                                
LASSE HOLMES  testified via teleconference.   The former co-owner                                                               
of  the Homer  Brewing Company,  he expressed  concern that  [the                                                               
committee] is  not talking about HB  153 at the same  time, which                                                               
is  an integral  [component] that  Representative Halcro  is also                                                               
sponsoring.   Without having HB  153 involved and,  instead, just                                                               
talking about the  cap, he said he doesn't believe  it is a level                                                               
playing field.                                                                                                                  
                                                                                                                                
Number 1310                                                                                                                     
                                                                                                                                
LARRY   HACKENMILLER,   Owner,   Club   Manchu,   testified   via                                                               
teleconference.   He noted that  he is  also the chairman  of the                                                               
board  for the  state CHARR,  which  discussed this  at its  last                                                               
meeting;  with the  original bill,  [CHARR] decided  to at  least                                                               
listen to increases  up to 150,000 gallons if there  is some type                                                               
of a level where (indisc.) of that  had to be a wholesale and had                                                               
to  be  distributed accordingly.    That  is quite  unclear  with                                                               
Version J.                                                                                                                      
                                                                                                                                
MR.  HACKENMILLER said  he appreciates  the hard  work that  went                                                               
into this with the BGA;  however, [brewers] are not full beverage                                                               
dispensary license [establishments], as  he is; he suggested that                                                               
perhaps  there needs  to be  more  familiarity with  some of  the                                                               
laws.   Mr. Hackenmiller emphasized  that he has been  before the                                                               
legislature  every year  with brewpub  legislation.   In HB  152,                                                               
Version  J, it  says  [brewers] want  to have  no  more than  two                                                               
licensed dispensary  premises to make  it a level  playing field.                                                               
He  guaranteed that  next  session [the  brewers]  will be  back.                                                               
There  will never  be  a  level playing  field  as  long as  [the                                                               
brewers] keep coming back every year, he concluded.                                                                             
                                                                                                                                
MR. HACKENMILLER said the licensed  beverage establishment is not                                                               
allowed to  give away drinks  or sell drinks off-premises.   Even                                                               
in  Version  J, it  says  [brewers]  are  going  to have  a  full                                                               
beverage  dispensary license,  but with  the exception  that they                                                               
are going to be allowed  to sell "growlers" or off-premises beer.                                                               
He asked why that is a  possibility, since it is not a separation                                                               
of the  three-tiered system.   He  added that  [licensed beverage                                                               
establishments] are  not allowed to  give away drinks due  to the                                                               
"happy hour  laws", yet [brewers] are  allowed to do that  [in HB
152].  He asked why that wasn't taken into consideration.                                                                       
                                                                                                                                
MR.  HACKENMILLER  expressed his  preference  for  leaving it  at                                                               
75,000 [gallons].   If [a brewer] can go Outside  for less money,                                                               
then that  is a  marketing tool or  a personal  business decision                                                               
that one has to make.                                                                                                           
                                                                                                                                
Number 1447                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr.  Hackenmiller whether CHARR was                                                               
involved in this compromise.                                                                                                    
                                                                                                                                
MR. HACKENMILLER said not with Version  J.  He noted that [CHARR]                                                               
has  two board  members  who are  also  on the  BGA.   He  didn't                                                               
remember  exactly  what the  situation  was,  but believed  after                                                               
150,000  gallons   it  had  to   go  through  a   wholesaler  for                                                               
distribution.  And if it  went above 75,000 gallons, the brewpubs                                                               
gave up  their right to  wholesale the  beer.  The  consensus was                                                               
that it  would be acceptable  for CHARR; however, other  things -                                                               
for  instance,  full  beverage dispensary  license  violations  -                                                               
would not be.                                                                                                                   
                                                                                                                                
Number 1503                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Hackenmiller whether  the BGA                                                               
board members who are also in CHARR were representing CHARR.                                                                    
                                                                                                                                
MR.  HACKENMILLER  responded that  they  were  not in  this  last                                                               
[discussion]  about Version  J.    He said  he  was referring  to                                                               
several weeks  ago when legislative issues,  including this bill,                                                               
were discussed in a [CHARR] board  meeting.  Last year, CHARR was                                                               
not in  support of  doubling the  gallons; however,  a compromise                                                               
was accepted  that anything over  75,000 would have to  be [sold]                                                               
wholesale.    Mr.  Hackenmiller  said  he  also  remembers  Chris                                                               
Anderson of Anchorage  last year asking why there  [needed to be]                                                               
any gallon  limit at  all.  He  said he was  amazed that  it came                                                               
back  at 150,000  gallons  again this  year,  and predicted  that                                                               
brewpubs are going to be coming back for more.                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out  that Version  J has  no cap                                                               
either.    He  asked  for verification  that  Mr.  Hackenmiller's                                                               
testimony is that CHARR was not involved today.                                                                                 
                                                                                                                                
MR. HACKENMILLER answered in the affirmative.                                                                                   
                                                                                                                                
Number 1564                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  clarified that  Mr. Brady was  involved in                                                               
both teleconferences,  on Wednesday and  Thursday.  When  his own                                                               
staff completed  the teleconference and  spoke to [Mr.  Brady] on                                                               
the phone,  he was in agreement  with the decision that  had been                                                               
reached.   Representative Halcro  said Mr. Hackenmiller  has been                                                               
in  opposition to  every  brewpub  bill he  has  introduced.   He                                                               
asked:  Is it fair for a brewpub  to have to spend money to buy a                                                               
beverage  dispensary license  that it  doesn't want  or need,  in                                                               
order to expand its business?                                                                                                   
                                                                                                                                
Number 1618                                                                                                                     
                                                                                                                                
MR. HACKENMILLER  responded that  it must be,  because [brewpubs]                                                               
wanted the legislation changed for  it, and "we" didn't object to                                                               
it.   He emphasized that  he has to buy  the same license  at the                                                               
same cost,  whether he has  a brewpub or not.   He added  that it                                                               
would definitely be fair.                                                                                                       
                                                                                                                                
REPRESENTATIVE HALCRO asked if that  is true even though [brewpub                                                               
owners] have no desire to serve  hard alcohol, just the beer they                                                               
make.                                                                                                                           
                                                                                                                                
MR. HACKENMILLER  said that should  have been the  case; however,                                                               
when [brewpubs] had  restaurants and eating places,  that was not                                                               
their intent.  Rather, they wanted  the beer and wine.  In having                                                               
a  full bar,  they discovered  the money  and effort  put into  a                                                               
licensed  premise  were  not in  compliance  with  restaurant-and                                                               
eating-place licenses, so it was  actually cheaper for them to be                                                               
a full  beverage dispensary.   There are all kinds  of underlying                                                               
points here, he  said; again, it wasn't CHARR or  the industry as                                                               
a  whole  that  wanted  them to  have  full  beverage  dispensary                                                               
licenses.   That was another  of the [brewer's] tools  to expand,                                                               
just as they are trying to do now.                                                                                              
                                                                                                                                
REPRESENTATIVE HALCRO asked Mr. Hackenmiller  if it was not CHARR                                                               
that insisted the provision be  placed in statute that [brewpubs]                                                               
must have  the beverage  dispensary license  in order  to expand.                                                               
He  also   asked  whether  [CHARR]  hadn't   been  worried  about                                                               
competition.                                                                                                                    
                                                                                                                                
Number 1670                                                                                                                     
                                                                                                                                
MR.  HACKENMILLER  responded  that  some  members  probably  were                                                               
worried  about  competition,  but  as  a  whole,  CHARR  was  not                                                               
involved in that.   He said [CHARR] was  basically following [the                                                               
brewer's] lead and  letting them have full dispensaries.   It was                                                               
a give-and-take  situation:  They  were taking the  full beverage                                                               
dispensary license's condition and then  [CHARR], ... had to give                                                               
them the gallonage."  He said  this is not a three-tiered system;                                                               
these brewpubs are allowed to  do everything that a package store                                                               
and a beverage dispensary [establishment]  can't do, which is one                                                               
reason it isn't  competitive.  It basically  destroys an existing                                                               
system that applies to everyone else.                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he had  wanted to make  that point.                                                               
The regulatory  scheme is  set up as  a three-tiered  system with                                                               
retail, package  stores, and  manufacturing, patterned  after the                                                               
federal law.   The brewpub  provision allowed in the  statute was                                                               
under the [condition] that [brewpubs]  have a beverage dispensary                                                               
license.   In  1995, he  noted, a  provision in  an omnibus  bill                                                               
passed  although nobody  understood  what it  said, and  suddenly                                                               
[Alaska] had taverns  and had brewing at eating-places.   It took                                                               
a number of  years to get the system back  into conformity, which                                                               
is why Alaska has that system.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG said part of  it was that the brewpub had                                                               
a  cap because  it was  considered  to be  a beverage  dispensary                                                               
licensee.   The integrity of  the three-tiered system and  how it                                                               
is regulated is more important, he added.                                                                                       
                                                                                                                                
Number 1786                                                                                                                     
                                                                                                                                
S.J. KLINE,  President, Borealis  Brewery Company,  testified via                                                               
teleconference.  As  a guild, he said  [Borealis Brewery Company]                                                               
works  hard to  address a  lot  of the  concerns mentioned  about                                                               
Version J.  He said Rod  Hancock (ph) would be speaking on behalf                                                               
of  the BGA  in support  of  the bill  and how  it addresses  the                                                               
issues that  Mr. Hackenmiller and  others have.   As a  model for                                                               
making  beer in  Alaska, this  bill strengthens  the three-tiered                                                               
system:  it  removes discrepancies in Alaska law  that allow some                                                               
people to do everything.                                                                                                        
                                                                                                                                
MATT    JONES,   Co-Owner,    Moose's   Tooth,    testified   via                                                               
teleconference.  He said he was  appointed by the BGA to speak on                                                               
behalf  of the  guild.   There  are ten  members in  the BGA,  he                                                               
noted, and one was absent today;  seven members voted in favor of                                                               
HB 152, Version J, and two members voted in opposition.                                                                         
                                                                                                                                
MR. JONES  expressed that  there has never  been a  level playing                                                               
field in  the brewing  industry in Alaska.   Brewers  have always                                                               
dreamed of opening a brewpub [in  Alaska], and at this point they                                                               
can't.   They are  trapped in  a position and  can't adjust  to a                                                               
changing market.   House Bill 152 would allow a  brewery to own a                                                               
beverage dispensary license and  open a brewpub, while protecting                                                               
the value of  the beverage dispensary licenses.  The  only way to                                                               
become  a  brewpub  now  is to  purchase  a  beverage  dispensary                                                               
license;  that is  how [the  brewers] have  grown.   He said  Mr.                                                               
Hackenmiller is worried  about eroding the value  of the beverage                                                               
dispensary license.  He mentioned  purchasing two in the last few                                                               
years, however, and single-handedly driving up the price.                                                                       
                                                                                                                                
MR. JONES  explained that  CHARR and ARBA  are concerned  that if                                                               
brewpubs  are allowed  to bypass  the provisional  (indisc.) from                                                               
the purchase  of the  beverage dispensary  license, to  favor the                                                               
cheaper  beer and  wine license,  the licenses  will lose  value.                                                               
[Version  J] forces  a  person  who wants  to  enter the  brewpub                                                               
market  to purchase  a beverage  dispensary  license.   Breweries                                                               
that have  never had a  chance would  now have an  opportunity to                                                               
enter  the market.   Of  the people  who voted  "yes" today,  Mr.                                                               
Jones said  there were at least  three breweries.  It  is nice to                                                               
see brewpubs and breweries agreeing  on legislation, for the most                                                               
part, he added.                                                                                                                 
                                                                                                                                
Number 1971                                                                                                                     
                                                                                                                                
MR.  JONES  said  there  was  great  concern  that  suddenly  the                                                               
brewpubs would be all-powerful entities  that could play on every                                                               
level of  the three-tiered system  - which he didn't  believe was                                                               
true.  Under  HB 152 any beer  that is produced and  not sold, in                                                               
the first few beverage dispensary  licenses, must be sold through                                                               
a wholesaler.   He  said he  is satisfied with  that tier  of the                                                               
three-tiered system.                                                                                                            
MR.  JONES  said  [the Moose's  Tooth's]  distributor,  Specialty                                                               
Imports,  is enthused  because they  will continue  to have  [the                                                               
Moose's  Tooth's] business.   He  added that  HB 152  also allows                                                               
brewpubs to  keep growing  beyond two  locations with  a beverage                                                               
dispensary  license;   it  provides   the  opportunity   to  keep                                                               
developing  locations throughout  the  state.   At  this time,  a                                                               
large brewery  in the Lower 48  can open a brewery,  for example,                                                               
in Washington  or Oregon, have  an unlimited production  cap, and                                                               
come into  the Alaska;  it can  either buy a  cheap beer  or wine                                                               
license or buy a beverage dispensary  license and open a chain of                                                               
50 brewpubs.  It could produce its  own beer and ship it into the                                                               
state, and the  in-state breweries or brewpubs would  not be able                                                               
to  respond  to that,  because  they  would be  restricted  under                                                               
Alaskan law.                                                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO asked Mr. Jones how many employees he has.                                                                
                                                                                                                                
MR.  JONES replied  170.   When asked  if employees  are provided                                                               
with  healthcare benefits,  he replied,  "We do,  indeed."   When                                                               
asked how  much money  they spent  purchasing and  renovating the                                                               
Denali  Theater  and  opening  the  second  facility,  Mr.  Jones                                                               
replied  that  it will  be  close  to  $2 million;  he  expressed                                                               
satisfaction with the way it is working out.                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  he  was pleased  to  have  passed                                                               
legislation two years ago that  allowed [the Moose's Tooth] to do                                                               
that.   He asked whether [the  Moose's Tooth] had worked  out its                                                               
problems with the ABC Board and the last legislation.                                                                           
                                                                                                                                
MR.   JONES  answered   in  the   negative,  and   asked  whether                                                               
Representative Rokeberg was referring to the "growler" issue.                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG replied  that  he was  referring to  the                                                               
off-premises  situation,  the reason  for  the  equivalent to  AS                                                               
04.11.135(d) in the last bill.                                                                                                  
                                                                                                                                
MR.  JONES asked  whether that  is the  section referring  to the                                                               
collocation or the non-collocation of the brewing facility.                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG answered affirmatively.                                                                                 
                                                                                                                                
Number 2128                                                                                                                     
                                                                                                                                
MR. JONES  said AS 04.11.135(d)  dealt with  it.  If  [Version J]                                                               
becomes law, however, AS 04.11.135(d)  will be moot because there                                                               
will be  no problem with the  brewing facility and a  "VDL" being                                                               
collocated.                                                                                                                     
                                                                                                                                
CHRIS  ANDERSON testified  via teleconference  in  support of  HB
152.  He  said "we" have members  on the BGA who are  also on the                                                               
CHARR board,  and said  he is  on the ARBA  board.   During "our"                                                               
meetings,  there was  discussion about  communicating extensively                                                               
with CHARR, ARBA, and the  distributors that their [knowledge] is                                                               
critical to  "our" success, so  that they didn't  feel threatened                                                               
by this action.                                                                                                                 
                                                                                                                                
Number 2241                                                                                                                     
                                                                                                                                
MR.  ANDERSON  said allowing  other  breweries  in the  state  to                                                               
participate  and purchase  a beverage  dispensary license  and do                                                               
the same  work that  [the Moose's Tooth]  is doing  allows [other                                                               
breweries] to  enter the playing  field, yet limits them  to only                                                               
two locations -  which was critical.  [The  industry] didn't want                                                               
a multitude of these throughout the  state, he said, so "we" have                                                               
limited "ourselves"  by allowing  ourselves to continue  to grow.                                                               
The leader,  he said,  is the Alaskan  Brewing Company,  with the                                                               
Moose's Tooth  probably number  two, and  the Glacier  Brew House                                                               
probably  number three.   All  of the  other breweries  are doing                                                               
less volume in  total gallons, and there is a  desire to see them                                                               
grow.                                                                                                                           
                                                                                                                                
MR. ANDERSON  said this compromise took  a lot of time,  but is a                                                               
compromise with the  BGA, trying in earnest to  satisfy CHARR and                                                               
its  membership, the  wholesalers,  and retailers.   Between  the                                                               
Brew House  (ph) and Orso (ph),  he employs about 250  people and                                                               
has invested over  $6 million in Anchorage; however,  he is still                                                               
not affected by this since he is still under the cap.                                                                           
                                                                                                                                
Number 2305                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked  Mr. Anderson  what  his  current                                                               
volume is.                                                                                                                      
                                                                                                                                
MR. ANDERSON said about 60,000  [gallons], considerably under the                                                               
cap; it  will be another  year before he is  over that.   Orso is                                                               
not a beer restaurant, so he doesn't sell much there.                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG clarified that  Mr. Anderson is averaging                                                               
about 5,000 [gallons] a month or 60,000 a year.                                                                                 
                                                                                                                                
Number 2345                                                                                                                     
                                                                                                                                
MR. ANDERSON reiterated that he  is number three in Alaska behind                                                               
the  Alaskan  Brewing  Company  and   the  Moose's  Tooth.    The                                                               
definition  of a  small brewery  is  65,000 barrels.   The  total                                                               
brewing  of  Alaskan  beer  is  less  than  4  percent  of  state                                                               
consumption, however,  so [local brewers]  are just a  small part                                                               
of the total  beer throughout the state.  In  response to further                                                               
questions,  he  said he  has  two  premises:    a brewpub  and  a                                                               
beverage dispensary restaurant.  As  to whether he could sell his                                                               
production directly  in Orso, he said  he could because he  has a                                                               
duplicate license,  but is not doing  so, nor does he  intend to,                                                               
because  it is  an  Italian  restaurant and  he  sells more  fine                                                               
Italian wine.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Anderson whether he  has been                                                               
before this  committee on this  issue, and whether  the committee                                                               
took corrective action.                                                                                                         
                                                                                                                                
Number 2422                                                                                                                     
                                                                                                                                
MR.  ANDERSON emphasized  that this  has been  an ongoing  issue.                                                               
However, it  is the closest  to a  level playing field,  not only                                                               
allowing those  that are  successful to  grow, but  also allowing                                                               
young  breweries another  opportunity to  become more  successful                                                               
without  impacting the  three-tiered  system  or diminishing  the                                                               
beverage dispensary  license.   He said he  hopes CHARR  and ARBA                                                               
would agree when they see this.                                                                                                 
                                                                                                                                
REPRESENTATIVE  HALCRO  remarked  that  an  opportunity  will  be                                                               
created  for  some  of  the  smaller brewers  to  follow  in  the                                                               
footsteps  [of   those  already   established]  and   grow  their                                                               
businesses.    There  is  an  understanding  that  [the  state's]                                                               
biggest  competitor is  the Outside  beer  coming in  at a  lower                                                               
price, with a greater margin for bar owners.                                                                                    
                                                                                                                                
TAPE 01-50, SIDE B                                                                                                              
Number 2452                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   asked  Mr.   Jones  what   his  gallon                                                               
production is.                                                                                                                  
                                                                                                                                
MR. JONES  replied that  his company  [produced] about  68,000 to                                                               
70,000  gallons.   When  asked  if he  also  sells wholesale,  he                                                               
replied that between 20 to  25 percent of production goes through                                                               
Specialty Import.   When asked what  type of a cap  is realistic,                                                               
Mr. Jones  replied that  it is difficult  to guess,  because [the                                                               
Moose's  Tooth]  is  opening  a  new  addition,  the  Bear  Tooth                                                               
theater, and it is tough to guess what that consumption will be.                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG suggested that  if [the Moose's Tooth] is                                                               
under  the cap  now, and  25 percent  is "wholesaled  off," there                                                               
would be 25 or 30 percent for expansion internally.                                                                             
                                                                                                                                
Number 2384                                                                                                                     
                                                                                                                                
MR. JONES said he had never  heard that proposal from CHARR.  The                                                               
proposal he heard was that  [brewpubs] could use the first 75,000                                                               
gallons in any manner desired,  whether for wholesale or in-house                                                               
use.   If above that  75,000 gallons,  the beer couldn't  be sold                                                               
wholesale and could only be sold in-house.                                                                                      
                                                                                                                                
REPRESENTATIVE   ROKEBERG   commented   that  he   had   received                                                               
communication from  people around  the state saying  [the Moose's                                                               
Tooth] is going to move out of the  state if it can't have a cap,                                                               
or that it would be forced to move out.                                                                                         
                                                                                                                                
MR. JONES explained that [the  Moose's Tooth] had a brewery built                                                               
before  it  became a  brewpub.    It  built  it as  a  production                                                               
facility and  probably invested $1  million, and it  can probably                                                               
brew 1.5 million  gallons.  [The Moose's Tooth]  became a brewpub                                                               
and has  the restriction now.   There  are five employees  at the                                                               
brewery, and  if [the company]  can't brew above  75,000 gallons,                                                               
each year  in mid-summer [the  company] will bump up  against the                                                               
cap;  therefore,  his  employees  are seasonal  and  have  to  be                                                               
unemployed.   In facing that,  nobody with  a mortgage to  pay is                                                               
going to  want to  work for  [the Moose's  Tooth]; in  that case,                                                               
[the company]  would have  to think about  moving the  brewery to                                                               
the Lower 48.                                                                                                                   
                                                                                                                                
Number 2270                                                                                                                     
                                                                                                                                
MR. JONES  said on the other  hand, [the Moose's Tooth]  could go                                                               
to an  existing brewery in the  Lower 48, have it  brew the beer,                                                               
and shut  down the  Moose's Tooth brewing  company.   The Moose's                                                               
Tooth and the  Bear Tooth might not move, but  the overall health                                                               
of the entire business might suffer.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG announced that  he can't support the bill                                                               
as it stands now, and said  the testimony in large part wasn't in                                                               
favor of it.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAYES asked  Representative Halcro  why he  would                                                               
like  to move  the bill  today, since  there are  groups who  are                                                               
uncomfortable supporting it because  they haven't had enough time                                                               
to read it.                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO replied that his  concerns are twofold:  it                                                               
is getting  late [in  the session], and  the compromise  that was                                                               
"hammered out" in Version  J was done over two days.   He said he                                                               
understands  that the  representatives from  the Alaskan  Brewing                                                               
Company  are   on  vacation  and  couldn't   participate  in  the                                                               
teleconference, but the bill has  been scheduled.  The opposition                                                               
that the committee heard is from  the opponents who show up every                                                               
year,  including the  fellow from  Fairbanks  who is  not in  the                                                               
business, but is a beverage  dispensary holder who has opposed it                                                               
every year.                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  emphasized that  this is  a time-sensitive                                                               
issue:  as expressed by  Mr. Jones, come middle-to-end of summer,                                                               
[the Moose's Tooth]  is going to bump up against  that cap, which                                                               
will  affect employees.    This  can be  worked  out  as it  goes                                                               
through  the process,  Representative  said.   He  added that  he                                                               
doesn't believe that  some of the people who  testified are going                                                               
to be in favor of any  changes.  Some of the testimony expressing                                                               
opposition was from  very small brewers, like  [brewers of] 1,000                                                               
gallons, if  that.  [The committee]  has to look for  the overall                                                               
good.                                                                                                                           
                                                                                                                                
REPRESENTATIVE HALCRO  reiterated that between Mr.  Jones and Mr.                                                               
Anderson,  they  employ  almost  400  people  and  have  invested                                                               
upwards of $10 million in the  economy over the last six to seven                                                               
years expanding  their businesses.   He remarked that  in reading                                                               
through the public testimony on  the green [questionnaire] cards,                                                               
[he  found  that]  the  average  person  doesn't  understand  why                                                               
government would get involved and  preempt economic growth, which                                                               
is his contention with the bill.                                                                                                
                                                                                                                                
REPRESENTATIVE HALCRO  reiterated that the initiative  passed the                                                               
BGA board  with a  7-2 vote,  and the  board passed  a resolution                                                               
supporting this compromise.                                                                                                     
                                                                                                                                
Number 2100                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  responded that  the testimony  today has                                                               
been mixed;  even people  in the  alleged compromise  don't agree                                                               
with this particular  version.  He said he  vehemently objects to                                                               
the use of the term "compromise."   This bill is a huge change in                                                               
[Alaska's]  public  policy,  which  basically  gets  rid  of  the                                                               
concept of  a brewpub and  allows one  to do whatever  one wants.                                                               
If  the  Moose's  Tooth's  problem needs  to  be  addressed,  the                                                               
original bill is closer on the  mark, he suggested, and this bill                                                               
is highly objectionable on the part  of most people in the liquor                                                               
industry.    It is  not  a  compromise  with  the people  in  the                                                               
business,  but  a compromise  among  a  small group  of  brewers.                                                               
Additionally,  this issue  has been  before this  committee three                                                               
times in the  last five years.  One of  the things being repealed                                                               
was just  put into statute two  years ago by the  very people who                                                               
are back here trying to do something again.                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO   remarked  that  he   and  Representative                                                               
Rokeberg have had this discussion  in private, and certain groups                                                               
are  no more  than  the "good  ol' boy  network"  who oppose  any                                                               
change to protect their standing in  the marketplace.  He said he                                                               
doesn't  hear  anybody  from   any  beverage  dispensary  license                                                               
holders making the offer to  help others [on business startup and                                                               
design, as was expressed by  the brewers] because everybody wants                                                               
to  protect  their  "piece  of  the pie."    Every  day  in  this                                                               
building,  [the legislature]  addresses  legislation that  passed                                                               
with bad  consequences, he said,  and this is no  different; this                                                               
has stifled economic development, and  some of the arbitrary caps                                                               
have the possibility  of affecting employment in  this state, and                                                               
will certainly affect growth.                                                                                                   
                                                                                                                                
REPRESENTATIVE HALCRO  pointed to the hundreds  of questionnaires                                                               
received.   He  said the  average  public expresses:   Why  would                                                               
government limit  economic development?  [The  state] is throwing                                                               
open the doors  and saying, "If you want to  invest the money and                                                               
take the risk -  as the free market is based on -  do it, but you                                                               
are still  under certain regulations."   This is a good  piece of                                                               
legislation, he  asserted, opposed  by those  who don't  want any                                                               
changes; it is  not about compromise.  He explained  that when he                                                               
says "compromise"  he means  it is a  compromise among  those who                                                               
are willing to sit at the table.                                                                                                
                                                                                                                                
Number 1884                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  made a motion to  move the CS for  HB 152,                                                               
version  22-LS0354\J,   Ford,  4/6/01,  out  of   committee  with                                                               
individual recommendations and the attached zero fiscal note.                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG objected.                                                                                               
                                                                                                                                
REPRESENTATIVE MEYER  asked Representative Halcro why  he prefers                                                               
[Version J]  over the original bill.   He asked if  his intent is                                                               
to not have the upper limit of 150,000 [gallons].                                                                               
                                                                                                                                
Number 1849                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO responded  that the  upper limit  is fine,                                                               
but  what the  group came  up  with was  this:   instead of  just                                                               
raising  the limit,  it  is  a good  opportunity  to address  the                                                               
system as a whole and create  a level playing field.  [The group]                                                               
expressed that by just raising  the limit, it wasn't leveling the                                                               
playing field as the bill was intended to do.                                                                                   
                                                                                                                                
REPRESENTATIVE MEYER said he was  confused because he thought the                                                               
goal was to raise the upper  limit so [brewers] could continue to                                                               
stay  in  business  here.    He asked  for  verification  of  his                                                               
understanding that this  levels the playing field  with the other                                                               
beverage [industry  components] because they  have to buy  a full                                                               
dispensary license like those for other bars.                                                                                   
                                                                                                                                
REPRESENTATIVE  HALCRO explained  that instead  of just  going in                                                               
and raising the limit, it levels the entire playing field.                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG added  that right now a  provision in the                                                               
liquor  law prohibits  a brewer  from  being a  restaurant-eating                                                               
place;  it has  to become  a brewpub.   He  added that  a brewery                                                               
can't become  a brewpub; [the  product] has  to be brewed  on the                                                               
premises.  With the exception of  the Snow Goose in Anchorage and                                                               
the Armadillo in Juneau, there are  no tavern licenses left.  The                                                               
bill  before   the  committee  destroys   the  symmetry   of  the                                                               
regulatory scheme.   It  takes any requirement  for the  cap away                                                               
from  a  brewpub,  and  allows   a  brewery  to  buy  a  beverage                                                               
dispensary  license  and enter  into  the  business of  having  a                                                               
brewpub, which is restricted by the law now.                                                                                    
                                                                                                                                
REPRESENTATIVE MEYER  asked for clarification of  what the "whole                                                               
industry" means.   He  asked if that  would include  ARBA, CHARR,                                                               
and the BGA.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  clarified that anyone who  has a license                                                               
to sell alcohol in the state  is part of the competitive picture.                                                               
He said  it would  also include the  ABC Board,  the wholesalers,                                                               
and  the  distributors.   This  is  a  highly regulated  area  of                                                               
business, he added.                                                                                                             
                                                                                                                                
REPRESENTATIVE  HALCRO said  he likes  to think  of this  bill as                                                               
encouraging  economic development,  jobs, and  further investment                                                               
in the state by Alaskans.                                                                                                       
                                                                                                                                
REPRESENTATIVE MEYER asked  how the alcohol tax  issue, which the                                                               
committee will hear on Monday, would affect brewpubs.                                                                           
                                                                                                                                
CHAIR MURKOWSKI explained  that it would be the same  as a tax on                                                               
other malt beverages.                                                                                                           
                                                                                                                                
Number 1619                                                                                                                     
                                                                                                                                
A  roll call  vote  was taken.    Representatives Halcro,  Meyer,                                                               
Kott,  Hayes, and  Murkowski voted  in favor  of moving  the bill                                                               
[Version  J]  from  committee.    Representative  Rokeberg  voted                                                               
against it.   [Representative Crawford was absent  for the vote.]                                                               
Therefore, CSHB 152(L&C) moved from  the House Labor and Commerce                                                               
Standing Committee by a vote of 5-1.                                                                                            

Document Name Date/Time Subjects