Legislature(2001 - 2002)

05/05/2001 08:49 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                      HB 152-BREWPUB LICENSES                                                                               
The committee took up HB 152.                                                                                                   
MR. KEVIN HAND,  staff to Representative Halcro, sponsor  of HB 152,                                                            
explained  that  HB  152  is  a  stop  gap  measure  to  ensure  the                                                            
unencumbered  operation  of  a  relatively  new,  highly  successful                                                            
industry in Alaska.   HB 152 provides a band-aid solution  involving                                                            
a one-year  sunset clause  that will  enable brew  pubs to  continue                                                            
their operation  for a full  year, rather  than having to shut  down                                                            
their operation  once they reached the production  cap put in place.                                                            
The  bill  has a  sunset  date  is  June 30,  2002;  it  raises  the                                                            
production  cap on brew pubs  to 150,000 gallons,  of which  no more                                                            
than  75,000 gallons  can  be  sold retail  through  their  in-house                                                            
establishments  and no  more than 75,000  gallons  can be sold  to a                                                            
wholesaler.   The brew pub industry  has fostered employment  in the                                                            
state, it has  made millions of dollars in capital  investments, and                                                            
it provides  diversification  of the economy.   The idea behind  the                                                            
sunset clause is to allow  a one year period for everyone to come to                                                            
the table, including the  industry groups to foster a long solution.                                                            
He informed  the committee that Representative  Halcro has  received                                                            
thousands   of  contacts  from  patrons   of  these  establishments                                                             
statewide  who would like  to see the continued  operation  of them.                                                            
He pointed  out the net effect  of this production  cap in  place is                                                            
that it  will leave the brew  pub operator  with a few choices:  the                                                            
operator can  cease the operation  upon reaching the production  cap                                                            
and no longer  sell beer or bring in another brand  until the end of                                                            
the calendar  year; contract  brew to a brewery,  which can  be done                                                            
without  the cap, or  contract brew  to a company  out-of-state;  or                                                            
move  the  entire  facility  to  the Lower  48  where  there  is  no                                                            
production  cap,  but  the  operator  will  lose the  moniker  of  a                                                            
handcrafted  Alaskan  beer.    In  fact, the  production  cap  is  a                                                            
disincentive  for  Alaskan  employment  and  capital  investment  in                                                            
SENATOR COWDERY  noted the downtown pub is an asset  to the downtown                                                            
area.  He questioned  whether any  other establishments are  limited                                                            
to what they can sell, for example, imports.                                                                                    
MR. HAND said  regarding the alcohol industry, there  is no limit to                                                            
how much Anheuser-Bush  or Coors can  ship into Alaska and  sell and                                                            
there is no  limit to how much a package  store or brewery,  such as                                                            
the Alaskan Brewery, can sell of any product.                                                                                   
SENATOR  COWDERY asked  when the  limit was  established whether  it                                                            
would be adjusted in the future.                                                                                                
MR. HAND  said that brings  up a very valid  point because  when the                                                            
brew pubs  first came  on to the  scene in Alaska,  for example  the                                                            
Moose's Tooth,  the law allowed a brewery to also  own a restaurant-                                                            
eating  place license.   At  that time,  there was  no limit on  the                                                            
amount that could  be brewed.  That law was changed  and the cap was                                                            
put in  place while  they were in  operation in  1996.  The  Moose's                                                            
Tooth's license became illegal and had to be grandfathered in.                                                                  
SENATOR DONLEY asked if the increase is temporary for one year.                                                                 
MR. HAND  said that is correct;  it is a  temporary fix so  that all                                                            
parties have time to come up with a long term fix.                                                                              
MR.  MATT JONES,  co-owner  of the  Moose's Tooth  Brewing  Company,                                                            
urged  committee  members  to  support  HB  152.   He  informed  the                                                            
committee  that when he and  his partner  planned their business  in                                                            
1995, the Moose's  Tooth legally obtained both a restaurant  license                                                            
and a  brewery license.   At that  time, when  they opened in  1996,                                                            
they could produce and  sell an unlimited amount of beer in both the                                                            
wholesale  and retail  sectors, as  well as own  as many  restaurant                                                            
licenses as they desired.   After less than six months of operation,                                                            
the 1996 Legislature  passed a statute prohibiting  the simultaneous                                                            
ownership of a restaurant and brewery license.                                                                                  
His business  was  never contacted  during  that session  as to  the                                                            
effect  that statutory  change  would  have on  the  business.   The                                                            
Moose's Tooth  was told by  the ABC Board  that the law had  changed                                                            
and that their license  was in a grandfather status.  Right now, the                                                            
Moose's Tooth  is asking to be able to brew beer to  meet the market                                                            
demand  for  its product,  as  allowed  in 1996.  Bar  owners  often                                                            
complain that the Moose's  Tooth has an unfair market advantage, but                                                            
he pointed  out that bar owners can  also add a brewing facility  to                                                            
their bar  to become a brew  pub.  The only  thing stopping  them is                                                            
the investment  in that infrastructure.   In  many states brew  pubs                                                            
can wholesale  and retail.   The state of  Oregon has a free  market                                                            
approach,  in  which   brew  pubs  can  wholesale,   retail,  own  a                                                            
distillery, winery  or restaurant and bar and they  can brew to meet                                                            
the market  demands.   That  approach is  the reason  Oregon is  now                                                            
internationally  recognized as one  of the most flourishing  brewing                                                            
industries  in the  world.   His final point  was that  of the  beer                                                            
produced  in Alaska,  the microbrewed  sector accounts  for about  4                                                            
percent.  Of that 4 percent,  the Alaskan Brewery makes about 2 to 3                                                            
percent;  the remainder is  divvied up amongst  10 other  breweries.                                                            
He does not believe his  business is about to monopolize the market.                                                            
He noted that  he would like to be  able to brew to the demand  that                                                            
he built  his brewery  for  in 1996.   Doubling  the production  cap                                                            
under HB 152 will  allow him to get closer to that  and to meet with                                                            
other parties to find a permanent solution.                                                                                     
MR. CHUCK  FREESE, a principal  in the Great  Bear Brewing  Company,                                                            
stated  support  for HB  152.   He  said Mr.  Jones  summarized  the                                                            
benefits of HB 152.                                                                                                             
SENATOR  COWDERY  asked Mr.  Freese  if his  primary  business is  a                                                            
restaurant  and,  in  a  brew  pub  business,   whether  arrests  of                                                            
intoxicated people occur more often than with a restaurant.                                                                     
MR. FREESE said his business  is just getting started and does about                                                            
half restaurant  business and half brew pub business.   His business                                                            
closes at 1:00 a.m. on  Friday and Saturday nights.  They have never                                                            
had an incident with the  police.  He offered to forward a letter he                                                            
has  received  from  the  Chamber  of Commerce.    He  believes  the                                                            
community is very  supportive of his business and  families comprise                                                            
a big part of his business.                                                                                                     
CHAIRMAN TAYLOR noted he would take up HB 132 again tomorrow.                                                                   
CHAIRMAN TAYLOR  announced, regarding HB 152, that  it is his intent                                                            
to let  the parties  find a solution  and insert  it into the  other                                                            
SENATOR ELLIS  said that bill represents everything  the legislature                                                            
says it stands  for, regarding economic development  in Alaska so he                                                            
hopes the Chairman can make that happen.                                                                                        
CHAIRMAN TAYLOR  announced that the  committee would take  up HB 106                                                            
and HB 184 the following  day, and that he hopes to hold the meeting                                                            
at 1:30  p.m.  or while  the full  Senate  takes a  recess. He  then                                                            
adjourned the meeting at 11:13 p.m.                                                                                             

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