Legislature(2001 - 2002)

05/01/2001 01:40 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                SENATE LABOR & COMMERCE COMMITTEE                                                                             
                           May 1, 2001                                                                                          
                            1:40 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Randy Phillips, Chair                                                                                                   
Senator Alan Austerman                                                                                                          
Senator John Torgerson                                                                                                          
Senator Bettye Davis                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Loren Leman                                                                                                             
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR HOUSE BILL NO. 152(RLS)                                                                                                  
"An Act relating to brewpub licenses; and providing for an                                                                      
effective date."                                                                                                                
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR SENATE JOINT RESOLUTION NO. 28(HES)                                                                                      
Urging dissemination of information about the costs of long-term                                                                
care services and the availability of long-term care insurance                                                                  
for individuals.                                                                                                                
                                                                                                                                
     MOVED CSSJR 28(HES) OUT OF COMMITTEE                                                                                       
                                                                                                                                
SENATE BILL NO. 191                                                                                                             
"An Act relating to insurance pooling by members of an airline                                                                  
employers association."                                                                                                         
                                                                                                                                
     MOVED CSSB 191(L&C) OUT OF COMMITTEE                                                                                       
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
HB 152 - No previous action to record.                                                                                          
                                                                                                                                
SJR 28 - See HESS minutes dated 4/27/01.                                                                                        
                                                                                                                                
SB 191 - See Labor and Commerce minutes dated 4/17/01 and                                                                       
4/24/01.                                                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
Senator Gary Wilken                                                                                                             
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Sponsor of SJR 28.                                                                                        
                                                                                                                                
Ms. Sarah MacNear-Grove                                                                                                         
Property Casualty Actuary                                                                                                       
Division of Insurance                                                                                                           
Department of Community and Economic Development                                                                                
PO Box 110805                                                                                                                   
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Commented on SB 191.                                                                                      
                                                                                                                                
Senator Robin Taylor                                                                                                            
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Sponsor of SB 191.                                                                                        
                                                                                                                                
Ms. Glen Brady, President                                                                                                       
Brew Master of Silver Gulch Brewing                                                                                             
PO Box 82125                                                                                                                    
Fairbanks AK 99708                                                                                                              
POSITION STATEMENT: Opposed HB 152.                                                                                           
                                                                                                                                
Mr. Larry Hackenmiller, Chairman                                                                                                
State Board of CHAR                                                                                                             
518 Farmer's Loop Rd.                                                                                                           
Fairbanks AK 99712                                                                                                              
POSITION STATEMENT: Opposed HB 152.                                                                                           
                                                                                                                                
Ms. Karen Berger, Owner                                                                                                         
Homer Brewing Co.                                                                                                               
PO Box 1319                                                                                                                     
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed CSHB 152.                                                                                         
                                                                                                                                
Mr. Chip Duggan, Owner                                                                                                          
Duggan's Pub                                                                                                                    
120 W. Bunnell                                                                                                                  
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed CSHB 152                                                                                          
                                                                                                                                
Mr. Doug Griffin, Director                                                                                                      
Alcohol Beverage Control Board (ABC)                                                                                            
550 W 7th #540                                                                                                                  
Anchorage AK 900501                                                                                                             
POSITION STATEMENT: Commented on HB 152.                                                                                      
                                                                                                                                
Mr. Chris Anderson                                                                                                              
Glacier Brew House                                                                                                              
737 W 5th                                                                                                                       
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Supported HB 152.                                                                                         
                                                                                                                                
Ms. Marika Heatwall                                                                                                             
Moose's Tooth Brewpub                                                                                                           
Anchorage AK                                                                                                                    
POSITION STATEMENT: Commented on HB 132.                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-26, SIDE A                                                                                                            
Number 001                                                                                                                      
                     HB 152-BREWPUB LICENSES                                                                                
                                                                                                                              
CHAIRMAN  RANDY  PHILLIPS  called  the  Senate  Labor  &  Commerce                                                            
Committee  meeting to  order at  1:40 pm  and said  he would  take                                                              
testimony  on HB  152  now and  then move  it  to the  end of  the                                                              
meeting when  there would  be a quorum  present. There was  no one                                                              
who wanted to testify.                                                                                                          
                                                                                                                                
           SJR 28-INFO ABOUT LONG-TERM CARE INSURANCE                                                                       
                                                                                                                                
CHAIRMAN PHILLIPS announced SJR 28 to be up for consideration.                                                                  
                                                                                                                                
SENATOR GARY WILKEN,  sponsor of SJR 28, explained  that this bill                                                              
grew  out  of  the efforts  of  the  Long-term  Care  Task  Force.                                                              
Recommendations #29  and 33 other  recommendations had to  do with                                                              
getting  information   out  to  the   general  public   about  the                                                              
availability and  the need of  long-term care insurance.  He noted                                                              
that  there was  a  sponsor statement  in  their  packets that  he                                                              
wouldn't  read,  but stated  that  the  senior population  is  the                                                              
fastest growing population in Alaska.                                                                                           
                                                                                                                                
     In  18  years it  will  represent  about 12  percent  of                                                                   
     Alaskans.  The need  for long-term  care is obvious  and                                                                   
     the  need to  get the  information out  to families  and                                                                   
     people  that are  planning  their lives  at  the age  of                                                                   
     teens  or 20  or 30  is the  key to  long-term care.  It                                                                   
     doesn't do much  good to buy long-term care  at 60 years                                                                   
     old. It's very expensive.                                                                                                  
                                                                                                                                
Page 2, lines  10 - 19 encourages others, officials  and agencies,                                                              
to disseminate information.                                                                                                     
                                                                                                                                
SENATOR  AUSTERMAN moved  to pass  SJR  28 out  of committee  with                                                              
individual recommendations.  There were  no objections and  it was                                                              
so ordered.                                                                                                                     
                                                                                                                                
          SB 191-JOINT AVIATION INSURANCE ARRANGEMENTS                                                                      
                                                                                                                                
CHAIRMAN PHILLIPS announced SB 191 to be up for consideration.                                                                  
                                                                                                                                
SENATOR TAYLOR, sponsor,  said he has a committee  substitute that                                                              
would provide  for some  of the concerns  that were raised  during                                                              
the first  hearing. "In essence,  the authority would  fall within                                                              
the regulatory  authority of the  Division of Insurance  and would                                                              
require    various    reporting    requirements    and    reserves                                                              
requirements."                                                                                                                  
                                                                                                                                
MS. SARAH  MACNEAR GROVE, Property  Casualty Actuary,  Division of                                                              
Insurance, said they worked with  Senator Taylor and prepared some                                                              
changes. She  pointed out  that safety  issues are very  important                                                              
and any entity that deals with such  a high-risk business needs to                                                              
address safety.  The other  thing was  that the  CS forms  a joint                                                              
insurance arrangement.                                                                                                          
                                                                                                                                
AS 21.77.020 talks about regulations  by the Division of Insurance                                                              
in  an  annual  report.  It  says,  "A  joint  aviation  insurance                                                              
arrangement  may not be  considered insurance  for the  purpose of                                                              
any  other law  of the  state and  is not  subject to  regulations                                                              
adopted by the Director."                                                                                                       
                                                                                                                                
She explained  that statement  takes it  outside of anything  that                                                              
would happen  in Title 21. "Because  this is a risky  business, we                                                              
would prefer to  see some of the protections in Title  21 apply to                                                              
such an entity."                                                                                                                
                                                                                                                                
CHAIRMAN  PHILLIPS asked if  she had  a problem  with the  bill as                                                              
drafted.                                                                                                                        
                                                                                                                                
MS. GROVE answered:                                                                                                             
                                                                                                                                
     It  does say  that this  is not  subject to  regulations                                                                   
     adopted by the  director and it is not to  be considered                                                                   
     insurance, which  means that it would not  be subject to                                                                   
     Title  21.  Because  of  the  nature  of  this  type  of                                                                   
     insurance, we think some of  the protections in Title 21                                                                   
     are important.                                                                                                             
                                                                                                                                
SENATOR TORGERSON asked  on page 3, line 26, "How  do you have and                                                              
maintain a surplus  no less than the amount equal  to the total of                                                              
the capital of one half of the surplus?"                                                                                        
                                                                                                                                
MS.  GROVE   answered,   "I  believe  the   capital  and   surplus                                                              
requirements  for  domestic stock  insure  they  have to  have  $1                                                              
million in capital  and $1 million in surplus. So,  this would say                                                              
you have $1 million in capital and $500,000 in surplus."                                                                        
                                                                                                                                
SENATOR TORGERSON asked if that was somewhere else in Title 21.                                                                 
                                                                                                                                
MS.  GROVE  answered, "Yes,  a  reciprocal  insurer has  the  same                                                              
requirement."                                                                                                                   
                                                                                                                                
SENATOR TAYLOR said  that was the reason he put that  in - to make                                                              
certain that  they had to  meet that  same standard. He  said, "If                                                              
you look  back to the other  provisions, we have both  agreed that                                                              
even though I don't want regulation  by the department, that there                                                              
will probably be a significant amount of regulation…"                                                                           
                                                                                                                                
CHAIRMAN PHILLIPS  asked Ms.  Grove if they  would come up  with a                                                              
position on this bill.                                                                                                          
                                                                                                                                
MS. GROVE indicated they would look at it closer.                                                                               
                                                                                                                                
Number 700                                                                                                                      
                                                                                                                                
SENATOR  TORGERSON moved  to pass  SB  191 out  of committee  with                                                              
individual recommendations.                                                                                                     
                                                                                                                                
CHAIRMAN  PHILLIPS noted  that  they had  to  adopt the  committee                                                              
substitute first.                                                                                                               
                                                                                                                                
SENATOR TORGERSON  removed his motion  to move the bill  and moved                                                              
that  the committee  adopt LS  0590F/Ford 4/28/01.  There were  no                                                              
objections and it was so ordered.                                                                                               
                                                                                                                                
SENATOR TORGERSON  moved to  pass CSSB  191(L&C) out of  committee                                                              
with individual  recommendations. There were no  objections and it                                                              
was so ordered.                                                                                                                 
                                                                                                                                
                     HB 152-BREWPUB LICENSES                                                                                
                                                                                                                                
CHAIRMAN   PHILLIPS  announced   HB  152   to  be   back  up   for                                                              
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE ANDREW HALCRO, sponsor of HB 152, said:                                                                          
                                                                                                                                
     HB  152  addresses the  amount  of  beer that  a  person                                                                   
     operating under  a brewpub license  can brew in  a given                                                                   
     year. Years ago,  brewpubs were created in  the mid '90s                                                                   
     and the licensees became grandfathered  in. There's only                                                                   
     a handful.                                                                                                                 
                                                                                                                                
     But over  the last couple  of years these  brewpubs have                                                                   
     lived  with very  stringent  conditions  that have  been                                                                   
     placed  upon them  that have limited  their growth.  But                                                                   
     even with  such conditions they have still  continued to                                                                   
     grow  and the  problem exists  today  that they  operate                                                                   
     under  a 75,000 gallon  per year  cap. They cannot  brew                                                                   
     and sell no more than 75,000 gallons in a year.                                                                            
                                                                                                                                
     The problem is that some of  these operators have opened                                                                   
     second locations and they have  twice as many tables and                                                                   
     obviously,  twice as  many customers,  which means  that                                                                   
     come September  or October,  they are  going to hit  the                                                                   
     75,000 gallon  cap. Once they hit that 75,000  cap, they                                                                   
     have  two options.  One, they  can  cease production  of                                                                   
     their own  beer and just sell  others' beer or  they can                                                                   
     pay a competitor  to brew their beer and  then resell it                                                                   
     in their  restaurant and in  some cases, brew  that beer                                                                   
     out of state,  which means there would be  some job loss                                                                   
     with regards to individual breweries.                                                                                      
                                                                                                                                
     This is a  kind of compromise within the  brewer's guild                                                                   
     industry.  It  provides  them   with  a  one-year  grace                                                                   
     period,  sunsetting June  30,  2002. It  allows them  to                                                                   
     regroup and take a look at some  non-legislative options                                                                   
     as well as possibly coming to  some kind of an agreement                                                                   
     with the members of CHAR and  ARB and some of the others                                                                   
     to address maybe  a legislative fix. But this  is just a                                                                   
     band-aid,  Mr.  Chairman  and  it is  an  eleventh  hour                                                                   
     compromise.                                                                                                                
                                                                                                                                
SENATOR  AUSTERMAN said  he understood  that it  was a  compromise                                                              
coming out of the House.                                                                                                        
                                                                                                                                
RERPESENTATIVE HALCRO  said he was right. The  original version of                                                              
HB 152 was far  more expansive and dealt with  some larger issues.                                                              
Certain  smaller breweries  felt that  they needed  to have  their                                                              
problems addressed, too, to create  this even playing field in the                                                              
market  place.   That  had  a   tremendous  amount   of  political                                                              
opposition,  mostly from  outside  of the  Capitol Building.  They                                                              
decided  to put  something in  place for  a year;  so, during  the                                                              
interim so they could get all of  the affected people to the table                                                              
and negotiate  some kind  of an agreement.  This may  include non-                                                              
legislative fixes. So, they might not be back next year.                                                                        
                                                                                                                                
SENATOR  AUSTERMAN  asked  if  the "fix"  takes  them  to  150,000                                                              
gallons.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HALCRO replied yes and that basically right now                                                                  
the cap is at 75,000 gallons.                                                                                                   
                                                                                                                                
     They can  wholesale all of it;  they can sell all  of it                                                                   
     in their  restaurants. There's  no limitation as  far as                                                                   
     what they  can't. The concern  is that some  competitors                                                                   
     don't  believe  that they  should  have the  ability  to                                                                   
     wholesale   as  well  as  sell   their  beer   in  their                                                                   
     restaurants.  So what  we've done is  we've doubled  the                                                                   
     cap, but  we've limited the  amount they can  wholesale.                                                                   
     Currently,  there  is  no  limit   they  can  wholesale.                                                                   
     There's  only that  75,000 gallons.  So, this does  take                                                                   
     into   consideration   some  of   the   anti-competitive                                                                   
     arguments  that are  out there.  These  folks should  be                                                                   
     able  to do both.  We're limiting  the wholesale  output                                                                   
     through this one-year sunset  bill. Are there questions?                                                                   
                                                                                                                                
MR. GLEN BRADY, President and Brew Master, Silver Gulch Brewing,                                                                
opposed HB 152. He said:                                                                                                        
                                                                                                                                
     I can't support this as a temporary  band-aid. There's a                                                                   
     lot  of essentially  ill  will  in-house and  folks  are                                                                   
     tired of looking  at this. We're dealing  with one group                                                                   
     of  people,  so  this ends  up  being  special  interest                                                                   
     legislation to give them essentially what they want.                                                                       
                                                                                                                                
     To  say  that  limiting  their   wholesaling  to  75,000                                                                   
     gallons per year,  we're one of the larger  breweries in                                                                   
     the state, up here in Fairbanks,  and 75,000 gallons per                                                                   
     year is more than we sold in  the entire state of Alaska                                                                   
     last  year.  So,  it's  essentially   no  cap;  it's  no                                                                   
     protection  against  them flooding  the  market under  a                                                                   
     marketing tool for their retail  establishments. So, for                                                                   
     those  reasons I'm  against  this. I  think they  should                                                                   
     probably be  able to get by  with what they have  on the                                                                   
     books right now.                                                                                                           
                                                                                                                                
     I  do believe  that  we as  a group,  brewers,  industry                                                                   
     members  and the legislature  certainly  need to take  a                                                                   
     look at brewpub  legislation. I think there  is room for                                                                   
     both breweries  and brewpubs, but  I don't know  if this                                                                   
     band aid  is such a  good idea in  light of many  of the                                                                   
     other things that are going on.                                                                                            
                                                                                                                                
SENATOR AUSTERMAN asked if he was a brewer who sold wholesale and                                                               
asked if it was correct that he didn't want to see the brewpubs                                                                 
competing against him.                                                                                                          
                                                                                                                                
MR. BRADY answered that was correct.                                                                                            
                                                                                                                                
     I don't want  to see a brewpub competing with  me in the                                                                   
     wholesale marketplace where  I am prohibited by law from                                                                   
     competing  with them in  the retail marketplace.  That's                                                                   
     been  kind of  the  crux of  the breweries'  issues  all                                                                   
     along.                                                                                                                     
                                                                                                                                
     We  do  believe generally  speaking  that  the  brewpubs                                                                   
     should  have their  production cap  lifted. They  should                                                                   
     not  be penalized  for  being successful  and  certainly                                                                   
     Moose's Tooth has been very  successful. My hat's off to                                                                   
     them.  However, the  issue we have  with the  production                                                                   
     cap  is the  wholesale portion  that goes  out into  the                                                                   
     market place.  That's to them  a marketing tool.  It's a                                                                   
     very small  part of their business.  For us that  is our                                                                   
     only  source of revenue.  That's our  bread and  butter.                                                                   
     So, it's a difficult situation for small brewers.                                                                          
                                                                                                                                
CHAIRMAN PHILLIPS asked who else opposed this bill.                                                                             
                                                                                                                                
MR. BRADY replied  that he is speaking  for himself, he  is on the                                                              
Board of Directors of CHAR, and this  is something they as a group                                                              
have discussed. The  Board is also against this,  however he could                                                              
not speak for them.                                                                                                             
                                                                                                                                
CHAIRMAN PHILLIPS asked if the board had voted on it.                                                                           
                                                                                                                                
MR. BRADY  replied that  the board voted  to support  the original                                                              
language  doubling  the  production  cap  of a  brewpub  with  the                                                              
exception that above  75,000 gallons per year, they  would give up                                                              
their option to wholesale.                                                                                                      
                                                                                                                                
MR. LARRY HACKENMILLER, Chairman  of the Board of State CHAR, said                                                              
he  also is  a bar  owner in  Fairbanks  and opposed  the bill  as                                                              
written.                                                                                                                        
                                                                                                                                
     The  CHAR Board  voted,  I think  it  was unanimous,  to                                                                   
     support  the bill  on the 150,000  gallons provided  the                                                                   
     wholesale  item was  added. Personally,  I've done  this                                                                   
     for the  last eight  years -  come before a  legislative                                                                   
     body  and fought  this issue,  because competition  with                                                                   
     brewpubs has been around for  years. They started off as                                                                   
     a  brewpub, not  a brewery  and  that's specifically  to                                                                   
     sell their  own type of beer.  Each year they  come back                                                                   
     asking for more and more and more.                                                                                         
                                                                                                                                
     One  of the  things  we haven't  gotten  away from  with                                                                   
     regards to brewpubs  is that by law, they  can give away                                                                   
     free samples on the premises;  they can sell growlers on                                                                   
     the premises. We try to keep  that separate. If you have                                                                   
     an  off premises package  store, you're  not allowed  to                                                                   
     give away free  samples on the premises or  sell them by                                                                   
     the  drink. Brewpubs  could do  that. I  can't sell  off                                                                   
     premises; but brewpubs can do  that. So, there's kind of                                                                   
     a disparity there. Every year  they keep coming back for                                                                   
     more. Last year  when they brought this up,  they wanted                                                                   
     a 150,000 cap instead of the  75,000. They indicated why                                                                   
     150 at all? Why don't we just have open?                                                                                   
                                                                                                                                
     Well,  then, to  cover breweries  and  follow the  rules                                                                   
     there,  a  brewery  person  cannot  sell  alcohol,  open                                                                   
     container  or  sell  by  the  drink,  on  premises.  So,                                                                   
     everybody's  got restrictions  except brewpubs and  they                                                                   
     want more. I think that the  compromise that the brewery                                                                   
     people  came up with,  the original  one, regarding  the                                                                   
     issue of the  150,000 gallons and the wholesale  cap was                                                                   
     a good cap. It still allows them to be competitive.                                                                        
                                                                                                                                
     In  the  House they  even  had it  set  up so  that  the                                                                   
     brewers could get licensed premises.  You're just taking                                                                   
     away the whole three-tier system,  which involves number                                                                   
     one, the  manufacturers, number two the  wholesalers and                                                                   
     distributors  and  we,  the   retailers.  We  kept  that                                                                   
     separate for a reason, so you  wouldn't have monopolies.                                                                   
                                                                                                                                
     I don't agree with the sunset  clause especially because                                                                   
     one year from  now all they're going to do  is come back                                                                   
     and ask for  more. They're not going to go  back to what                                                                   
     they had originally. You can't  expect someone to get an                                                                   
     open  cap like  this and  come back  and determine  that                                                                   
     you're  going  to take  away  this business  from  them.                                                                   
     That's almost idiotic.                                                                                                     
                                                                                                                                
     Also, I would  like a study to be done  before this bill                                                                   
     goes  any   further  with  regards  to  just   what  the                                                                   
     gallonage is for each location.  But be careful, because                                                                   
     what they'll  tell is  that they  use 65,000 gallons  of                                                                   
     their 75,000  gallon cap, so  therefore they  need more.                                                                   
     Yet,  how much  are they  wholesaling  off premises?  If                                                                   
     they are  taking 20,000 gallons  of that and  selling it                                                                   
     off premise  or in  a different  location means that  if                                                                   
     they stopped that, they would  still have that 20,000 to                                                                   
     sell on their  premises. Again, the CHAR  Board will not                                                                   
     support  this bill  and voted  only to  support what  we                                                                   
     came  up with  originally -  the 150,000  gallon with  a                                                                   
     75,000 gallon wholesale cap.                                                                                               
                                                                                                                                
MS. KAREN BERGER,  Owner, Homer Brewing Co., said  she agreed with                                                              
Mr. Brady in  Fairbanks 100 percent. "His comments  stand true for                                                              
the beliefs here in Homer."                                                                                                     
                                                                                                                                
SENATOR AUSTERMAN said he was confused,  because the CS does go to                                                              
150,000 and caps at 75,000 gallons also.                                                                                        
                                                                                                                                
MR. BRADY asked him to rephrase his question.                                                                                   
                                                                                                                                
SENATOR AUSTERMAN  reiterated that  this bill  says that  they may                                                              
not do more than 150,000 gallons  of beer in a calendar year, sell                                                              
not more  than 75,000  gallons manufactured on  the premises  as a                                                              
wholesaler. He said he thought that's  what he heard Mr. Brady say                                                              
he wanted and he thought that's what the bill does.                                                                             
                                                                                                                                
MR.  BRADY responded  that the  original language  that the  State                                                              
CHAR organization  and the Brewer's Guild of Alaska  supported was                                                              
150,000 gallon per year cap with  the language saying if a brewpub                                                              
goes  above  75,000 gallons  per  year,  they  give up  all  their                                                              
options to wholesale, not 50 percent of it, essentially.                                                                        
                                                                                                                                
     Right now the way the bill is  written, they can produce                                                                   
     75,000 gallons  for sale through  a wholesaler  and they                                                                   
     can sell an  additional 75,000 gallons on  the premises.                                                                   
     That's the  difficulty we have,  because basically  in a                                                                   
     market  place  as small  as  Alaska, 75,000  gallons  of                                                                   
     wholesaling would be comparable  to having no production                                                                   
     cap.  If this  were California,  that would  not be  the                                                                   
     case,  but we're limited  geographically and  population                                                                   
     wise.                                                                                                                      
                                                                                                                                
SENATOR  AUSTERMAN said  they were  only limited  if they stay  in                                                              
Alaska and sell it in Alaska.                                                                                                   
                                                                                                                                
MR. BRADY  replied that the  production cap doesn't  apply outside                                                              
the state. "It's only instate."                                                                                                 
                                                                                                                                
REPRESENTATIVE HALCRO commented:                                                                                                
                                                                                                                                
     We need to  keep in focus what we're talking  about. The                                                                   
     beer that's  brewed by brewpubs  in Mr. Brady's  company                                                                   
     represents four  percent of the total beer  sold in this                                                                   
     state. It's  a fraction. But more importantly,  comments                                                                   
     made  by both Mr.  Brady and  Mr. Hackenmiller  - and  I                                                                   
     understand  them -  but the  assertion  that we've  come                                                                   
     back  year after  year needs  to be  clarified a  little                                                                   
     bit.                                                                                                                       
                                                                                                                                
     I introduced this  bill two years ago. It  never got out                                                                   
     of Labor and  Commerce, but more importantly  every year                                                                   
     for  the last  number of  years,  these brewpubs,  every                                                                   
     year it seems  that they have been put  under increasing                                                                   
     pressure and increasing regulations.  For instance, they                                                                   
     have been living with this 75,000  gallon cap. Two years                                                                   
     ago they accepted a provision  that said if they want to                                                                   
     expand and  open a second location,  they had to  go out                                                                   
     and buy a beverage dispensary  license, which allows you                                                                   
     to  serve  hard  alcohol.  Even   though  one  of  these                                                                   
     organizations had no desire  to serve hard alcohol, they                                                                   
     had  to  go  out  and  spend   $150,000  on  a  beverage                                                                   
     dispensary  license  so  they  could open  up  a  second                                                                   
     location.  That was  one of  the  requirements that  was                                                                   
     pushed  by the  members of CHAR  as they  felt it  would                                                                   
     even the  playing field to  make sure brewpubs  and some                                                                   
     of these more  established bars and eating  and drinking                                                                   
     places were on  the same level and had the  same kind of                                                                   
     investment.  So, the  assertion that  these people  come                                                                   
     back  to the table  every year  and want  a bite of  the                                                                   
     apple is  completely untrue.  To date they haven't  been                                                                   
     given anything.  They've simply  lived with some  of the                                                                   
     requirements  and the conditions  that have been  placed                                                                   
     on them by others.                                                                                                         
                                                                                                                                
MR. CHIP  DUGGAN, Owner,  Duggan's  Pub, said  he agreed with  Mr.                                                              
Brady and  Ms. Berger, that the  CS doesn't limit the  brewpubs to                                                              
anything.                                                                                                                       
                                                                                                                                
     It  gives them 75,000  gallons to  wholesale and  75,000                                                                   
     gallons to retail. And that's  a very unfair competition                                                                   
     against the breweries  in the State of Alaska.  I'd like                                                                   
     to state  that I'm in favor  of, if they do go  over the                                                                   
     75,000  gallons,   that  they  do  not  sell   any  more                                                                   
     wholesale product after that.                                                                                              
                                                                                                                                
MR. DOUG GRIFFIN,  Director, Alcohol Beverage Control  Board, said                                                              
he would  answer questions the  committee may have  about existing                                                              
state law.  He said  that Representative  Halcro  had done  a very                                                              
good  job of  giving  some of  the history  and  his comments  are                                                              
accurate. He  did not  have a position  on this legislation  other                                                              
than that  the whole  area of brewpubs  has been  in the  state of                                                              
evolution for the last five years.                                                                                              
                                                                                                                                
MR.  CHRIS ANDERSON,  Glacier  Brew House,  supported  HB 152.  He                                                              
said:                                                                                                                           
                                                                                                                                
     The  bill, as  it raises  the amount  of production  for                                                                   
     brewpubs, there's  really only one of us  that is really                                                                   
     involved  in that  type of  business right  now that  it                                                                   
     affects. As  a brew house,  this bill will  not directly                                                                   
     affect  me,  although  for my  competitor,  the  Moose's                                                                   
     Tooth, it will, for which it  is a great thing. I really                                                                   
     think this  is a  good thing for  them and overall  very                                                                   
     good for the industry…                                                                                                     
                                                                                                                                
MR. ANDERSON  said he was also tired  of this issue coming  up. He                                                              
said if there was  any change to the bill, he would  like it to be                                                              
a permanent change, not just temporary.                                                                                         
                                                                                                                                
SENATOR TORGERSON asked how much beer he sells wholesale.                                                                       
                                                                                                                                
MR. ANDERSON  replied about 800 barrels  per year or  about 42,000                                                              
gallons.                                                                                                                        
                                                                                                                                
SENATOR TORGERSON asked if he would  have to buy a brewery license                                                              
if he wanted to exceed that.                                                                                                    
                                                                                                                                
MR. ANDERSON  replied  that he cannot  own a  brewery license.  "A                                                              
brewery together  with a beverage dispensary license  is currently                                                              
illegal in the  state. We bought a beverage dispensary  license so                                                              
that we  could go a  different route,  which was required  several                                                              
years ago."                                                                                                                     
                                                                                                                                
SENATOR TORGERSON said, "Maybe we're fixing the wrong thing."                                                                   
                                                                                                                                
MR. ANDERSON said:                                                                                                              
                                                                                                                                
     If we look  at the breweries in the state,  for those of                                                                   
     you who look  at this type of thing, the  Moose's Tooth,                                                                   
     the Glacier Brew House, Midnight  Sun, SJ Kline's place,                                                                   
     Homer, Fairbanks  altogether, if we put all  of our beer                                                                   
     together,  we may  do maybe  8,000 or  9,000 barrels  of                                                                   
     beer total.  That's less than  one percent of  the total                                                                   
     beer coming  into the  state. The rest  of the beer,  as                                                                   
     Jeff  Larson does  an  excellent job  in  Alaska and  he                                                                   
     sells  83,000 barrels of  beer, but  he's the only  true                                                                   
     brewery in the  State of Alaska. The rest  are just very                                                                   
     small operations of less than 2,000 barrels.                                                                               
                                                                                                                                
MS. MARIKA  HEATWALL, Moose's  Tooth Brewpub,  said she  wanted to                                                              
answer  two questions  and wanted  also to impress  upon them  the                                                              
importance of raising the 75,000 gallon wholesale cap.                                                                          
                                                                                                                                
     Moose's  Tooth currently  at their  established rate  of                                                                   
     production  will hit 75,000  gallons of brew  production                                                                   
     late this  summer or early this  fall. At that  point in                                                                   
     time, without  this sunset, they will be  forced to stop                                                                   
     brewing out  of their $1 million manufacturing  facility                                                                   
     in Ship Creek.  Holding that kind of a facility  idle is                                                                   
     very expensive. They would also  at that time lose their                                                                   
     contract  relationships;  they   have  taps  in  several                                                                   
     restaurants  (they have about  a dozen in the  Anchorage                                                                   
     area). The reason the language  has been crafted the way                                                                   
     it  has is  to allow  them in  this  one-year sunset  to                                                                   
     continue their existing operations.                                                                                        
                                                                                                                                
     Senator  Torgerson, through  the  chair, mentioned  that                                                                   
     maybe  this  bill  is  fixing  the  wrong  thing  and  I                                                                   
     couldn't   agree   more.  There   have   been   numerous                                                                   
     conversations  among the Brewer's  Guild and there  need                                                                   
     to many many more about what  the final outcome needs to                                                                   
     be. I simply  hope to clarify that without  the language                                                                   
     the  way it's  written before  you now,  one company  in                                                                   
     Anchorage  will  have  to cease  their  operations  this                                                                   
     summer. We hope that this body  sees it's unnecessary to                                                                   
     put  somebody  out  of business.  This  is  complicated;                                                                   
     there  are many many  regulations affected  and lots  of                                                                   
     interested parties.  We ask simply  that we have  a year                                                                   
     to work with  all the interested parties  to resolve the                                                                   
     issue  without  putting  someone  unnecessarily  out  of                                                                   
     business   or   requiring    them   to   lose   contract                                                                   
     relationships  with some  of the  restaurants that  they                                                                   
     currently serve.                                                                                                           
                                                                                                                                
SENATOR DAVIS asked if she supported the sunset.                                                                                
                                                                                                                                
MS.  HEATWALL answered  that she  does  support it  only in  that,                                                              
"This would  allow everyone to stay  in business for the  year and                                                              
to come back  to this body with hopefully an  appropriate solution                                                              
to every bodies' concerns."                                                                                                     
                                                                                                                                
SENATOR TORGERSON asked Mr. Griffin, "Why don't we license these                                                                
places as breweries?"                                                                                                           
                                                                                                                                
MR. GRIFFIN replied:                                                                                                            
                                                                                                                                
     That is really  where we started this whole  thing about                                                                   
     six years ago. We did allow  breweries to own restaurant                                                                   
     eating place  licenses, which is commonly refered  to as                                                                   
     the beer and wine licenses.  That's how these handful of                                                                   
     what  are now  brewpubs started  out. That  was seen  as                                                                   
     being  an  attack  on the  three-tier  system  and  some                                                                   
     people   taking  advantage  of   a  loophole.   So,  the                                                                   
     legislature  prohibited  that,   made  it  a  prohibited                                                                   
     financial  interest that  you couldn't  have a beer  and                                                                   
     wine  license and  a  brewery license  together.  That's                                                                   
     what forced the hand of the  Moose's Tooth folks and the                                                                   
     Brew House and  Snow Goose to go out and  buy a beverage                                                                   
     dispensary  license  and convert  from  a brewery  to  a                                                                   
     brewpub.   That  was   in  response   to  the   beverage                                                                   
     dispensary licenses.                                                                                                       
                                                                                                                                
     It felt  that these folks  were unfairly competing  with                                                                   
     them,  because the  brewpub  or the  brewery  restaurant                                                                   
     combination  had  more of  a  flavor even  though  their                                                                   
     sales   of   food   still  qualified   them   as   being                                                                   
     restaurants. They  still felt that because  the beer was                                                                   
     such  a high lighter  of their  establishment that  they                                                                   
     were unfairly  competing with them  and so they  got the                                                                   
     law  changed.  Now,  unfortunately,  the  Moose's  Tooth                                                                   
     folks and some others are felt  to be unfairly competing                                                                   
     with the breweries.  So, they're kind of  caught between                                                                   
     the  beverage  dispensary  licensees   and  the  brewery                                                                   
     licensees; and  they fit somewhere in the  middle there.                                                                   
     They've got it from one side  and now they're getting it                                                                   
     from the other.                                                                                                            
                                                                                                                                
     There  is  a  legitimate  concern  on the  part  of  the                                                                   
     breweries  in  that  their whole  means  of  staying  in                                                                   
     business  is finding  taps and  shelf  space in  package                                                                   
     stores,  if they're  putting their  product in a  bottle                                                                   
     and that's  what they've  got to  do. These places  that                                                                   
     are brewpub  licenses and are also wholesaling  have the                                                                   
     cash flow  from the restaurant, the theatre  operations,                                                                   
     in the  case of the Bear  Tooth. But the one  thing that                                                                   
     does need  to be  taken into  consideration is that  all                                                                   
     these  guys  have  had  to   go  out  and  buy  beverage                                                                   
     dispensary licenses,  which in the Anchorage  market was                                                                   
     about  $150,000,  plus  or  minus  $25,000  for  what  a                                                                   
     beverage  dispensary  license  costs. So,  they've  made                                                                   
     substantial investments  in their brewing  equipment and                                                                   
     they've  had  to  make  investments   in  licenses.  So,                                                                   
     they've  gotten  some pretty  tall  orders  in terms  of                                                                   
     things they had to do to try  to stay in compliance with                                                                   
     the  law.  Now, unfortunately  for  the  Moose's  Tooth,                                                                   
     they're sort  of a victim of  their own success  in that                                                                   
     they've been  so successful in finding taps  for beer as                                                                   
     wholesaler   and  also   selling   beer  through   their                                                                   
     restaurants, that they're up against this cap.                                                                             
                                                                                                                                
     You  can attach  this problem  from the  other side  and                                                                   
     that might bring us full circle to where we started.                                                                       
                                                                                                                                
SENATOR TORGERSON said he didn't have the original bill in his                                                                  
packet so he didn't know where it started.                                                                                      
                                                                                                                                
CHAIRMAN PHILLIPS  said he was inclined  to hold the bill  for one                                                              
day.                                                                                                                            
                                                                                                                                
SENATOR TORGERSON  remarked that he didn't  have to do it  for him                                                              
since he probably wouldn't support  it, because he didn't think it                                                              
was the right way to fix it.                                                                                                    
                                                                                                                                
CHAIRMAN  PHILLIPS said  that was  why he  was going  to hold  the                                                              
bill.                                                                                                                           
                                                                                                                                
SENATOR AUSTERMAN  said he  didn't feel  it was  the right  way to                                                              
attack it  either, but at  this point  in time in the  legislative                                                              
session,  it might  be the  only way  we could  address the  issue                                                              
without placing them into a box.                                                                                                
                                                                                                                                
CHAIRMAN  PHILLIPS  said  he  would  hold the  bill  one  day  and                                                              
adjourned the meeting at 2:24 p.m.                                                                                              
                                                                                                                                
                                                                                                                                

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