Legislature(2001 - 2002)
04/06/2001 03:20 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 152-BREWPUB LICENSES [Contains discussion of HB 153] Number 0542 CHAIR MURKOWSKI announced that the committee would hear HOUSE BILL NO. 152, "An Act relating to brewpub licenses." REPRESENTATIVE HALCRO, speaking as the sponsor of HB 152, made a motion to adopt the proposed committee substitute (CS), Version J [22-LS0354\J, Ford, 4/6/01], as the work draft. There being no objection, Version J was before the committee. KEVIN HAND, Staff to Representative Andrew Halcro, Alaska State Legislature, explained that this new, highly successful industry in Alaska continues to have substantial growth, and is a new source of employment and benefits to local communities around the state; it provides diversification for the state's otherwise mono-modal economy around the state. Breweries and brewpubs are providing positive economic enhancements in almost every region of Alaska, including many different communities from Southeast to the Interior. Positive effects include tax revenue for local communities, employment, and subsequent positive side effects for such things as employment insurance. Number 0320 MR. HAND remarked that current brewpub law - a portion of which was supplied for the committee - caps the amount of beer a brewpub is allowed to brew annually at 75,000 gallons. However, businesses are impeded by that limitation. A few years ago when this legislative body considered these laws, he told members, a cap was arbitrarily put in place; according to committee testimony, there was nothing substantive that led to the creation of the cap at that level. MR. HAND said there are companies which, after bumping up against that cap, are faced with the decision of moving their operations elsewhere - where they would be unlimited in the amount of beer they could brew. It is much cheaper to take all of the aggregate products that are required to brew beer, bottle them elsewhere, and ship them to Alaska as a finished product than to do it here. MR. HAND told the committee [Alaska] has alcohol laws that oversee the industry for good reason. Regardless of where one stands on the issue of alcohol enforcement, he suggested that everyone would agree that the government should not stifle private industries, especially [industries] that would help diversify the Alaskan economy. MR. HAND, referring to Version J, explained that it is an agreement considered by many different interests in the alcohol industry, and incorporates provisions to ensure their interests and financial obligations; much dialogue has taken place to bring this proposed legislation to the table. MR. HAND said [Version J] levels the playing field for all breweries and brewpubs, allowing all participants to operate under the same basic structure and to have the same opportunities. It is the closest that this industry has come to equal access to the market. Any current brewery that wants to utilize these statutes to convert to a brewpub would be doing so under the same laws and conditions as any other competitors, which is the basis for competition in the private sector. Number 0086 MR. HAND explained Version J. Section 1 [paragraph (1)] removes the production cap of 75,000 gallons annually and authorizes anyone with a brewpub license to manufacture beer in the state. Paragraph (2) removes the collocation clause regarding the location of manufacturing facility versus a retail location; it allows a brewpub to have its brewing facility in a separate location from its retail outlet. It also provides that brewpubs may not hold more than two beverage dispensary licenses, meaning they can only have a maximum of two retail locations from which to supply themselves with their product. A brewpub can continue to open more locations utilizing a regular restaurant-eating place license, but would have to buy its own product via the normal distribution channels and at wholesale. MR. HAND noted that paragraph (3) authorizes the sale of up to five gallons a day to [an individual who is present on the licensed premises]. TAPE 01-50, SIDE A MR. HAND, referring to paragraph (4), said free samples could be provided on the manufacturing premises during a brewery tour. He concluded with Section 1, noting that paragraph (5) authorizes brewpubs to sell beer to a wholesaler. Section 2 repeals subsection (d) of the statute, which is the portion written a few years ago when the legislature went over this issue. In an effort to level the playing field, it repeals the section that was currently employed regarding a specific operation. MR. HAND remarked that the Brewers Guild of Alaska (BGA), which includes [representation] from most of the breweries and brewpubs in the state, recently passed a resolution in support of HB 152, Version J. A great deal of public testimony has been received by Representative Halcro's office in just a few short weeks, from all portions of the state, and from every district in Anchorage. He emphasized that 99.9 percent of [the input] is greatly in support of revisiting the brewpub limits. Number 0192 REPRESENTATIVE HALCRO remarked that all of the green card [questionnaires piled on the table] were supportive. Although three cards were received in opposition, one was from a gentleman who will be testifying before the committee today, and who is [now] in support of the bill. REPRESENTATIVE ROKEBERG asked Mr. Hand why he'd said the volume cap [set by the legislature] wasn't based on anything substantive. Number 0299 MR. HAND replied that he had derived that from the testimony he got from the Bill Action and Status Inquiry System (BASIS). REPRESENTATIVE ROKEBERG indicated there was truth in what Mr. Hand had said, but added that he thought a brewpub was envisioned to have a beverage dispensary license and would brew the beer on the premises. He mentioned the uniqueness of the Moose's Tooth situation, which qualified under a provision of law enacted at the same time as the 16,000-gallon [limit] was, when taverns were legalized in the state; Representative Rokeberg said he had sponsored a law to outlaw that, and - with a few exceptions in the state - all of those licenses are gone. Unfortunately, he said, another provision in law was a financial interest section that prohibited a brewer from owning a restaurant license, and subsequently that bill was changed to make sure they were brewpubs under a beverage dispensary license with which that business conformed. Number 0458 REPRESENTATIVE ROKEBERG continued, saying when that was done, the cap was put on it. When the revision was done, there was a glitch in the "fix" made to AS 04.11.135(d), which is trying to be repealed now. He asked whether the sponsor wants to repeal that section because the Moose's Tooth is operating as a brewpub under the holder of a beverage dispensary license. MR. HAND replied affirmatively. He thought there might have been some unintended inconsistencies if the statute were prohibited under that subsection (d), he added. REPRESENTATIVE ROKEBERG said subsection (d) was formed almost as special-interest legislation to allow [the Moose's Tooth] to be able to operate. When the bill was drafted, however, someone forgot to tell [the drafters] that its brewery was separate from the premises. He expressed concern about repealing that unless he is 100 percent certain, and said he would like to know the position of CHARR (Cabaret Hotel Restaurant & Retailer Association) and ARBA (Anchorage Restaurant and Beverage Association), rather than the position of those who serve food along with brewing beer. MR. HAND replied that he believed subsection (d) to now be moot because the Moose's Tooth, for which the provision was originated, no longer operates under it; it gave up its grandfathered right and now operates under a beverage dispensary license. REPRESENTATIVE ROKEBERG asked if both [Moose's Tooth] locations hold beverage dispensary licenses. MR. HAND responded affirmatively and said he believed the proprietors of the business were online to answer questions. Number 0629 REPRESENTATIVE HALCRO said he believed the [proprietors] had to procure a beverage dispensary license to open and operate the second location. Two years ago, the committee rewrote an Alcohol Beverage Control (ABC) liquor law; one of the provisions in HB 67 required that if these brewpubs wanted to open a second location, they had to spend $150,000 to buy a beverage dispensary license. REPRESENTATIVE ROKEBERG objected to that statement. He said a brewpub by law has to have a beverage dispensary license. [Alaska] has taverns, he pointed out, and there were only a couple in operation. REPRESENTATIVE HALCRO emphasized that [the legislature] instituted a provision that mandated that if a brewpub wanted to open a second location, it had to purchase a beverage dispensary license, at a cost of $150,000, that would allow the serving of hard alcohol, even though there was no intention of serving it; this was pushed by competitors who were fearful of the growth and competition that was being presented. He said it was his standpoint two years ago that it was unfair to make a business spend money on an unnecessary license instead of putting that money into capital improvements. House Bill 152 addresses that investment and levels the playing field. Number 0771 LINDA THOMAS, Chief Operations Officer, Alaska Brewing Company, came forth on behalf of Marcy and Jeff Larson, co-founders of the brewery, who were unable to attend the hearing. She said the [Alaska Brewing Company] doesn't support this bill as currently drafted and requests postponement to analyze changes. The BGA resolution was passed at noon today, and [the Alaska Brewing Company] has not had time to analyze it, either. CHAIR MURKOWSKI mentioned a portion of the BGA's faxed statement, which read [original punctuation provided]: The Brewers Guild of Alaska (BGA) supports the raising of the production capacity on Brewpubs from 75,000 gallons to 150,000 gallons with the following restriction in place. Any Brewpub requesting a production capacity increase (above 75,000 gal.) would be prohibited from wholesaling any of their beer offsite. MS. THOMAS responded affirmatively. In response to a comment by Representative Rokeberg, she said CHARR had endorsed the original bill. Number 0953 SEAN BECK, President, Specialty Imports, testified via teleconference. He stated that [Specialty Imports] is a wholly owned Alaskan distributor of fine wine and beer, and also is the distributor for the Moose's Tooth. [Specialty Imports] supports HB 152 and believes it is vital for the economic interest of all the brewers in the state. REPRESENTATIVE ROKEBERG asked Mr. Beck if he believes in the three-tiered system under Alaska Statute that regulates the industry. MR. BECK said he believes in the taxation issues of the three- tiered system. When asked if the Moose's Tooth is the only brewpub in Alaska with a stand-alone brewery, he said he wasn't certain, but knows of other breweries, like Bear Creek, that went out of business because they didn't get into that end of the business or weren't allowed to. He said he thought others would as well. He added that a number of breweries in the Lower 48 have brewpubs onsite or off-site and are selling their products in Alaska; it could be an economic hardship for brewers here if they aren't allowed to do the same. Number 1075 GLENN BRADY, President, Silver Gulch Brewing Company, testified via teleconference in opposition to the proposed CS [Version J]. He said this would be a sweeping change to the legislation affecting how [brewers] operate in the state. He agreed with the statement made by the Alaska Brewing Company that the bill hearing needs to be postponed for further consideration, although he said it is a step in the right direction. KAREN BERGER, Owner, Homer Brewing Company, testified via teleconference in opposition to [Version J]. It is sweeping legislation, she explained, and there has not been time to understand the ramifications. She expressed concern about the $150,000 for a beverage dispensary license because in Homer there aren't any for sale now. It would most likely be double that price, which is prohibitive for small breweries in small towns. REPRESENTATIVE HALCRO asked whether Ms. Berger's objection is more about the cost and availability of the beverage dispensary license than the issues of competition and being able to "grow" one's business. Number 1240 MS. BERGER replied that although the playing field needs to be leveled, she doesn't agree that this is the best [method]. In speaking to the Washington Alcohol Board this morning, she found that [brewers in Washington] enjoy a different set of rules that she agrees with more. Once again, [all brewers] have to sit down and come to an agreement. LASSE HOLMES testified via teleconference. The former co-owner of the Homer Brewing Company, he expressed concern that [the committee] is not talking about HB 153 at the same time, which is an integral [component] that Representative Halcro is also sponsoring. Without having HB 153 involved and, instead, just talking about the cap, he said he doesn't believe it is a level playing field. Number 1310 LARRY HACKENMILLER, Owner, Club Manchu, testified via teleconference. He noted that he is also the chairman of the board for the state CHARR, which discussed this at its last meeting; with the original bill, [CHARR] decided to at least listen to increases up to 150,000 gallons if there is some type of a level where (indisc.) of that had to be a wholesale and had to be distributed accordingly. That is quite unclear with Version J. MR. HACKENMILLER said he appreciates the hard work that went into this with the BGA; however, [brewers] are not full beverage dispensary license [establishments], as he is; he suggested that perhaps there needs to be more familiarity with some of the laws. Mr. Hackenmiller emphasized that he has been before the legislature every year with brewpub legislation. In HB 152, Version J, it says [brewers] want to have no more than two licensed dispensary premises to make it a level playing field. He guaranteed that next session [the brewers] will be back. There will never be a level playing field as long as [the brewers] keep coming back every year, he concluded. MR. HACKENMILLER said the licensed beverage establishment is not allowed to give away drinks or sell drinks off-premises. Even in Version J, it says [brewers] are going to have a full beverage dispensary license, but with the exception that they are going to be allowed to sell "growlers" or off-premises beer. He asked why that is a possibility, since it is not a separation of the three-tiered system. He added that [licensed beverage establishments] are not allowed to give away drinks due to the "happy hour laws", yet [brewers] are allowed to do that [in HB 152]. He asked why that wasn't taken into consideration. MR. HACKENMILLER expressed his preference for leaving it at 75,000 [gallons]. If [a brewer] can go Outside for less money, then that is a marketing tool or a personal business decision that one has to make. Number 1447 REPRESENTATIVE ROKEBERG asked Mr. Hackenmiller whether CHARR was involved in this compromise. MR. HACKENMILLER said not with Version J. He noted that [CHARR] has two board members who are also on the BGA. He didn't remember exactly what the situation was, but believed after 150,000 gallons it had to go through a wholesaler for distribution. And if it went above 75,000 gallons, the brewpubs gave up their right to wholesale the beer. The consensus was that it would be acceptable for CHARR; however, other things - for instance, full beverage dispensary license violations - would not be. Number 1503 REPRESENTATIVE ROKEBERG asked Mr. Hackenmiller whether the BGA board members who are also in CHARR were representing CHARR. MR. HACKENMILLER responded that they were not in this last [discussion] about Version J. He said he was referring to several weeks ago when legislative issues, including this bill, were discussed in a [CHARR] board meeting. Last year, CHARR was not in support of doubling the gallons; however, a compromise was accepted that anything over 75,000 would have to be [sold] wholesale. Mr. Hackenmiller said he also remembers Chris Anderson of Anchorage last year asking why there [needed to be] any gallon limit at all. He said he was amazed that it came back at 150,000 gallons again this year, and predicted that brewpubs are going to be coming back for more. REPRESENTATIVE ROKEBERG pointed out that Version J has no cap either. He asked for verification that Mr. Hackenmiller's testimony is that CHARR was not involved today. MR. HACKENMILLER answered in the affirmative. Number 1564 REPRESENTATIVE HALCRO clarified that Mr. Brady was involved in both teleconferences, on Wednesday and Thursday. When his own staff completed the teleconference and spoke to [Mr. Brady] on the phone, he was in agreement with the decision that had been reached. Representative Halcro said Mr. Hackenmiller has been in opposition to every brewpub bill he has introduced. He asked: Is it fair for a brewpub to have to spend money to buy a beverage dispensary license that it doesn't want or need, in order to expand its business? Number 1618 MR. HACKENMILLER responded that it must be, because [brewpubs] wanted the legislation changed for it, and "we" didn't object to it. He emphasized that he has to buy the same license at the same cost, whether he has a brewpub or not. He added that it would definitely be fair. REPRESENTATIVE HALCRO asked if that is true even though [brewpub owners] have no desire to serve hard alcohol, just the beer they make. MR. HACKENMILLER said that should have been the case; however, when [brewpubs] had restaurants and eating places, that was not their intent. Rather, they wanted the beer and wine. In having a full bar, they discovered the money and effort put into a licensed premise were not in compliance with restaurant-and eating-place licenses, so it was actually cheaper for them to be a full beverage dispensary. There are all kinds of underlying points here, he said; again, it wasn't CHARR or the industry as a whole that wanted them to have full beverage dispensary licenses. That was another of the [brewer's] tools to expand, just as they are trying to do now. REPRESENTATIVE HALCRO asked Mr. Hackenmiller if it was not CHARR that insisted the provision be placed in statute that [brewpubs] must have the beverage dispensary license in order to expand. He also asked whether [CHARR] hadn't been worried about competition. Number 1670 MR. HACKENMILLER responded that some members probably were worried about competition, but as a whole, CHARR was not involved in that. He said [CHARR] was basically following [the brewer's] lead and letting them have full dispensaries. It was a give-and-take situation: They were taking the full beverage dispensary license's condition and then [CHARR], ... had to give them the gallonage." He said this is not a three-tiered system; these brewpubs are allowed to do everything that a package store and a beverage dispensary [establishment] can't do, which is one reason it isn't competitive. It basically destroys an existing system that applies to everyone else. REPRESENTATIVE ROKEBERG said he had wanted to make that point. The regulatory scheme is set up as a three-tiered system with retail, package stores, and manufacturing, patterned after the federal law. The brewpub provision allowed in the statute was under the [condition] that [brewpubs] have a beverage dispensary license. In 1995, he noted, a provision in an omnibus bill passed although nobody understood what it said, and suddenly [Alaska] had taverns and had brewing at eating-places. It took a number of years to get the system back into conformity, which is why Alaska has that system. REPRESENTATIVE ROKEBERG said part of it was that the brewpub had a cap because it was considered to be a beverage dispensary licensee. The integrity of the three-tiered system and how it is regulated is more important, he added. Number 1786 S.J. KLINE, President, Borealis Brewery Company, testified via teleconference. As a guild, he said [Borealis Brewery Company] works hard to address a lot of the concerns mentioned about Version J. He said Rod Hancock (ph) would be speaking on behalf of the BGA in support of the bill and how it addresses the issues that Mr. Hackenmiller and others have. As a model for making beer in Alaska, this bill strengthens the three-tiered system: it removes discrepancies in Alaska law that allow some people to do everything. MATT JONES, Co-Owner, Moose's Tooth, testified via teleconference. He said he was appointed by the BGA to speak on behalf of the guild. There are ten members in the BGA, he noted, and one was absent today; seven members voted in favor of HB 152, Version J, and two members voted in opposition. MR. JONES expressed that there has never been a level playing field in the brewing industry in Alaska. Brewers have always dreamed of opening a brewpub [in Alaska], and at this point they can't. They are trapped in a position and can't adjust to a changing market. House Bill 152 would allow a brewery to own a beverage dispensary license and open a brewpub, while protecting the value of the beverage dispensary licenses. The only way to become a brewpub now is to purchase a beverage dispensary license; that is how [the brewers] have grown. He said Mr. Hackenmiller is worried about eroding the value of the beverage dispensary license. He mentioned purchasing two in the last few years, however, and single-handedly driving up the price. MR. JONES explained that CHARR and ARBA are concerned that if brewpubs are allowed to bypass the provisional (indisc.) from the purchase of the beverage dispensary license, to favor the cheaper beer and wine license, the licenses will lose value. [Version J] forces a person who wants to enter the brewpub market to purchase a beverage dispensary license. Breweries that have never had a chance would now have an opportunity to enter the market. Of the people who voted "yes" today, Mr. Jones said there were at least three breweries. It is nice to see brewpubs and breweries agreeing on legislation, for the most part, he added. Number 1971 MR. JONES said there was great concern that suddenly the brewpubs would be all-powerful entities that could play on every level of the three-tiered system - which he didn't believe was true. Under HB 152 any beer that is produced and not sold, in the first few beverage dispensary licenses, must be sold through a wholesaler. He said he is satisfied with that tier of the three-tiered system. MR. JONES said [the Moose's Tooth's] distributor, Specialty Imports, is enthused because they will continue to have [the Moose's Tooth's] business. He added that HB 152 also allows brewpubs to keep growing beyond two locations with a beverage dispensary license; it provides the opportunity to keep developing locations throughout the state. At this time, a large brewery in the Lower 48 can open a brewery, for example, in Washington or Oregon, have an unlimited production cap, and come into the Alaska; it can either buy a cheap beer or wine license or buy a beverage dispensary license and open a chain of 50 brewpubs. It could produce its own beer and ship it into the state, and the in-state breweries or brewpubs would not be able to respond to that, because they would be restricted under Alaskan law. REPRESENTATIVE HALCRO asked Mr. Jones how many employees he has. MR. JONES replied 170. When asked if employees are provided with healthcare benefits, he replied, "We do, indeed." When asked how much money they spent purchasing and renovating the Denali Theater and opening the second facility, Mr. Jones replied that it will be close to $2 million; he expressed satisfaction with the way it is working out. REPRESENTATIVE ROKEBERG said he was pleased to have passed legislation two years ago that allowed [the Moose's Tooth] to do that. He asked whether [the Moose's Tooth] had worked out its problems with the ABC Board and the last legislation. MR. JONES answered in the negative, and asked whether Representative Rokeberg was referring to the "growler" issue. REPRESENTATIVE ROKEBERG replied that he was referring to the off-premises situation, the reason for the equivalent to AS 04.11.135(d) in the last bill. MR. JONES asked whether that is the section referring to the collocation or the non-collocation of the brewing facility. REPRESENTATIVE ROKEBERG answered affirmatively. Number 2128 MR. JONES said AS 04.11.135(d) dealt with it. If [Version J] becomes law, however, AS 04.11.135(d) will be moot because there will be no problem with the brewing facility and a "VDL" being collocated. CHRIS ANDERSON testified via teleconference in support of HB 152. He said "we" have members on the BGA who are also on the CHARR board, and said he is on the ARBA board. During "our" meetings, there was discussion about communicating extensively with CHARR, ARBA, and the distributors that their [knowledge] is critical to "our" success, so that they didn't feel threatened by this action. Number 2241 MR. ANDERSON said allowing other breweries in the state to participate and purchase a beverage dispensary license and do the same work that [the Moose's Tooth] is doing allows [other breweries] to enter the playing field, yet limits them to only two locations - which was critical. [The industry] didn't want a multitude of these throughout the state, he said, so "we" have limited "ourselves" by allowing ourselves to continue to grow. The leader, he said, is the Alaskan Brewing Company, with the Moose's Tooth probably number two, and the Glacier Brew House probably number three. All of the other breweries are doing less volume in total gallons, and there is a desire to see them grow. MR. ANDERSON said this compromise took a lot of time, but is a compromise with the BGA, trying in earnest to satisfy CHARR and its membership, the wholesalers, and retailers. Between the Brew House (ph) and Orso (ph), he employs about 250 people and has invested over $6 million in Anchorage; however, he is still not affected by this since he is still under the cap. Number 2305 REPRESENTATIVE ROKEBERG asked Mr. Anderson what his current volume is. MR. ANDERSON said about 60,000 [gallons], considerably under the cap; it will be another year before he is over that. Orso is not a beer restaurant, so he doesn't sell much there. REPRESENTATIVE ROKEBERG clarified that Mr. Anderson is averaging about 5,000 [gallons] a month or 60,000 a year. Number 2345 MR. ANDERSON reiterated that he is number three in Alaska behind the Alaskan Brewing Company and the Moose's Tooth. The definition of a small brewery is 65,000 barrels. The total brewing of Alaskan beer is less than 4 percent of state consumption, however, so [local brewers] are just a small part of the total beer throughout the state. In response to further questions, he said he has two premises: a brewpub and a beverage dispensary restaurant. As to whether he could sell his production directly in Orso, he said he could because he has a duplicate license, but is not doing so, nor does he intend to, because it is an Italian restaurant and he sells more fine Italian wine. REPRESENTATIVE ROKEBERG asked Mr. Anderson whether he has been before this committee on this issue, and whether the committee took corrective action. Number 2422 MR. ANDERSON emphasized that this has been an ongoing issue. However, it is the closest to a level playing field, not only allowing those that are successful to grow, but also allowing young breweries another opportunity to become more successful without impacting the three-tiered system or diminishing the beverage dispensary license. He said he hopes CHARR and ARBA would agree when they see this. REPRESENTATIVE HALCRO remarked that an opportunity will be created for some of the smaller brewers to follow in the footsteps [of those already established] and grow their businesses. There is an understanding that [the state's] biggest competitor is the Outside beer coming in at a lower price, with a greater margin for bar owners. TAPE 01-50, SIDE B Number 2452 REPRESENTATIVE ROKEBERG asked Mr. Jones what his gallon production is. MR. JONES replied that his company [produced] about 68,000 to 70,000 gallons. When asked if he also sells wholesale, he replied that between 20 to 25 percent of production goes through Specialty Import. When asked what type of a cap is realistic, Mr. Jones replied that it is difficult to guess, because [the Moose's Tooth] is opening a new addition, the Bear Tooth theater, and it is tough to guess what that consumption will be. REPRESENTATIVE ROKEBERG suggested that if [the Moose's Tooth] is under the cap now, and 25 percent is "wholesaled off," there would be 25 or 30 percent for expansion internally. Number 2384 MR. JONES said he had never heard that proposal from CHARR. The proposal he heard was that [brewpubs] could use the first 75,000 gallons in any manner desired, whether for wholesale or in-house use. If above that 75,000 gallons, the beer couldn't be sold wholesale and could only be sold in-house. REPRESENTATIVE ROKEBERG commented that he had received communication from people around the state saying [the Moose's Tooth] is going to move out of the state if it can't have a cap, or that it would be forced to move out. MR. JONES explained that [the Moose's Tooth] had a brewery built before it became a brewpub. It built it as a production facility and probably invested $1 million, and it can probably brew 1.5 million gallons. [The Moose's Tooth] became a brewpub and has the restriction now. There are five employees at the brewery, and if [the company] can't brew above 75,000 gallons, each year in mid-summer [the company] will bump up against the cap; therefore, his employees are seasonal and have to be unemployed. In facing that, nobody with a mortgage to pay is going to want to work for [the Moose's Tooth]; in that case, [the company] would have to think about moving the brewery to the Lower 48. Number 2270 MR. JONES said on the other hand, [the Moose's Tooth] could go to an existing brewery in the Lower 48, have it brew the beer, and shut down the Moose's Tooth brewing company. The Moose's Tooth and the Bear Tooth might not move, but the overall health of the entire business might suffer. REPRESENTATIVE ROKEBERG announced that he can't support the bill as it stands now, and said the testimony in large part wasn't in favor of it. REPRESENTATIVE HAYES asked Representative Halcro why he would like to move the bill today, since there are groups who are uncomfortable supporting it because they haven't had enough time to read it. REPRESENTATIVE HALCRO replied that his concerns are twofold: it is getting late [in the session], and the compromise that was "hammered out" in Version J was done over two days. He said he understands that the representatives from the Alaskan Brewing Company are on vacation and couldn't participate in the teleconference, but the bill has been scheduled. The opposition that the committee heard is from the opponents who show up every year, including the fellow from Fairbanks who is not in the business, but is a beverage dispensary holder who has opposed it every year. REPRESENTATIVE HALCRO emphasized that this is a time-sensitive issue: as expressed by Mr. Jones, come middle-to-end of summer, [the Moose's Tooth] is going to bump up against that cap, which will affect employees. This can be worked out as it goes through the process, Representative said. He added that he doesn't believe that some of the people who testified are going to be in favor of any changes. Some of the testimony expressing opposition was from very small brewers, like [brewers of] 1,000 gallons, if that. [The committee] has to look for the overall good. REPRESENTATIVE HALCRO reiterated that between Mr. Jones and Mr. Anderson, they employ almost 400 people and have invested upwards of $10 million in the economy over the last six to seven years expanding their businesses. He remarked that in reading through the public testimony on the green [questionnaire] cards, [he found that] the average person doesn't understand why government would get involved and preempt economic growth, which is his contention with the bill. REPRESENTATIVE HALCRO reiterated that the initiative passed the BGA board with a 7-2 vote, and the board passed a resolution supporting this compromise. Number 2100 REPRESENTATIVE ROKEBERG responded that the testimony today has been mixed; even people in the alleged compromise don't agree with this particular version. He said he vehemently objects to the use of the term "compromise." This bill is a huge change in [Alaska's] public policy, which basically gets rid of the concept of a brewpub and allows one to do whatever one wants. If the Moose's Tooth's problem needs to be addressed, the original bill is closer on the mark, he suggested, and this bill is highly objectionable on the part of most people in the liquor industry. It is not a compromise with the people in the business, but a compromise among a small group of brewers. Additionally, this issue has been before this committee three times in the last five years. One of the things being repealed was just put into statute two years ago by the very people who are back here trying to do something again. REPRESENTATIVE HALCRO remarked that he and Representative Rokeberg have had this discussion in private, and certain groups are no more than the "good ol' boy network" who oppose any change to protect their standing in the marketplace. He said he doesn't hear anybody from any beverage dispensary license holders making the offer to help others [on business startup and design, as was expressed by the brewers] because everybody wants to protect their "piece of the pie." Every day in this building, [the legislature] addresses legislation that passed with bad consequences, he said, and this is no different; this has stifled economic development, and some of the arbitrary caps have the possibility of affecting employment in this state, and will certainly affect growth. REPRESENTATIVE HALCRO pointed to the hundreds of questionnaires received. He said the average public expresses: Why would government limit economic development? [The state] is throwing open the doors and saying, "If you want to invest the money and take the risk - as the free market is based on - do it, but you are still under certain regulations." This is a good piece of legislation, he asserted, opposed by those who don't want any changes; it is not about compromise. He explained that when he says "compromise" he means it is a compromise among those who are willing to sit at the table. Number 1884 REPRESENTATIVE HALCRO made a motion to move the CS for HB 152, version 22-LS0354\J, Ford, 4/6/01, out of committee with individual recommendations and the attached zero fiscal note. REPRESENTATIVE ROKEBERG objected. REPRESENTATIVE MEYER asked Representative Halcro why he prefers [Version J] over the original bill. He asked if his intent is to not have the upper limit of 150,000 [gallons]. Number 1849 REPRESENTATIVE HALCRO responded that the upper limit is fine, but what the group came up with was this: instead of just raising the limit, it is a good opportunity to address the system as a whole and create a level playing field. [The group] expressed that by just raising the limit, it wasn't leveling the playing field as the bill was intended to do. REPRESENTATIVE MEYER said he was confused because he thought the goal was to raise the upper limit so [brewers] could continue to stay in business here. He asked for verification of his understanding that this levels the playing field with the other beverage [industry components] because they have to buy a full dispensary license like those for other bars. REPRESENTATIVE HALCRO explained that instead of just going in and raising the limit, it levels the entire playing field. REPRESENTATIVE ROKEBERG added that right now a provision in the liquor law prohibits a brewer from being a restaurant-eating place; it has to become a brewpub. He added that a brewery can't become a brewpub; [the product] has to be brewed on the premises. With the exception of the Snow Goose in Anchorage and the Armadillo in Juneau, there are no tavern licenses left. The bill before the committee destroys the symmetry of the regulatory scheme. It takes any requirement for the cap away from a brewpub, and allows a brewery to buy a beverage dispensary license and enter into the business of having a brewpub, which is restricted by the law now. REPRESENTATIVE MEYER asked for clarification of what the "whole industry" means. He asked if that would include ARBA, CHARR, and the BGA. REPRESENTATIVE ROKEBERG clarified that anyone who has a license to sell alcohol in the state is part of the competitive picture. He said it would also include the ABC Board, the wholesalers, and the distributors. This is a highly regulated area of business, he added. REPRESENTATIVE HALCRO said he likes to think of this bill as encouraging economic development, jobs, and further investment in the state by Alaskans. REPRESENTATIVE MEYER asked how the alcohol tax issue, which the committee will hear on Monday, would affect brewpubs. CHAIR MURKOWSKI explained that it would be the same as a tax on other malt beverages. Number 1619 A roll call vote was taken. Representatives Halcro, Meyer, Kott, Hayes, and Murkowski voted in favor of moving the bill [Version J] from committee. Representative Rokeberg voted against it. [Representative Crawford was absent for the vote.] Therefore, CSHB 152(L&C) moved from the House Labor and Commerce Standing Committee by a vote of 5-1.
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