SB 52-ALCOHOLIC BEVERAGE CONTROL; ALCOHOL REG  1:33:11 PM CHAIR REINBOLD announced that the first order of business would be SENATE BILL NO. 52, "An Act relating to alcoholic beverages; relating to the regulation of manufacturers, wholesalers, and retailers of alcoholic beverages; relating to licenses, endorsements, and permits involving alcoholic beverages; relating to common carrier approval to transport or deliver alcoholic beverages; relating to the Alcoholic Beverage Control Board; relating to offenses involving alcoholic beverages; amending Rule 17(h), Alaska Rules of Minor Offense Procedure; and providing for an effective date." 1:34:20 PM SENATOR COSTELLO moved to adopt Amendment 7, work order 31- LS0004\U.8, Bruce, 4/5/19: AMENDMENT 7  Page 6, line 13: Delete "At least 80 percent of each final product that contains" Insert "The fermentation process of all" Page 6, line 14: Delete "be manufactured" Insert "occur" Page 6, line 20: Delete "At least 80 percent of each final product that contains" Insert "The fermentation process of all" Page 6, line 21: Delete "be manufactured" Insert "occur" CHAIR REINBOLD objected for discussion purposes. 1:34:36 PM SENATOR MICCICHE said that Amendment 7 would address an issue that arose last year. He stated that AS 04.09.020 (c) contains language that defines a manufacturer in Alaska. This would clarify that any business in Alaska manufacturing alcohol must manufacture the alcoholic product in Alaska and not simply import and relabel it. Federal law currently prohibits this activity, but state law does not. This would protect small business owners since SB 52 clearly defines regulation of manufacturers in Alaska. This language seeks to to protect consumers who want to purchase locally made beverages. It would also protect the limited license system related to tasting rooms from being monopolized by large manufacturers. It would close a loophole allowing a large manufacturer that would otherwise not be allowed to sell direct to consumers, own a tasting room, or a licensed premise from creating a subsidiary company and selling the parent company's product under a subsidiary name thereby creating a "shell brewery." These large outside companies desire to take over the industry in Alaska, he said. 1:37:56 PM SENATOR COSTELLO asked whether industry has provided any negative response. SENATOR MICCICHE answered no. He said that that he worked with industry on this language and has not had any opposition. 1:38:28 PM SENATOR BIRCH asked whether anyone in Alaska brings in a barrel of Everclear grain alcohol to use as a base. He recalled his relative made cranberry liqueur using it. He asked whether Amendment 7 would prevent someone from making home liqueur as an unintended consequence. SENATOR MICCICHE related his understanding that manufacturers use local materials, but it was not possible to ferment without bringing in some products. That was the rationale for the 80 percent language, he said. He said that spruce tip, hops and Mat-Su Valley grains are used, but Alaska is limited in what it can grow due to its short growing season. 1:40:03 PM CHAIR REINBOLD expressed concern about the language, "The fermentation process of all." She asked whether this would adversely impact wineries or distilleries. SENATOR MICCICHE answered that it would not. He said this means the fermentation process must happen in Alaska. He explained that it was difficult to meet the 80 percent threshold. It would free manufacturers since it does not limit where the businesses purchase the raw materials. 1:41:25 PM LEE ELLIS, President, Brewers Guild of Alaska, Anchorage, stated that the industry asked for a language change from the 80/20 percent because it is confusing to determine. He explained that fermentation is the production of alcohol. He related that 90 percent of the product is water and the remaining percentage was malt and hops. Ingredients like berries and spruce tips would fall under the Federal Drug Administration (FDA). He said that the guild is very happy with this language. MR. ELLIS related his understanding that the distilleries retained the 80/20 language. The federal Alcohol and Tobacco Tax and Trade Bureau (TTB) and FDA regulate the ingredients that can be used, he said. He did not believe that Amendment 7 would have negative consequences since it more clearly defines who is a manufacturer. Amendment 7 was developed because a distillery brought alcohol in from the Lower 48, mixed in spices and resold it as "Alaskan made." He cautioned that if manufacturers are not regulated that issues arise in managing the three-tier system. In response to a question, he stated that he absolutely supported Amendment 1. He said he could not speak for distilleries or wineries, but it will work for breweries. He related that distilleries sometimes import wash for the distillation process, so distilleries chose to keep the 80/20 ratio. 1:44:49 PM CHAIR REINBOLD removed her objection. 1:45:18 PM SENATOR BISHOP reviewed the fiscal note from the Department of Commerce, Community and Economic Development (DCCED), Division of Corporations, Businesses, and Professional Licensing (CBPL) zero fiscal note prepared by Sara Chambers. The Office of Management and Budget (OMB) component is 2360, he said. He reviewed the fiscal analysis: SB 52 modifies the exemption from the Alaska business licensing requirement for businesses that sell only liquor to reflect the updated statutory reference. If the business sells anything in addition to liquor, they would be required to obtain an Alaska business license. There is no anticipated fiscal impact to the Division of Corporations, Business, and Professional Licensing. Business licensing fees are set per AS 43.70, and revenue in excess of authorized budgeted expenses revert to the State of Alaska general fund. 1:46:21 PM CHAIR REINBOLD asked to put on the record that she was working with the sponsor and the Department of Law. Some changes will be requested during the next committee of referral, the Senate Judiciary Committee. She noted that the Legislative Budget and Audit Division had several suggestions. She would also like to resolve winery license fees for the half dozen wineries. 1:48:56 PM ANNA BRAWLEY, Title 4 Project Review Coordinator, Senior Associate, Agnew Beck Consulting, Anchorage, echoed her thanks.   1:49:07 PM TIFFANY HALL, Executive Director, Recover Alaska, Anchorage, expressed her sincere thanks to the committee. 1:49:40 PM ERIKA MCCONNELL, Director, Alcohol and Marijuana Control Office (AMCO), Anchorage, echoed her thanks. 1:50:04 PM SENATOR BIRCH said he was supportive of passing a similar bill last year. He said thousands of hours have been put forth by the public, the industry and stakeholders. He said this bill cuts a fine balance and was a good and positive step forward. 1:51:02 PM SENATOR BISHOP asked whether this bill would raise new revenue. SENATOR MICCICHE agreed it would raise revenue, most of which would be put towards better management of alcohol sales and the impacts of alcohol in Alaska. SENATOR BISHOP asked whether the state would start recovering some of the funds from internet sales. SENATOR MICCICHE agreed that it has a positive fiscal note. He related that he began working on the bill because alcohol was about 95 percent of the adverse substance abuse problem in the state. SENATOR BISHOP thanked the sponsor and staff. CHAIR REINBOLD thanked Senator Costello for her work on the committee. 1:53:01 PM SENATOR COSTELLO moved to report SB 52, Version 31-LS0004\U, as amended, from committee with individual recommendations and attached fiscal note(s). There being no objection, the CSSB52 (L&C) was reported from the Senate Labor and Commerce Standing Committee. 1:53:25 PM At-ease.