Competing Craft Beer Bills Get Hearing At Montana Legislature

Two very different ideas were presented to the Montana House Business and Labor Committee this morning in a lengthy, civil hearing that drew tavern owners, brewers, barley growers, consumers and other industry members from around the state.

The hearing on HB 616, the so-called “brewery killing bill,” sponsored by Rep. Roger Hagen, started out with a lengthy history lesson on alcohol regulation in Montana.  Rep. Hagen sought to set the stage to demonstrate how his bill furthered both the goals of Montana’s licensing system and the specific intent of the “sample room” provisions added into the law in 1985 and 1999.  It was a good summary as far as it went, but left out some important counter-points.

Rep. Hagen argued the 1999 legislature believed they were approving small sample rooms, but unfortunately crafted such permission without any “sideboards.”  Thus HB 616 is an attempt to add those sideboards to ensure the sample rooms return to what they were intended to be and “put the onus on the breweries to market their products in ways other than selling on-premise.”

Of particular interest was Rep. Hagan’s attempt to portray the brewers and distributors as refusing to participate in discussions, thus forcing him to work with independent breweries who were not associated with the Montana Brewers Association.

The chairman of the committee provided proponents and opponents each with 45 minutes for testimony.  Up first for proponents was John Iverson of the Montana Tavern Association.  Mr. Iverson argued the bill has nothing to do with brewing beer, just the manner in which it is marketed.  He also suggested it is a “compromise bill” while simultaneously acknowledging the MBA and Montana Beer and Wine Distributors Association (MBWDA) do not support it. 

As for the substance of their argument, Mr. Iverson explained how, in the MTA’s view, the best way to allow breweries to have flexibility in the hours they may be open, the amount they may sell and related retail decisions is to permit them to purchase retail licenses as provided in the bill.  That’s certainly true in the abstract, but does not address the spin off effects of the chosen scheme.

In a move that had been the subject of rumors, Neal Leathers, co-owner of Big Sky Brewing Co., testified in favor of the bill, explaining how Big Sky is the only brewery in Montana that cannot sell beer for on-premise consumption in a tap room because they exceed the 10,000 bbl cap for such rights.*  Rather, they can only give it away, which they do to the tune of 40 kegs a month.  (HB 616 would only benefit Big Sky if it includes an amendment to the introduced version proposed by the MTA to specifically help Big Sky out.)

Twenty five others also spoke in favor of the bill, all of whom were tavern owners or representatives of the gaming and restaurant associations.

Up first for the opponents was Tony Herbert, Executive Director of the Montana Brewers Association, who handed in written testimony from a variety of breweries who were unable to attend.  He provided perhaps the best line of the day, noting “there are many ways to skin a cat, we just don’t like being the cat.”  Mr. Herbert argued the bill would create significant barriers for new breweries to enter the market, thus harming the growth of one of the most value added products in the State.

Mr. Herbert also ran through a list of requests the MBA has made in response to the bill and prior discussions – the possibility of a new brewpub license, more reasonable pricing for retail licenses,  and extending the proposed license privileges to future breweries – and in each instance was told “no.” He also pointed out that once the breweries are forced to distribute, it is largely the tavern owners who decide whether the product gets a chance to succeed in the market.

Kristy Blazer, representing the MBWDA spoke in opposition to the bill on the basis that it would destroy the three-tier system and create legal challenges.  She introduced an expert to speak to potential legal issues with the bill.  As lawyers often do, he made some decent points, but took far too long to get there.**  While the MBWDA joined the brewers in opposing the bill, it’s also clear they aren’t exactly in favor of expanded rights for breweries, either.

Nineteen others spoke in opposition to the bill including Kelley Christensen (Desert Mountain Brewing), Matt Muth (406 Brewing), Brian Smith (Blackfoot River Brewing), Michael Ulrich (Carter’s Brewery), David Breck (Bridger Brewing), and Rob Jarvis (Philipsburg Brewing).  Distributors from Missoula, Butte, Billings and Great Falls spoke against the bill as did two barley growers, a tavern owner in Philipsburg, and several unaffiliated “consumers.”

Questions from the Committee gave no particular indication which way the vote might go, though softball questions were lobbed at both supporters and opponents of the bill.  Representative McNivin – cautioning that HJ 18 would be like casting their lots into the hands of others – asked the lobbyists from the MTA, MBA and MBWDA to explain their appetite for spending two years studying the issues should HB 616 fail and HJ 18 pass.

Mr. Iverson said the MTA believes the study will only identify issues everyone already knows about and would only result in a bill that half the people don’t like.  Mr. Herbert and Ms. Blazer countered that the study bill would allow time for discussion and potential compromise.

Rep. Hagan took full advantage of his opportunity to close the proceedings, pulling a bit of a classless move.  With no opportunity for anyone else to comment, he presented a short video apparently shot from a cell phone from the second floor at Lewis and Clark Brewing Co.  The video showed a big crowd enjoying some loud, live music.  With a denigrating tone, he asked a series of rhetorical questions in which he wondered what the parking was like around the building and wondered who was counting the three pint limit. There was no mistaking what he left unsaid.

He also recounted a story about visiting several breweries in Colorado and noted none of them had “sample rooms,” but instead had fully licensed bars.  He neglected to tell the Committee, however, that Colorado does not have a quota system for retail licenses (and last I checked, a tavern license in CO will run you about $500 with a $1,000 application fee). 

In contrast to HB 616, House Joint Resolution 18 had a relatively short hearing.  The bill would create an interim study committee to conduct a thorough examination of Montana’s alcohol laws to “identify recommendations to streamline, improve, and update the alcohol licensing system and regulation in the state to meet the needs of the public, including safety, industry, agriculture, tourism, and the state’s economy.” The sponsor, Representative Christy Clark, called it a simple study bill to bring all the players around the table.  She argued the State needs to nurture the growing brewing industry and HJ 18 would allow time to be careful doing it.

Thirteen proponents spoke, including Neil Leathers from Big Sky Brewing.  Two distillery owners spoke, a smart move on their part to actively join the bigger conversation about alcohol laws.  The distributors asked for an amendment to ensure the discussion was not too focused on the manufacturing side. The Montana Department of Revenue also directly supported the bill.

Opposing HJ 18 were the MTA and the gaming and restaurant associations, all of whom nevertheless want to take part should the bill pass. 

Action on both bills could come as early as tomorrow at the Committee’s next meeting at 8:30 am.

For all our articles pertaining to the 2013 Montana Legislature, click here.
* Incidentally, prior to the session, the big three brewers in Missoula turned down an offer to help build a coalition around raising the cap.

** Although his dormant commerce clause argument seems to have an obvious problem.  (Threw that comment in there for the beer/lawyer geeks out there.)