Creep, and the Montana Legislature’s Approach to Beer

HB 541 is a simple bill. It would raise the production limits to allow Montana’s breweries that produce up to 60,000 bbl/year to sell beer in an on-premise taproom. The cutoff is currently 10,000 bbl.

The net effect? Big Sky Brewing Co., Montana’s largest and most recognized, could finally sell beer for consumption in its taproom. Big Sky has given away at least $4,000,000 of beer in the past 10 years thanks to the current law. Which also means the State has missed out on tax revenue from that beer.

Bayern Brewing Co. could begin producing more beer, but not have to give up its taproom. Over the next five years or so, a few more of Montana’s 70 breweries could probably do the same.

That’s the net effect.

The Montana House of Representatives realized this, passing the bill by a massive margin, 85-14. Yet, the bill remains in limbo in the Senate. Why?

Creep.

Creep is a nebulous concept depending upon which side of a bill you’re on. In this case, it is the Montana Tavern Association’s most common argument against any bill that might benefit the burgeoning craft beer industry.

Creep in this context is defined more or less like this: You can’t let the brewers have this bill because they’ll just keep coming back and asking for more.

As if that’s a bad thing. Major change is rare in any legislature. No matter the subject, incremental change is much more common.

Yet, major change appears to be what the Legislature is seeking.

Solely because the House of Representatives Passed HB 541, the MTA responded by having a hastily drafted license stacking bill introduced in the Senate, SB 356. The bill would allow existing taverns to also operate an onsite brewery or distillery.

The sponsor of the bill is Senator Ed Buttrey, (R) Great Falls, an owner of two liquor licenses and the chairman of the committee hearing HB 541.

Both bills received a hearing last week in the Senate Business, Labor and Economic Affairs Committee.

The MTA claims SB 356 is not a stacking bill, a version of which was introduced as a “coalition bill” during the 2015 Legislature. Technically they’re right. The license stacking bill would allow someone to own both a brewery license and a retail license.

SB 356, in contrast, would allow someone owning a beer/wine retail license to obtain a “brewery endorsement” to allow them to produce beer onsite. Brewers who wish to stay open later and sell more beer would have to buy a retail license, add a “brewpub” endorsement, and give up their brewery license. So yes, it isn’t stacking, but anyone familiar with recent legislative history will recognize it as the same thing.

The MTA presented two arguments in favor of SB 356 – it would level the playing field by allowing taverns to have the same privileges as breweries and distilleries; and it is just like numerous other states which have created licenses for brewpubs.

In reality, it does neither.

Brewpubs in other states are wholly separate beings from taverns and breweries. They are a third type of license, not an “endorsement” on a tavern/retail license. None have the level of manufacturing and retail privileges that SB 356 would create.

This significant expansion of privileges has the Montana Beer and Wine Distributor’s Association heavily opposed to SB 356. Creep, Kristi Blazer, Executive Director of the MBWDA, explained at last week’s hearing, is a normal part of the legislative process. Tearing at the fabric of the three-tiered system of alcohol is not.

As for leveling the playing field, the MTA’s argument is one of the biggest fallacies repeated by the organization at every hearing.  Breweries, they say, have gobs of extra cash to put toward marketing, facilities, and other means of unfair competition, because they did not have to buy a retail license.

What the MTA consistently fails to acknowledge, however, is there is no level playing field among even the tavern owners’ own members.  Taverns which purchased alcohol licenses for $400 compete next door to taverns which purchased alcohol licenses for $750,000.

Then there’s the “compromise” – that 1999 deal between the brewers (which numbered in the single digits then), tavern owners, and distributors, to allow breweries to sell pints for on-premise consumption. Heaven forbid the industry which now contributes more than $103 million annually to the economy with 1,044 jobs, 704 of them direct jobs (based on 2015 numbers), seek legislation to help it continue to grow because they made a “deal” in 1999.

Remember 1999? We were still rewinding VHS tapes before rushing them back to Blockbuster to avoid late fees. We’d plug our ears to block the screech of a dial-up modem connecting to AOL.  “Is that your final answer?” was the hottest question on television. MTV still had music videos.

At Monday’s executive session, the Senate Business, Labor and Economic Affairs Committee held a vote on SB 356.  During discussion, Senator Tom Facey, (D) Missoula, explained he would not support the bill because it represented a continued entrenchment of Montana’s quota system for alcohol licenses.

He’s right. As Senator Buttrey has explained during and outside of hearings, the main purpose of SB 356 is to force brewers to purchase a retail license (primarily from an existing tavern, since most populated areas are over quota) if they want any more privileges than they already have.

The most scathing testimony for the current tenor of the alcohol licensing debate was delivered by Senator Dee Brown, (R)  Hungry Horse.  Sen. Brown angrily stated she was tired of the continuing parade of alcohol bills to come before the legislature only to ignore the proverbial elephant in the room, the quota system. She practically begged someone to bring forward a bill to fairly compensate existing alcohol license holders so Montana can end the quota system and stop having these fights.

What happened to HB 541, the bill to lift production limits on Montana breweries?  It is being held hostage. During today’s executive action Sen. Buttrey explained he would support HB 541 if the committee also passed SB 356 – his bill to create a “brewpub” license unlike any in the U.S.

The motion to approve HB 356 resulted in a 5-5 vote, just enough to keep it alive while more arm twisting continues behind the scenes.  HB 541 was not discussed.

During last week’s hearing, the MTA released a new argument in support of their un-level playing field accusations.  Apparently, taverns are losing business to breweries. Thus, the MTA claims, the legislature needs to protect them by approving the “brewpub bill.”

Consumers vote with their wallet. Shouldn’t we be focusing our resources on legislative changes that support growth industries?  In reality, both taverns and breweries that focus on current consumer demand are doing well, not withstanding perceived legislative disparities.

As noted by Sen. Brown, we’re past due for eliminating the legislative fights created by the current quota system. Finding a fair way to end that system is an increasing priority for the Legislature and a result that would benefit those who matter most, the consumers who drive the industry.

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2 thoughts on “Creep, and the Montana Legislature’s Approach to Beer

  1. The second elephant in the room, that’s never really mentioned is that the Tavern owners created their own problem. The “inequity” between the cost of licenses happened because they created a false economy when they inflated the price of their liscenses upon selling them. They bought it for $400 form the state, they never should’ve sold it for $750k. It was never the breweries problem and it shouldn’t be everyone else’s problem.

    • The Montana Tavern Association needs new leadership. My equipment costs make their license costs look like a parking ticket. The Quota System and inflated license costs can all be directly attributed to gaming begin attached to liquor. The taverns are losing business? That’s because folks don’t want to drink beer in a video game parlor. The quota insulates bad businesses and the bad business people who run them. If they can’t compete, they should sell their license to somebody who can_

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