A bill introduced on Monday at the state House of Representatives by a Democrat and a Republican from Missoula would have immense ramifications for the state's craft beer breweries.
It would allow breweries in Montana to increase their production from the current limit of 10,000 barrels a year to 60,000 barrels and still sell beer to customers on the premises.
Rep. Adam Hertz, a Republican from House District 96, and Rep. Ellie Hill Smith, a Democrat from House District 94, are co-sponsoring HB541, which was introduced Monday afternoon.
The bill would upend a tenuous alliance between The Montana Brewers Association, The Montana Tavern Association and The Montana Beer and Wine Distributors Association. Back in 1999, they agreed to a compromise that would allow breweries to sell up to 48 ounces of beer in taprooms as long as they weren’t producing more than 10,000 barrels per year.
The compromise has been refined a number of times over the years. For many years, the only brewery in the state that produced more than 10,000 was Big Sky Brewery in Missoula, which gives away samples for free in its taproom. Recently, a new Kettlehouse location in Bonner started production of what the owner has said would be about 20,000 barrels annually. That location does not have a taproom.
However, breweries like Bayern in Missoula are pushing right up against that 10,000-barrel limit and pressure has been mounting for a change in the law.
“I was part of a coalition that worked together last session to try and get something done,” Hill Smith explained. ”There are three legs to the stool – the distributors, the tavern owners and the breweries – and we could never get anything over the finish line. So this bill is not a product of any of them telling us what to do.”
Hill said she joined with her friend Hertz to talk about revising a law so that it makes sense for Montanans, not just for special interest groups.
“We are coming at this from a pure tax revenue perspective,” she said. “Breweries in Montana generate $36 million in tax revenue every year. From my perspective, this isn’t about everyone on the three legs of the stool getting what they want. This is about our ability to get our state more money, and Republicans and Democrats are coming together to do this on our own.”
Hill Smith said that she believes that government regulation is stopping breweries’ ability to make more money.
“The demand for craft beer is one of the true economic drivers in our state,” Hill Smith said. “We are limiting them for some arcane reason because of backroom deals. That train has left the station. Breweries are driving the economy now. This is not a partisan issue for us. We are listening to constituents that want to drink Big Sky beer and want to drink Kettlehouse beer. Why are we holding them back? It’s not good business.”
Hill Smith said the 60,000-barrel limit was the number recommended by the coalition she worked with last year.
John Iverson, the government affairs director for the Montana Tavern Association, said his organization would oppose the bill.
“We want to see changes happen as part of a broader compromise,” he said. “Ideally, the people that have participated under the current rules are treated fairly. If you sell the same product to the same people, you need to play by the same rules.”
Iverson said his organization is going to continue working with the Montana Brewers Association on finding an industry-wide compromise that creates a system that makes sense for everyone.
Under the current rules, taverns aren’t allowed to open brewpubs unless they use a complicated third-party system to purchase a brewers license. Breweries aren’t allowed to be open past 8 p.m., cannot serve more than 48 ounces, and cannot own a beer and wine license unless they find a third-party workaround.
“I really believe the groundwork has been laid for a successful compromise to come,” Iverson said.
Matt Leow, a spokesperson for the Montana Brewers Association, said his organization would support the bill. He said breweries in Montana provide a total economic output of $103 million, including 704 direct jobs and 1,044 indirect jobs.
“This is an important piece of legislation for economic development,” Leow said. “The current policy is just bad policy. The 10,000-barrel limit punishes success, limits growth and puts Montana breweries at a competitive disadvantage.”
Leow said breweries that increase their capacity to near the 10,000-barrel limit are faced with two less-than-appealing options.
“The first is 'don’t brew more beer' in spite of public demand for their product, which is obviously not a decision that a business owner wants to make,” Leow said. “The other option is to stop selling beer through the taproom. These are the loyal patrons that helped you to grow your business and who often relied on the taproom as a community center that took the place of a traditional public house. And now you are eliminating revenue provided through the taproom that is important for capital investments like a new canning line.”
Leow said that all breweries in his organization, both large and small, would support the bill.