Arizona brewery-expansion bill advances

Arizona lawmakers easily approved a bill late Wednesday allowing for expanded production at breweries, sending it to Gov. Doug Ducey for consideration.

The bill, which passed 59-0 in the House of Representatives, is supported by the Arizona Craft Brewers Guild, which contends that the nearly 60 microbreweries in the state should be allowed to maintain restaurants and bars even if they exceed the current cap on beer production.

The guild members said they are punished for success because once they reach a certain production cap, the law prevents them from owning restaurants and bars, even if those establishments are the foundation of their success. The production cap is preventing some breweries, such as Four Peaks in Tempe, from expanding, members testified in hearings on the bill.

Senate Bill 1030 was held up earlier this year as opponents in the liquor, beer and wine distribution business raised concerns, but an amendment addressed those concerns and got the bill moving again earlier this month. Some distributors, such as Hensley Beverage Co., supported the craft brewers all along. The bill gained final passage in the Senate on a 28-1 vote earlier this month.

The bill's sponsor is Sen. Kelli Ward, R-Lake Havasu City.

Under a three-tier system that dates back to the end of Prohibition, a company only can be a producer, distributor, or retailer of beer in the state, and can't do business as more than one of those.

In 1987, Arizona passed special rules to allow small brewers to make and sell beer at their restaurants and bars. That allows them to act as a producer and retailer, with no distributor.

If signed into law, SB1030 would allow microbreweries to produce as much as 200,000 barrels of beer annually among multiple locations. Currently, the cap is 40,000 barrels a year. A barrel is 31 gallons, or two full-size kegs.

Under current law, brewers who make more than 40,000 barrels of beer a year are not allowed to run restaurants. Arizona brewers making less than 40,000 barrels of beer a year now also get special privileges, such as being allowed to "self-distribute" beer to a second location themselves without a distributor. Current law also allows them to self-distribute 3,000 barrels of beer a year to other retailers.

Under the amended bill, a brewer would have to give up those self-distribution rights once it exceeds 40,000 barrels, except for its on-site retail sales. Brewers also could not expand to any new retail locations once exceeding 40,000 barrels.