The Alberta government argued for the constitutionality of its craft beer program in court Tuesday following legal challenges by out-of-province breweries.

Toronto-based Steam Whistle Brewing and Saskatoon-based Great Western Brewing Co. say the system, which charges all small breweries $1.25 per litre sold but returns much of that to Alberta producers in the form of a grant, effectively provides an unconstitutional trade barrier.

The current program in Alberta replaced an earlier markup on breweries that only applied to provinces east of Saskatchewan, which was abandoned after Steam Whistle secured an injunction against the old system in January 2016.

Lawyer Sean McDonough defended the government's position at the Court of Queen's Bench in Calgary, arguing the markup is not a tax, and that the Alberta government has the right to support its small breweries.

"Alberta wanted to have a single markup to address perceived trade risks. Alberta also wanted to support small brewers, like all provinces do."

He said many provinces help their small brewery industries through tax rebates, direct grants, and preferential treatment in government-run retail stores, with Alberta simply doing the same.

'Separate measures aimed at different purposes'

Lawyers for the plaintiffs have argued the new system is simply an attempt to hide Alberta's efforts of continuing with the old preferential system, with the grant making up for the markup.

McDonough said, however, that changing the markup system was done to address trade issues, while the rebate was done separately to help breweries, and that either rate could change independently of each other.

"The measures were introduced at the same time, and taken in contemplation of one another, but they're separate measures aimed at different purposes."

Great Western Brewing president Michael Micovcin said he sees the two measures as clearly linked, and that Alberta had the option of other ways to support breweries without so directly hurting out-of-province breweries.

Beer prices 'significantly higher' in Alberta

An internal trade panel ruled in August much the same, concluding that Alberta's program discriminates against out-of-province beer products.

The panel gave Alberta six months to change the program, but the province is appealing the decision.

Micovcin said the change in policy has meant a big hit in one of the brewery's biggest markets.

"It's been devastating. We've lost close to a third of our sales in Alberta. It's not a competitive playing field any longer."

Micovcin said it hasn't been great for beer drinkers in the province either.

"Overall beer prices are actually significantly higher in Alberta as a result of the change in policy. So it's obviously not good for us, but it hasn't been good for the Alberta consumer."