Alaska lawmakers are considering a plan to limit new brewery taprooms as part of a major reform of state alcohol laws

JUNEAU — A proposal advancing in the Alaska Legislature would reduce the number of new taprooms at breweries and distilleries, the fastest-growing sector of Alaska’s alcohol industry.

Industry officials and public health experts supporting the idea say it’s a delicate compromise necessary to reach consensus on Senate Bill 9, a 124-page bill intended to modernize the state’s alcohol laws.

Some legislators see it differently, calling it a gift to existing licensees.

“The eventual outcome, unintended or not, is that we’re setting up a monopoly,” said Sen. Donny Olson, D-Golovin.

Despite his concerns, Olson voted in favor of the bill, which is now in the state House and advancing toward a final vote. If that vote takes place and the bill is signed into law, it would have far-reaching effects on the state’s alcohol industry. Among those effects:

• For the first time, the state will license online alcohol shippers, a change sought by public health officials who believe it will clamp down on illegal shipments to the state’s “dry” towns. It would also allow the state to collect excise taxes from out-of-state shippers.

• Alaska restricts the number of alcohol businesses in a city or borough. Cities and boroughs will be able to petition the state alcohol board for more licenses than normally allowed, something sought by the Matanuska-Susitna Borough.

• The state will require the registration of beer kegs, something intended to crack down on underage drinking. If a keg is found at an underage drinking party, police will be able to cite the person who bought it.

• Public safety, health and industry officials have been frustrated by the low prosecution rate of alcohol-related misdemeanors. Many low-level alcohol crimes would become citations instead, and licensees will become partially liable. For example, if a restaurant serves alcohol to someone underage, the employer may be fined, not just the employee who served the alcohol.

• Fees for most types of licenses will increase, and some licenses will get additional privileges. Package stores will be able to hold “tasting events” and deliver alcohol to your door; bars and resorts will be able to serve alcohol at multiple counters; and breweries and distilleries can stay open until 10 p.m., can hold a limited number of live events and can allow customers to bring in board games and playing cards. (There’s still a strict serving-size limit at breweries, and customers still aren’t allowed to sit at the counter.)

• The text of the law will be simplified, making it easier to understand, and the process of applying for special event permits is easier.

“There’s so much in this bill that will help the industry,” said Sarah Oates, president and CEO of CHARR, Alaska’s leading alcohol-industry trade group.

Oates has been working on the bill in various capacities since 2012, when members of the alcohol industry began negotiating with public health and safety groups who deal with the problems caused by alcohol.

Each participant felt that Alaska’s alcohol laws, most of which dated to the 1980s, needed to be updated. For example, Alaska’s laws don’t currently address online sales. Participants also felt they needed to address the growth of brewery taprooms, which were authorized by the Legislature in 2006.

Licensing for bars vs. taprooms

What followed were years of debate, discussion and three failed attempts to pass legislation. This is the fourth.

One of the toughest sticking points has been between the established alcohol industry and the newer taprooms.

Alaska law currently allows one distillery taproom and one brewery taproom for every 3,000 people in a city, but the owners of traditional bars have argued that the taprooms are too similar to bars.

Demand for bar licenses is high, and they’re not generally available over the counter from the state, forcing new businesses to buy them from an existing holder. That artificial demand has sent prices soaring.

“I’ve heard them going for everything from a quarter million dollars to a million dollars,” said Glen Klinkhart, director of the Alaska Alcohol and Marijuana Control Office, the state regulator. Oates said the lower end of that figure is most common for bar licenses.

Licensing a taproom costs just $1,250, and in all but the smallest cities, those licenses can be bought from the state. That has bar owners worried that a profusion of taprooms could devalue their licenses.

“These local businesses have spent hundreds of thousands of dollars on licenses. It’s their retirement. It’s their future. It’s their inheritance,” Oates said.

Alcohol is the most commonly abused substance in Alaska, and public health and safety officials also expressed concerns about problems created by “an explosion” of new places serving alcohol, said Tiffany Hall, executive director of Recover Alaska.

In 2019, the brewers and others reached a compromise: Make it tougher for new taprooms in exchange for some new rights, such as later operating hours and the right to hold a limited number of live events.

Senate Bill 9 would raise the population limit for new taprooms from one per 3,000 people to one per 12,000 people. (That’s one license if your town has 0-12,000 people, two licenses if it has 12,001-24,000 residents, and so on.) The limits for other types of alcohol licenses, such as those issued to bars and package stores, will not change, and there would be no limit for the number of breweries and distilleries without taprooms.

“Is it what we would dream of? Of course not. But is it better than the world we live in now? That’s absolutely the case,” said Lee Ellis, president of the Brewers Guild of Alaska.

“It’s not necessarily something we’re supportive of, but during the compromise process, that was something that we gave,” he said.

In Cordova, one license and two applications

It remains to be seen whether the Alaska Legislature will go along with that compromise. Sen. Jesse Kiehl, D-Juneau, said he feels that breweries will now be bought into a system that limits entry.

“My worry is down the road, somebody’s going to have to buy one of these (secondhand licenses) to do business in Alaska,” he said.

Senate President Peter Micciche, R-Soldotna, is sponsoring Senate Bill 9. He said he doesn’t like the population limits either and might seek to change them in the future. But for now, he said, preserving the compromise is more important.

“Every stakeholder, every member who knows the bill knows that there’s something in the bill that they don’t absolutely love, because it’s part of a compromise. And so the tasting room discussion is one that we’re closely tracking, it’s one that we’re nervous about,” Oates said.

To understand what the new world of alcohol licensing might look like, those involved in the process suggest looking at the Prince William Sound town of Cordova.

“We’ve got fresh experience with this,” said city manager Helen Howarth.

In Cordova, two breweries filed license requests within days of each other, each planning to open taprooms, but the city only has the population for one license.

City officials asked the alcohol board whether there was any way to obtain an additional license but were told no.

To decide the issue, the state alcohol board put the names of the two prospective breweries into a hat, and AMCO director Klinkhart reached behind his back to pull out the name of No Road Brewery.

Curtis Fincher, who owns the brewery with his wife, said he was thrilled with the result and intends to display the hat and the slips on the wall of the brewery.

He’s less thrilled with the process, which saw the board ignore a recommendation from the local city council in favor of the random draw.

Brooke Stewart, who sought to open a brewery called Witch’s Brew but lost the drawing, is now considering her options, she said. She could pursue a brewpub license, but that would limit how much beer she could make.

Only eight cities or boroughs have more than 12,000 people; other cities could face choices like the one in Cordova. (Anchorage, and parts of the Mat-Su Borough outside city limits, would still have many available licenses under the new system.)

Fincher said he’s generally in favor of the compromise in the bill, but “ideally, I would see no population caps, or even much regulation on any of these industries, and I would let the market sort it out.”

‘Alcohol impacts people’s lives’

The idea of abolishing Alaska’s limited-entry alcohol system has been discussed by state lawmakers before — Alaska’s marijuana industry has no limited-entry system — but public health groups and industry officials are strongly opposed.

“Marijuana is not killing Alaskans at the incredible rate that alcohol is,” said Hall, of Recover Alaska, explaining its link to Alaska’s high rates of domestic violence and sexual assault.

There’s no comparison, she said, between the possible deregulation of alcohol and legislative action on limited-entry fishing or allowing Uber and Lyft to operate in Alaska.

“Those things may greatly impact a person’s livelihood. But alcohol impacts people’s lives. People die, people are raped and assaulted and killed. When there is an overabundance of outlets with alcohol, it’s different. It’s a different commodity,” she said.

In Cordova, manager Howarth said that if Senate Bill 9 passes, she expects the local government to wait and see how No Road Brewing performs, but if there is room for a second brewery through a petition to regulators, “absolutely, I think there would be interest in doing that.”

Stewart said she hadn’t heard of that part of Senate Bill 9, but “if I was granted that, I’d be very happy. I’d be a happy camper,” she said.

It isn’t clear how frequently the alcohol board would use its power to create new licenses. Board chairman Dana Walukiewicz, co-owner of King Street Brewing, said he isn’t willing to speculate.

“I would hope,” said Oates of CHARR, “that if the bill passes in its current form, that for most license types, (petitions) would occur only on extremely rare occasions.”

She and Walukiewicz each said Senate Bill 9 offers another alternative — a brewery could simply buy a bar-style license from the secondary market. Each of them called this new “pay to play” system a good thing, saying it allows breweries the same rights as traditional bars, if they can afford the license.

“I’m still hopeful that there’s still opportunity for more to get into the industry if they wanted to. They just might have to be a little more creative,” Walukiewicz said.

Correction: This story has been updated to correct Sarah Oates’ role at CHARR. She is the organization’s president and CEO, not its executive director.