PROPOSED RULEMAKING
LIQUOR CONTROL BOARD
[ 40 PA. CODE CH. 3 ]
Breweries
[44 Pa.B. 7075]
[Saturday, November 8, 2014]The Liquor Control Board (Board), under the authority of section 207(i) of the Liquor Code (47 P. S. § 2-207(i)), proposed to add § 3.93 (relating to breweries).
Summary
The purpose of § 3.93 is to clarify the privileges of breweries with regard to on-premises consumption of the malt or brewed beverages (beer) produced on the licensed premises. Recent changes to the Liquor Code prompt the need for this proposed rulemaking.
Formerly, and for many years, section 440 of the Liquor Code (47 P. S. § 4-440) prohibited manufacturers from offering beer for on premises consumption:
No manufacturer shall sell any malt or brewed beverages for consumption on the premises where sold . . . nor shall any manufacturer maintain or operate within the Commonwealth any place or places other than the place or places covered by his or its license where malt or brewed beverages are sold or where orders are taken.(Emphasis added.)
The act of February 18, 1998 (P. L. 162, No. 25) (Act 25) created the brewery pub license, whereby a brewery could operate a restaurant or brewery pub on the licensed premise. See section 446(a)(2) of the act (47 P. S. § 4-446(a)(2)). When Act 25 was enacted, the only location where a brewery could sell its own beer for on-premises consumption was by obtaining a license for a brewery pub. The brewery pub was to be operated under the conditions and regulations as the Board deemed appropriate. Ultimately, those conditions were codified at § 3.92 (relating to brewery pubs).
The act of December 22, 2011 (P. L. 530, No. 113) (Act 113) triggered the need for this proposed rulemaking. Act 113 amended section 440 of the Liquor Code, allowing a brewery to permit on premises consumption: ''A manufacturer may sell malt or brewed beverages produced and owned by the manufacturer to individuals on the licensed premises for consumption on the licensed premises where sold only if it complies with the conditions and regulations placed upon holders of brewery licenses under section 446(a)(1).'' (Emphasis added.)
The reference to section 446(a)(1) of the Liquor Code is significant to this proposed rulemaking because it provides the Board with the specific authority to clarify under what circumstances a brewery may sell for on premises consumption. Section 446(a)(1) of the Liquor Code states that holders of a brewery license may ''[s]ell malt or brewed beverages produced and owned by the brewery under such conditions and regulations as the board may enforce, to individuals for consumption on the licensed premises in any container or package of any volume and to hotel, restaurant, club and public service liquor licensees.'' (Emphasis added.)
Although section 446(a)(1) of the Liquor Code now provides that breweries are permitted to offer beer for on premises consumption, they may only do so ''under such conditions and regulations as the board may enforce.'' Because the regulations do not presently address consumption on a brewery's premises in the absence of a brewery pub license, there has been confusion in the industry in this regard. The purpose of this proposed rulemaking is to provide the industry with guidance as to the lawful consumption of beer on a brewery's premises.
Affected Parties
As of September 9, 2014, there were 170 breweries with active licenses issued by the Board. Approximately 1/3 of these breweries also hold retail licenses, such as a restaurant liquor license, which allow them to sell any type of liquor or beer. Another third of these brewers also hold brewery pub licenses, which allows a brewery to sell its own beer for consumption on the brewery pub premises. Therefore, this proposed rulemaking most directly affects the final third of breweries that, without this proposed section, may not allow patrons to consume beer on the licensed premises.
In addition, the proposed rulemaking states clearly that a brewery may offer tastings, for on-premises consumption, of the malt or brewed beverages the brewery has produced on the licensed premises. This proposed rulemaking, therefore, may benefit every licensed brewery in this Commonwealth.
Paperwork Requirements
The proposed rulemaking seeks to clarify the privileges inherent with the issuance of a brewery license. Therefore, additional paperwork on behalf of a brewery licensee is not required. In fact, as a result of this proposed rulemaking, some breweries may decide to discontinue holding a brewery pub license. This decision would result in less paperwork for that brewery, as the additional brewery pub license paperwork would not need to be filed.
Fiscal Impact
The brewery industry provides a significant fiscal impact on the economy in this Commonwealth. The Brewers Association, a nonprofit organization dedica- ted to America's craft brewers, determined that small and independent American craft brewers contributed $33.9 billion to the United States economy in 2012. See www.brewersassociation.org/statistics/economic-impact-data/. That figure is calculated from the total impact of craft-brewed beer moving through the three-tier system (breweries, wholesalers and retailers) and all nonbeer products, such as food and merchandise sold by brewpubs and breweries. According to the Brewers Association, the craft brewing industry also provided more than 360,000 jobs, including 108,440 jobs at breweries and brewpubs.
In 2012, Pennsylvania ranked in the top five states (bested only by California, Texas and New York) when looking at the impact of the craft brewing industry on a state's economy. The Brewers Association calculated the economic impact of craft brewers in this Commonwealth to be $2 billion in 2012.
The proposed rulemaking would provide meaningful support to this important industry. For example, in early 2012, the Commonwealth of Virginia passed a bill allowing breweries to sell beer for on-premises consumption. In the 8 years before the passage of this bill, the number of breweries increased an average of 2.7 breweries a year. In the 2 years after the passage of the bill, the number of breweries increased by 33, for an average of 16.5 breweries a year.
The proposed rulemaking can also have a positive fiscal impact not only on the number of breweries, but also with production volumes. In 2013, states that allowed on premises consumption by breweries had greater production volumes (2.8 gallons produced per adult resident over 21 years of age) than states that do not allow on premises consumption (1/2 gallon produced per adult resident over 21 years of age).
Effective Date
This proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin.
Public Comments
Interested persons are invited to submit written comments about the proposed rulemaking to Rodrigo Diaz, Executive Deputy Chief Counsel, or Norina Blynn, Assistant Counsel, Office of Chief Counsel, Liquor Control Board, Room 401, Northwest Office Building, Harrisburg, PA 17124-0001 within 30 days after publication of this proposed rulemaking in the Pennsylvania Bulletin. Comments submitted by facsimile will not be accepted.
Public comments will be posted on the Independent Regulatory Review Commission's (IRRC) web site. Personal information will not be redacted from the public comments received.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 28, 2014, the Board submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to IRRC and to the Chairpersons of the House Liquor Control Committee and Senate Committee on Law and Justice. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of comments, recommendations or objections raised.
JOSEPH E. BRION,
ChairpersonFiscal Note: 54-80. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 40. LIQUOR
PART I. LIQUOR CONTROL BOARD
CHAPTER 3. LICENSE APPLICATIONS
Subchapter J. MALT OR BREWED BEVERAGE MANUFACTURERS § 3.93. Breweries.
(a) The holder of a brewery license may not allow patrons to consume alcohol on the licensed premises except as set forth in this section.
(b) If the holder of a brewery license has obtained a brewery pub, restaurant liquor, eating place retail dispenser or hotel license for use on the licensed premises, it may allow on-premises consumption of alcohol on the licensed premises in conformity with the requirements of the brewery pub, restaurant liquor, eating place retail dispenser or hotel license.
(c) If the holder of a brewery license has not obtained a brewery pub, restaurant liquor, eating place retail dispenser or hotel license for use on the licensed premises, it may allow on-premises consumption of alcohol on the licensed premises only under the following conditions:
(1) Consumption may occur between 10 a.m. and midnight.
(2) The only alcohol that may be consumed on the licensed premises is the malt or brewed beverages produced on the licensed premises by the brewery.
(3) There must be at least ten seats on the licensed premises for use by patrons while they are consuming alcohol.
(4) The brewery shall make food available to each patron who is consuming alcohol on the licensed premises while that person is consuming alcohol. Food must, at a minimum, consist of potato chips, pretzels and similar foods. Food may be prepared by the brewery or by a third party.
(d) The holder of a brewery license may offer tastings of malt or brewed beverages produced on the licensed premises by the brewery in accordance with §§ 13.201 and 13.211 (relating to definitions; and tasting events).
[Pa.B. Doc. No. 14-2316. Filed for public inspection November 7, 2014, 9:00 a.m.]
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