RULES AND REGULATIONS
Title 40—LIQUOR
LIQUOR CONTROL BOARD
[ 40 PA. CODE CH. 3 ]
Breweries
[45 Pa.B. 2594]
[Saturday, May 30, 2015]The Liquor Control Board (Board), under the authority of sections 207(i) and 446(a)(1) of the Liquor Code (47 P. S. §§ 2-207(i) and 4-446(a)(1)), adds § 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 and owned by the brewery. Recent changes to the Liquor Code (47 P. S. §§ 1-101—10-1001) prompt the need for this final-form 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 Liquor Code. 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 in § 3.92 (relating to brewery pubs).
The act of December 22, 2011 (P. L. 530, No. 113) (Act 113) triggered the need for this final-form 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 final-form 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 did not 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 final-form rulemaking is to provide the industry with guidance as to the lawful consumption of beer on a brewery's premises.
Affected Parties
As of January 15, 2015, there were 169 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 1/3 of these brewers also hold brewery pub licenses, which allow a brewery to sell its own beer for consumption on the brewery pub premises. Therefore, this final-form rulemaking most directly affects the final 1/3 of breweries that, without this final-form rulemaking, may not allow patrons to consume beer on the licensed premises.
In addition, in response to comments received from the Brewers of Pennsylvania and the Independent Regulatory Review Commission (IRRC), this final-form rulemaking states clearly that a brewery may offer tastings, for on-premises consumption, of the malt or brewed beverages the brewery has produced and is owned by the brewery. This final-form rulemaking, therefore, may benefit every licensed brewery in this Commonwealth.
Paperwork Requirements
The final-form 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 final-form 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 dedicated to America's craft brewers, determined that small and inde- pendent American craft brewers contributed $33.9 bil- lion 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, this Commonwealth 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 final-form rulemaking provides 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 final-form 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 final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.
Contact Person
Comments should be addressed to Rodrigo J. 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.
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 the notice of proposed rulemaking, published at 44 Pa.B. 7075 (November 8, 2014), to IRRC and the Chairpersons of the House Liquor Control Committee and Senate Committee on Law and Justice for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the House and Senate Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the House and Senate Committees and the public. The Board received a comment from The Brewers of Pennsylvania and a comment from IRRC, the responses to which are set forth in a separate document.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on April 15, 2015, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on April 16, 2015, and approved the final-form rulemaking.
Findings
The Board finds that:
(1) Public notice of intention to adopt the administrative amendments adopted by this order has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The amendments to the Board's regulations in the manner provided in this order are necessary and appropriate for the administration of the Liquor Code.
(3) The revisions that were made to this final-form rulemaking do not enlarge the purpose of the proposed rulemaking published at 44 Pa.B. 7075.
Order
The Board, acting under the authorizing statute, orders that:
(a) The regulations of the Board, 40 Pa. Code Chapter 3, are amended by adding § 3.93 to read as set forth in Annex A.
(b) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(c) This order shall become effective upon publication in the Pennsylvania Bulletin.
TIM HOLDEN,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 45 Pa.B. 2218 (May 2, 2015).)
Fiscal Note: Fiscal Note 54-80 remains valid for the final adoption of the subject regulation.
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 and owned by the brewery.
(3) The brewery must have 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 and owned by the brewery in accordance with §§ 13.201 and 13.211 (relating to definitions; and tasting events).
[Pa.B. Doc. No. 15-998. Filed for public inspection May 29, 2015, 9:00 a.m.]
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