State Bill Will Keep Craft Distilleries Local

And may check the plans of future distillery moguls.

At the end of last year, Washington state gained its first licensed distillery since Prohibition: Spokane-based Dry Fly Distilling. It didn't take a genius to smell a new industry on the horizon. Now that someone's finally broken the 80-proof barrier, many interested parties lie in wait to bottle the next hot spirit, like wine guru Rusty Figgins. So many people have an interest in opening a gin mill that a wee little bill concerning the creation of a new "craft distillery" license created much buzz and controversy as it passed through the state Legislature over the past few months.

House Bill 2959, which Dry Fly lobbied to get introduced, defines what a Washington craft distillery is and grants craft distilleries certain rights enjoyed by breweries and wineries—mainly the right to sell their own product and the right to provide on-site samples to customers. Right now, Washington law does not allow a distillery to sell its own product, as distilled spirits must be sold exclusively through state liquor stores. HB 2959 sailed through the House and Senate and is expected to be signed by the governor. If so, it will become law in July of this year.

The part of the bill that had people freaking out lies in the clause that requires craft distilleries to procure at least half of their raw materials from Washington state. The 51 percent requirement counts raw ingredients, not final product, or distilleries would be able to dilute neutral spirits with Washington tap water and Bob's your uncle. Any distiller that does not meet the 51 percent rule will be able to obtain a normal distillery license without the special privileges that craft distillers will enjoy.

As I talked to people in the spirits industry about the issue, two opposing viewpoints emerged. The anti-2959 side—represented by a few parties with interest in, but no paperwork filed for, distilling in Washington—sees a distillery much like a microbrewery, creating a product not necessarily bound to using local ingredients, which might restrict profits. The pro-2959 side sees the advantage of setting a different bar for Washington by treating a distillery more like a winery and tying it to a place. As Section 2, item No. 5, which was added before passing the House, reads, "Distilling is an agricultural practice."

The source-local requirement will keep the plans of some future distillery moguls in check. Even among the nation's existing microdistilleries, it's not unusual to truck in neutral grain spirits from parts faraway and from ingredients unknown to serve as a product base. This base is then flavored, à la gin, or redistilled with other ingredients to make the final spirit. Some distilleries blend a little, some quite a bit. It's the mildly dirty little secret of "craft."

At present, no one in Washington except Dry Fly is set up to manufacture neutral grain spirits, except in small quantities for fortifying wine. If HB 2959 becomes law, craft distilleries will have to make their own neutral grain spirits at least partly from Washington state grains—just like Dry Fly already does.

Word is that the state Liquor Control Board requested that this agricultural distinction be in the bill. It will surely limit any expansion of distilleries in the state, micro or otherwise. The LCB is sending a message that if it is to allow Washington state to develop a distilling industry, the board wants it to benefit the state, and in particular the farming community. This restriction will help to prevent the liquor equivalent of plane parts being machined in other countries and only put together in Washington.

As backer of this bill, and the only party affected by it at the moment, Dry Fly can count the passage of HB 2959 as its second small step for distillery-kind. Those who follow should be grateful to Dry Fly and this compromise. The LCB has heretofore been hostile toward the industry it regulates, but is showing a soft side with this accord, while no doubt smelling the tax revenues that a healthy Washington spirits industry could waft its way.

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