New wine bill in Okla. makes it through committee

Journal Record, The (Oklahoma City), Mar 4, 2008 by Janice Francis-Smith

A bill allowing voters to reinstate Oklahoma wineries' ability to deal directly to restaurants and retailers in the state was approved by a legislative committee on Monday - but lawmakers hobbled the measure to ensure future changes to the legislation.

Lawmakers have created two bills to deal with the issue of direct distribution for small wineries. Senate Joint Resolution 29 would create a ballot item, asking voters to decide if wineries may sell directly to retailers and restaurants.

Senate Bill 995 would clarify certain points regarding such distribution, making sure the measure applies only to wineries that produce less than 10,000 gallons of wine per year.

Both bills were approved after their titles had been stricken, a procedural move that will likely subject the bills to yet another difficult legislative hurdle that claims dozens of bills each year: a conference committee during the final weeks of the session.

"This is a simple bill to help one of our local, fledgling industries," said state Rep. Danny Morgan, D-Prague, the House sponsor of both SJR 29 and SB 995. Oklahoma law does not require wholesalers to take on state wineries as clients, and some small wineries have had a difficult time getting a wholesaler to take on their account and make their products available for retail sale. The state is home to 55 wineries but less than 10 wholesalers.

In 2000, voters had approved a law to allow Oklahoma wineries sell their products directly to retailers and restaurants without using a wholesaler. The vote created a constitutional amendment giving special privilege to Oklahoma winemakers, as all other alcohol manufacturers are required by law to sell their products through a wholesaler. Liquor wholesalers in Oklahoma challenged the law in federal court. Judge Stephen Friot ruled the law violated federal interstate commerce law, because out-of-state wineries were not provided the same freedom to bypass the wholesaler.

The Oklahoma Legislature failed to address the problem during the 2007 session, though Judge Friot had delayed the effectiveness of the ruling to give lawmakers an opportunity to fix the law.

As presented to the House Rules committee on Monday, SJR 29 would allow wineries both in Oklahoma and other states to sell directly to retailers and restaurants, in keeping with limitations as prescribed by the Legislature.

SB 995 stipulates that only wineries producing 10,000 gallons of wine per year would be allowed to bypass the wholesaler. Morgan agreed with state Rep. Joe Dorman, D-Rush Springs, who argued the state constitution should provide general guidelines for state law, but the details of the measure should be addressed with legislation that may be modified in future years without requiring another vote of the people.

Five of Oklahoma's 55 wineries are large enough to produce more than 10,000 gallons of wine per year, said Oklahoma Grape Growers and Wine Makers Association President Andrew Snyder. About 10 wineries produce between 5,000 gallons and 10,000 gallons, he said.

Wineries making more than 10,000 gallons per year would need to use a wholesaler anyway, said Morgan, as the size of the operation would make self-distribution impractical. The bill does not expand access to alcohol in any way, said Snyder, but allows Oklahoma wineries to compete for shelf space in the state's existing liquor stores.

Brad Naifeh of Central Liquor cautioned lawmakers against the bill. Some large winemakers from other states, such as California's E&J Gallo, sell wines under hundreds of labels that produce less than 5,000 gallons per year, said Naifeh, and could use the proposed law to flood the market in Oklahoma without using a wholesaler.

Morgan said the bill requires both in-state and out-of-state wineries who sell directly to retailers in Oklahoma to transport their wines in vehicles owned by the winery, and requires such deliveries to be transferred directly from the winery to the retailer. Such vehicles must obtain the necessary licensure and permits from the Oklahoma Alcoholic Beverage Laws Enforcement agency. Morgan questioned if it would be cost-effective for an out- of-state winery to drive a few thousand gallons of wine all the way to Oklahoma.

Both measures were approved by the committee, though some lawmakers voting to advance the bill said they expected further changes to be made before the bills would receive final approval.