TWO HARBORS, MINN. – Cream ale coursed through a drain on the floor as Castle Danger Brewery emptied yet another keg of its most popular beer that expired during COVID-19 shutdowns.

"That's just sad," said Rep. Jim Nash, R-Waconia, as he watched the golden liquid flow.

He and two other lawmakers visited the Two Harbors taproom on Friday to hear a plea from the state's largest breweries, who are again asking the Legislature to let them sell growlers.

Breweries that produce more than 20,000 barrels of beer in a year are prohibited from selling the to-go containers under state law. Lon Larson, co-owner of Castle Danger, said this rule forced layoffs and waste when COVID-19 caused his taproom to close for months. The brewery has dumped 920 kegs since March.

Five Minnesota breweries — Schell's, Summit, Surly, Fulton and Castle Danger — have surpassed the 20,000 barrel production mark. Others, like Lift Bridge Brewing Co. in Stillwater and Indeed Brewing Co. in Minneapolis, are nearing the milestone.

Those breweries minus Sum­mit recently got together to form the Alliance of Minnesota Craft Breweries, and a "free the growler" campaign to argue that the state's cap penalizes businesses for growing. Jim Diley, Fulton Beer co-founder, said he believes Minnesota's largest breweries are the only ones in the country prohibited by state law from selling off-sale beer.

"If we were a bakery, you would think it was crazy that you couldn't take a great doughnut home and you had to go to the grocery store to get it," he said.

In 2013, lawmakers raised the growler cap from 3,500 barrels to 20,000. The limit was part of legislation to protect Minnesota's three-tiered liquor system, which regulates the relationship between the three separate arms of the state's industry — producers, distributors and retailers.

Distributors and retailers have previously lobbied against efforts to raise or remove the growler cap, arguing that a change would benefit big producers at the expense of small restaurants, bars, liquor stores and wholesalers.

"Everyone involved in the hospitality industry — restaurants, bars, breweries and more — is hurting due to COVID-related restrictions and shutdowns," Tony Chesak, executive director of the Minnesota Licensed Beverage Association, said in a statement. "We hope legislators focus on continued relief packages for all small businesses in the industry."

Michael Madigan, president of the Minnesota Beer Wholesalers Association, said in a statement that large breweries "have experienced a substantial increase in sales due to increased demand of their packaged products."

"They do not need any further competitive advantages to the detriment of the restaurants, bars and other industry members who have been devastated by the pandemic," Madigan said.

Larson said that while it's true Castle Danger sales in liquor stores have increased during the pandemic, that revenue has not been nearly enough to offset the hit to the brewery's sales to restaurants and bars, which make up more than 60% of business.

At the Two Harbors taproom Friday, Sen. Sandy Pappas, DFL-St. Paul, Sen. John Jasinski, R-Faribault, and Nash said they planned to help introduce bills to remove the growler cap next week.

Efforts to change or remove the cap in past years have died in legislative committees. House Commerce Chair Zack Stephenson, DFL-Coon Rapids, said Friday that he is "encouraging all of the stakeholders to work together and come up with a solution that is broadly acceptable" as the committee prioritizes a response to the COVID-19 economic crisis and the state's budget deficit.

Senate Commerce Committee Chairman Gary Dahms, R-Redwood Falls, has objected to pushes to raise the growler cap in 2019 and 2020.

"My position remains that I encourage them to sit down with all the other affected industries and reach a negotiated compromise before asking us to pick winners and losers," Dahms said in a statement Friday.

Last year the Legislature approved other measures aimed at helping the struggling hospitality industry during pandemic-fueled shutdowns. Lawmakers passed a bill that temporarily allowed restaurants to sell beer and wine with takeout food orders, and there have been pushes to allow the sale of cocktails to-go. The Minnesota Craft Beverage Council — a coalition of breweries, cideries, distilleries and wineries — is leading a charge to make these rules permanent and calling for the loosening of other state regulations.

However, changes to Minnesota's liquor laws have historically been slow and controversial; many laws have not been altered in decades.

"I think COVID has been really eye-opening to see just how fragile the hospitality industry is," said Lauren Bennett McGinty, executive director of the Minnesota Craft Brewers Guild. "I think we all found out we have a lot more in common."

Katie Galioto • 612-673-4478