BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Senator Isadore Hall, III
                                        Chair
                                2015 - 2016  Regular 

          Bill No:           AB 1554          Hearing Date:    6/14/2016
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          |Author:    |Irwin et, al.                                        |
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          |Version:   |4/25/2016    Amended                                 |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Felipe Lopez                                         |
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          SUBJECT: Powdered alcohol


            DIGEST:    This bill would prohibit the Department of Alcoholic  
          Beverage Control (ABC) from issuing a license to manufacture,  
          distribute, or sell powdered alcohol, as defined. 

          ANALYSIS:
          
          Existing law:
          
          1)Federal Law grants states the authority to establish alcoholic  
            beverage laws and administrative structures to regulate the  
            sale and distribution of alcoholic beverages.

          2)Establishes the Alcoholic Beverage Control Act (Act) which  
            contains various provisions regulating the application for,  
            the issuance of, the suspension of, and the conditions imposed  
            upon, alcoholic beverage licenses by ABC. 

          3)Imposes regulations on the sale of alcoholic beverages and  
            creates penalties for violations of those regulations.

          4)Grants ABC exclusive authority to administer the provisions of  
            the Act. 

          5)Establishes three types of alcoholic beverages for tax  
            purposes, namely, distilled spirits, beer and wine. 








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          6)Prohibits the use in any advertisement of alcoholic beverages,  
            of any subject matter, language or slogans addressed to and  
            intended to encourage minors to drink alcoholic beverages. 

          This bill:

          1)Prohibits ABC from issuing a license to manufacture,  
            distribute, or sell powdered alcohol. 

          2)Defines "powdered alcohol" to mean an alcohol prepared or sold  
            in a powder or crystalline form that is used for human  
            consumption in that form or reconstituted as an alcoholic  
            beverage when mixed with water or any other liquid. 

          3)Requires that ABC revoke or suspend any license if the  
            licensee or the agent or employee of the licensee  
            manufacturers, distributes, or offers for retail sale powdered  
            alcohol. 

          4)Prohibits the possession, purchase, sell, offer for sale,  
            distribution, manufacture, or use of powdered alcohol. 

          5)Specifies that any person who sells, offers for sale,  
            manufacturers, or distributes powdered alcohol is guilty of an  
            infraction that shall be punishable by a fine of not more than  
            $500. 

          6)Specifies that any person who possesses, purchases, or uses  
            powdered alcohol is guilty of an infraction and subject to a  
            fine of $125.

          Background

          Purpose of the bill.  According to the author, "powdered alcohol  
          provides everyone, but especially children, a new way to drink  
          and experiment with alcohol.  The odorless, easily concealable  
          white powder can turn any water bottle into vodka, or increase  
          liquor's alcohol content to higher and dangerous levels.  With  
          the risks and harms traditional liquid alcohol already present  
          to children, allowing another path to those distressing outcomes  
          is unacceptable."

          Powdered alcohol.  As the name suggests, powdered alcohol is  
          powder that when mixed with water or any other liquid becomes an  
          alcoholic beverage.  Small amounts of liquid alcohol are  








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          enclosed in cyclodextrins, which are literally small rings of  
          sugar.  Once water or any other liquid is added the sugar  
          dissolves and the alcohol is freed into the drink.  Powdered  
          alcohol gained media attention in the United States when in  
          April 2014 the U.S. Alcohol and Tobacco Tax and Trade Bureau  
          (TTB) approved labels for a product called Palcohol.  

          Proponents of powdered alcohol have touted its light weight and  
          its ease to transport as some of the benefits of powdered  
          alcohol compared to liquid alcohol.  
          Critics of powdered alcohol argue that powdered alcohol will be  
          much easier to over consume, conceal and be acquired by minors.   
          Critics point to the ability to add powdered alcohol to liquid  
          alcohol to produce a greater concentration than intended.  In  
          addition, critics point to the ease in which people, including  
          youths, could bring alcohol to places where it is banned; such  
          as sporting events, movie theaters, parks, and schools. 

          Powdered Alcohol Authorization.  Though the TTB approved the  
          Palcohol labels in April of 2014, within two weeks the TTB  
          issued a statement stating that the approval had been issued in  
          error.  However in March 2015, the TTB again approved four  
          powdered alcohol products with the brand name "Palcohol" for  
          sale in the U.S.  

          Shortly after TTB approval, the U. S. Food and Drug  
          Administration (FDA) responded to inaccurate reports that  
          implied that the FDA had approved powdered alcohol as being  
          safe.  Rather, the FDA clarified that its role was to evaluate  
          the nonalcoholic ingredients.  Based on that evaluation, the FDA  
          stated that "the use of ingredients in the proposed products was  
          in compliance with FDA's regulations.  The agency notes that the  
          ingredients used in the products are typical of ingredients  
          found in many processed foods."  The FDA concluded that they had  
          no legal basis to block their entry into the U.S. market. 

          However, individual states, not the TTB, are responsible for  
          regulating the sale of alcohol and tobacco products at the  
          retail level, including sales to minors.  As of November 2015,  
          27 states have banned powdered alcohol outright.  Two states,  
          Maryland and Minnesota have a one year temporary statutory ban.   
          Three states, Colorado, Delaware, and New Mexico have added  
          powdered alcohol in their statutory definitions of alcohol so  
          that the product can be regulated under existing alcohol  
          regulations.  








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          As of today, powdered alcohol is not being sold anywhere in the  
          United States, though the Palcohol website does state that the  
          product will be available, "as soon as we can."

          Prior/Related Legislation
          
          SB 819 (Huff, 2016) prohibits ABC from issuing a license to  
          manufacture, distribute, or sell powdered alcohol, as defined,  
          and requires ABC to revoke the license of any licensee who  
          manufactures, distributes, or sells powdered alcohol, as  
          provided.  (Pending in Assembly Appropriations Committee)

          SB 39 (Padilla, Chapter 140, Statutes of 2011) prohibited the  
          importation, production, manufacture, distribution, or sale of  
          beer to which caffeine has been directly added as a separate  
          ingredient at retail locations in California, as defined.

          AB 1598 (Beall, 2010) would have prohibited the sale,  
          production, importation, manufacture or distribution of a  
          caffeinated malted beverage, as defined.  (Failed passage in  
          Assembly Governmental Organization Committee)

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          Yes


            SUPPORT:  

          Alcohol Justice (Co-Source)
          Health Officer's Association of California (Co-Source)
          McGeorge Legislative & Public Policy Clinic (Co-Source)
          Alameda County Board of Supervisors
          Alcohol Policy Panel of San Diego County
          Association of California Healthcare Districts
          Association for Los Angeles Deputy Sheriffs
          California Alcohol Policy Alliance
          California Association of Code Enforcement Officers
          California Beer and Beverage Distributors
          California College and University Police Chiefs Association
          California Consortium of Addiction Programs and Professionals 
          California Council on Alcohol Problems
          California District Attorneys Association
          California Friday Night Live Partnership
          California Narcotic Officers Association








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          California Public Health Association - North
          California School Employees Association
          California State PTA
          California State Sheriff's Association
          Children's Hospital Los Angeles
          City of El Cajon 
          City of Los Angeles
          Consumer Federation of California
          Contra Costa County
          County Behavioral Health Directors Association
          County of El Dorado Board of Supervisors
          County Health Executives Association of California
          Eden Youth and Family Center
          Fighting Back Steering Committee
          Institute for Public Strategies
          Los Angeles County Professional Peace Officers Association
          Los Angeles Deputy Sheriffs
          Los Angeles Drug and Alcohol Policy Alliance
          Los Angeles Police Protective League 
          Lutheran Office of Public Policy - California
          Marin County Board of Supervisors
          National Association of Social Workers, California Chapter
          National Council on Alcoholism and Drug Dependence - San  
          Fernando Valley
          Pacific Clinics
          Partnership for a Positive Pomona
          Placer County Board of Supervisors
          Pueblo y Salud, Inc.
          Riverside Sheriffs Association
          Saving Lives Coalition
          SHIELDS for Families
          Social Model Recovery Systems, Inc.
          Sonoma County Board of Supervisors
          Techniques for Effective Alcohol Management
          Ventura County Board of Supervisors
          Ventura County Sheriff's Office
          The Wall - Las Memoria Project
          Women Against Gun Violence
          Youth for Partnership for a Positive Pomona
          Youth Leadership Institute

          OPPOSITION:

          Palcohol









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          ARGUMENTS IN SUPPORT:    According to the California Alcohol  
          Policy Alliance, "powdered alcohol is perhaps the most  
          dangerous, youth attractive alcohol product allowed in the  
          market.  We cannot ignore the dangers the product poses to  
          underage drinkers.  If this product hits the California market,  
          serious injuries, alcohol poisonings, and even deaths will  
          result."

          The Health Officer's Association of California states that,  
          "mixing powdered alcohol with smaller amounts of water than  
          directed will result in extremely potent beverages.  In its  
          powdered and compact form, this product will be easy to conceal  
          and bring to areas where alcohol is prohibited, such as schools;  
          or where alcohol is sold and regulated, such as cultural events.  
           When alcohol is for sale at an event or location, retailers are  
          required to monitor customers' intake to prevent over  
          intoxication.  This becomes much more difficult when customers  
          can bring their own alcohol in powdered form."
          
          Alcohol Justice states that, "the health and safety concerns  
          that have been associated with powdered alcohol include: low  
          cost; easy youth access; similar size and shape of packets to  
          nonalcoholic children's drink packets; potential mixing with a  
          small amount of water to make a very potent drink; mixing with  
          other alcoholic beverages or energy drinks; concealment by  
          underage drinkers attending events/locations where alcohol is  
          prohibited; ingestion of the product by snorting, eating,  
          smoking or vaping; easy theft; possible extreme flammability,  
          and more."
          
          ARGUMENTS IN OPPOSITION:    Palcohol claims that ,"Palcohol is a  
          revolutionary new product that offers so many innovative  
          solutions in medicine, recreation, travel, energy, aviation,  
          pharmaceuticals, the military, food production, manufacturing  
          and many more.  In addition, because Palcohol is so much lighter  
          to ship than liquid alcohol, it will reduce the carbon  
          footprint."

          In addition, Palcohol argues that, "a ban will be a double  
          whammy financially.  The state will have to spend money to  
          enforce the ban and on top of that, the government won't realize  
          the significant tax revenue from the legal sales of powdered  
          alcohol so it's fiscally irresponsible to ban powdered alcohol."  
           









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