Regulatory Costs Helped Kill Tumwater's Miller Brewery

By Don C. Brunell
President
Association of Washington Business

1/11/03

Olympia, WA - A century of tradition and history has ended with the announcement that
Miller Brewing Company will close its Tumwater brewery in July. Four
hundred people will lose their jobs.

The brewery has been in operation at that site since 1896. Built by the
Schmidt family, it was sold to Pabst in 1983 and sold again to Miller in
1999.

So, what caused the demise of a century-old business? No single factor,
really.

The facility was old and inefficient, production costs were high, and it was
the smallest of Miller's seven breweries.

But, one of the major factors was regulatory costs - specifically, water
treatment costs.

The brewery, which produced about 1.7 million barrels of beer per year, ran
its production water through LOTT, the regional water treatment facility
serving Lacey, Olympia, Tumwater and Thurston County. Over the years,
treatment costs had escalated to the highest of any Miller operation in the
country.

"We have a major brewery in Los Angeles, California, with some of the
highest environmental standards in the nation," noted one Miller employee,
"and the costs there aren't as high as they are in Washington. We've looked
at facilities in San Francisco, which is well-known for its regulatory
restrictions, and even there water treatment costs are less than they are in
Washington."

Because of rising water treatment costs and a lack of treatment capacity at
LOTT, Miller ultimately decided it would be cheaper and easier to build its
own treatment plant.

The only problem was, Miller couldn't find anyplace to dispose of the
treated water. Now, keep in mind, the treated water from the brewery is
Class A - virtually drinking water quality. Nonetheless, the state
Department of Ecology (DOE) wouldn't let the brewery discharge its treated
water into the nearby Deschutes River. According to one company official, a
DOE staffer said, "The water might be good enough for people to drink, but
that doesn't mean it's good for the fish."

Miller investigated a myriad of options for disposing of its treated water,
including providing it to the Department of Fisheries to expand its hatchery
right across the street. But the Department of Ecology nixed that idea as
well, saying it didn't want more fish waste in the river.

So, while it wasn't any one thing that doomed the brewery, regulatory costs
and restrictions finally tipped the balance. It simply wasn't worth it
anymore to do business in Washington state.

Hundreds, if not thousands, of other businesses in Washington are fast
approaching their own "tipping point." Employers, who are already
struggling with a sluggish economy, fierce foreign competition, and high
health insurance costs, are facing big increases in state fees and costs
such as the proposed 29 percent increase in workers' compensation insurance
rates.

Washington's business community constantly warns about the affect high
regulatory costs have on employers' ability to provide jobs, but many people
don't see the connection.

For the 400 people who will lose their jobs at the Miller Brewery, the
connection has become crystal clear.