MULBERRY, Tenn. (AP) — The Tennessee and Kentucky whiskey and bourbon producers have long held a special place in the hearts of their local communities. These distilleries, where the spirits are crafted, and the barrelhouses, where they mature, have seamlessly blended with the rural charm of their surroundings, offering employment opportunities and instilling pride in a thriving local industry.
However, the industry’s surging global popularity has ignited conflicts on the domestic front.
In Kentucky, the birthplace of 95% of the world’s bourbon, counties are in open rebellion following a legislative decision to gradually eliminate a barrel tax that has been their crucial source of funding for schools, infrastructure, and public utilities. Local officials, who generously provided land and invested millions in infrastructure development to support bourbon manufacturers, now fear that these investments may never be recovered.
The once amicable relationship between the whiskey and bourbon industry and their neighboring communities has soured, leading to ongoing disputes and even legal battles. Residents have raised numerous concerns, ranging from the proliferation of a damaging black “whiskey fungus” to the loss of valuable agricultural land and the transformation of distillery tours into commercialized, liquor-themed tourist attractions reminiscent of Disneyland.
It appears that the deep affection between the industry and the local communities has waned.
“We have been their strongest supporters, and yet they have let us down,” expressed Jerry Summers, a former executive at Jim Beam and the judge-executive for Bullitt County, essentially the equivalent of a county mayor.
Bullitt County has traditionally relied on an annual barrel tax levied on aging whiskey, which generated $3.8 million in revenue in 2021, according to Summers. The majority of these funds are allocated to schools, but they also contribute to services that support the county’s Jim Beam and Four Roses plants, including a dedicated fire department.
Many of the newly constructed barrelhouses have been granted industrial revenue bonds, exempting them from property taxes for extended periods, sometimes spanning years or even decades. County officials endorsed these tax breaks with the expectation that they would continue collecting the barrel tax. However, when the state legislature voted to phase out the tax earlier this year, following intense lobbying efforts by the Kentucky Distillers’ Association, county officials felt betrayed.
“Our relationship with the industry was always built on trust,” Summers lamented. Regrettably, these agreements are now being disregarded.
When the barrel tax eventually expires in 2043, distillers will no longer be obligated to pay any taxes to Bullitt County on certain warehouses. Nonetheless, the county will still be responsible for providing them with essential services, ensuring their safety, and protecting the surrounding community in case of any mishaps, as stated by Summers.
“Given that alcohol-based plants produce hazardous materials, we need emergency management, EMS, and a sheriff’s department,” he emphasized.
Democratic Governor Andy Beshear, who signed the bill into law following its approval by Kentucky’s Republican-controlled legislature, acknowledged the importance of several compromises within the industry that were essential for his support. He believes the bill will promote investment.
“I understand it was a challenging situation. On one hand, you have an industry that generates numerous jobs and considers Kentucky its home. On the other hand, you have communities that have played a significant role in building that industry. I recognize that there are currently some difficult feelings,” Beshear stated during a news conference.
Eric Gregory, President of the Kentucky Distillers’ Association, highlighted that the compromise bill introduces a new excise tax to support school districts. Additionally, another tax helps fund fire and emergency management services, although it may not apply to all counties.
“Even with these provisions, the distilling industry remains the most heavily taxed sector in Kentucky, contributing $286 million in taxes annually,” Gregory noted in an email.
While the tax changes stir controversy, the whiskey industry continues to experience remarkable growth.
As a former executive at Beam, Summers recalls a time when whiskey was considered a cheap and low-quality beverage. However, with the introduction of small batch products, whiskey gradually gained a reputation for being cool and sophisticated. According to the Distilled Spirits Council of the United States, American whiskey revenues have nearly quadrupled since 2003, reaching $5.1 billion last year. In the same period, the super premium segment skyrocketed by over 20 times, amounting to $1.3 billion.
Today, many of the well-known whiskey brands are owned by international beverage conglomerates. Jim Beam, for example, is owned by Japan-based Beam Suntory, while Bulleit is owned by Britain’s Diageo, and Wild Turkey is owned by Italy’s Campari Group.
During their campaign to end the tax, the distillers’ group hinted that the industry might consider leaving Kentucky. However, officials like Summers view this as a bluff. He asserted that Bullitt County has no desire for new barrelhouses unless significant changes occur, and he is not alone in this sentiment.
Nelson County, which is home to Heaven Hill, Log Still, and other Kentucky communities associated with the industry, recently implemented a moratorium on the construction of new bourbon warehouses. This pause allows the county to update zoning and permitting regulations. Moving forward, any new projects will be required to seek citizen input and gain approval from the zoning board, as stated by Judge Executive Timothy Hutchins.
Hutchins remarked, “That definitely caught their attention. Now, we are working towards reconciliation.”
The barrel tax contributes approximately $8.6 million annually to the county’s revenue, as mentioned by Hutchins.
In Lincoln County, Tennessee, Jack Daniel’s faced legal action and a stop-work order due to an unauthorized expansion that led to a lawsuit filed by neighboring residents. Since 2018, the company had constructed six large warehouses, each spanning 86,000 square feet (7,989 square meters), capable of holding 66,000 barrels, on a 120-acre (48-hectare) property.
While Jack Daniel’s has retroactively obtained the necessary approvals, residents claim that their primary concern remains unaddressed: the presence of a black fungus that thrives on the ethanol released during whiskey aging.
The notorious “whiskey fungus” has been a nuisance around liquor facilities for centuries. However, due to the scale and magnitude of the new barrelhouse complexes, a significantly larger amount of ethanol is being released in a concentrated area. Consequently, the fungus blankets nearby homes and cars with a sooty black residue, impairs the growth of trees and shrubs, and poses an environmental concern.
Pam Butler, a resident of Lincoln County for the past 30 years, recalled a time when only two barrelhouses existed nearby, and she experienced no issues. However, around five years ago, everything started to appear grimy, tarnishing the appearance of her white car and white horse trailer.
Butler, who owns a small farm adjacent to the Jack Daniel’s property, has observed negative effects on her land. Her pasture is not flourishing as it should, several trees have died, and she has developed asthma. While she is unsure if her illness is directly related to the fungus, she began experiencing symptoms in the past few years.
Butler and other neighbors are advocating for Jack Daniel’s to capture and contain its ethanol emissions instead of releasing them into the neighborhood. The company did not provide a comment specifically addressing the fungus but stated that it strives to be a good partner to the community.
“We recognize that there have been instances where a small number of individuals do not appreciate or value the growth of Tennessee Whiskey production in the areas where we operate,” the company’s statement expressed.
In Kentucky, celebrated author and agriculturalist Wendell Berry raises another concern regarding local food security and the destruction of prime agricultural land. Berry has spent nearly 30 years working on developing a regional food economy for Louisville. He highlights the fertile land surrounding cities like Louisville and Nashville, which could provide locally grown food. However, he notes that these cities still heavily rely on food imports from California’s Central Valley. Berry argues that preserving and utilizing local agricultural land is essential to meet future food demands.
Berry recently lost a battle with distiller Angel’s Envy in Louisville over the development of a 1,200-acre property adjacent to his childhood farm. Henry County approved the distiller’s plans to establish a bourbon tourism complex on the site, featuring cabins, an amphitheater, and a helipad.
Angel’s Envy declined to comment on the matter.
Fred Minnick, an author on bourbon and a judge in global whiskey competitions, acknowledges the current intriguing dynamics in the industry. Bourbon has never been as popular as it is now. However, he questions whether bourbon will maintain its revered status and continue to be seen as a hero, particularly in the state of Kentucky.