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Sunday, November 25, 2007

Ind. Econ. Dev. - Distilling ethanol? Why not vodka?

"Farmyard Stills Quench a Thirst for Local Spirits" is the headline to a front-page story in today's NY Times reported by Susan Saulny. Some quotes from the lengthy story:

ATCHISON, Kan. — The main still of the High Plains liquor company here was scraped together from junked parts of an old food processing plant. The tubing for the bottling equipment had been used to milk cows, and one of the tanks was actually an industrial vacuum cleaner.

The whole clanking operation, headquartered on a farm northwest of Kansas City, looks like a patchwork contraption out of the imagination. And that is basically what it was two years ago when Seth Fox, a cattle rancher down on his luck, decided to get a license to distill some vodka and a little whiskey.

“I talked to banks, told them I wanted to make vodka on my farm here, and they said, ‘Yeah, right you are,’” recalled Mr. Fox, whose company went on to become the first distillery in Kansas since Prohibition. “Well, I had a million dollars in sales last year.”

“I’m the seventh generation to be in alcohol,” he said proudly. “Just the first to do it legally.”

On the heels of the microbrewing boom, new microdistilleries are thriving from coast to coast. And some of the latest and quirkiest entrants to the industry are in places like Iowa, Indiana, Illinois, Michigan and Mr. Fox’s barn. * * *

[S]ome of the states, increasingly aware of the power of agri-business to generate tourism and tax dollars, have gradually begun loosening some of the temperance-era laws that have lingered for decades, restricting who can distill what, and where.

With its abundance of grain and fruit, the Midwest stands poised to capitalize on the confluence of trends unlike any other region and could, in time, come to rival California, currently the leader in small-scale distilling, experts said.

Small, private distilleries are opening at a rate of about 10 to 20 a year. There are about 100 across the country. Some are attached to wineries, restaurants and breweries, or, increasingly, are located on farms. Though there is no precise definition for what the industry refers to as artisanal or craft distilleries, experts say they are distinguished from mass distillers by their small scale, their use of local and often organic ingredients, and the experimental quality of some of their products, like seasonal pumpkin-infused vodka. * * *

The heyday for small distillers was actually during Prohibition, which failed to deter extralegal production across the country. But after Prohibition’s repeal, each state was given broad powers to regulate the sale and distribution of alcohol, with an overlay of some standing federal requirements. Some states adopted stringent laws.

(Home distilling is still against the law, largely because of the safety hazards of working with flammable liquids. At minimum, distillers must be licensed by the federal government and a state.)

Over the past years, though, small steps have been taken toward loosening state regulation — moves that probably have as much to do with bringing in revenue as anything going on with consumer tastes.

“Distilled spirits are a bonanza from a tax standpoint,” said Kris A. Berglund, a professor at Michigan State University who is an expert on microdistilling. “I guess somebody sat down and looked at the math and said, Holy cow! We’re cutting ourselves out of the action, not to mention tourism dollars.”

Nebraska is the latest state to deregulate a part of the industry. A law went into effect Sept. 1 allowing brewpubs to operate stills. Indiana changed a part of its law in 2001 to allow wineries to operate stills. In the mid-90s, Michigan dropped the license fee to manufacture spirits to $1,000 from $10,000. Now it is home to at least 10 microdistilleries.

“There was no way for me to have an artisan distillery the way Indiana law was written after Prohibition,” said Ted Huber, who runs the Starlight Distillery on his farm in southern Indiana and who helped draft the law that was passed six years ago. “I can’t make whiskey, but can make anything that would come from raw ingredients for wine. I’m experimenting with grape vodka now.”

Mr. Huber also runs a winery, and it attracts a half-million tourists a year. But he finds that his copper pot still, imported from Germany, “is really a crowd pleaser, even when it’s not running.”

From an accompanying story:
Speaking of rugged stuff, grappa, distilled from the residue of the winemaking process, generally has all the appeal of a flame-throwing punch to the stomach. Most are harsh and unpleasant, though there are significant exceptions. A grappa made by the Starlight Distillery in Borden, Ind., is one of them. It is smooth with a fruity, floral aroma, and would be highly enjoyable after a heavy meal.

Posted by Marcia Oddi on November 25, 2007 03:59 PM
Posted to Indiana Law | Indiana economic development