Interim Joint Committee on Natural Resources and Environment

 

Minutes of the<MeetNo1> 1st Meeting

of the 2016 Interim

 

<MeetMDY1> June 2, 2016

 

Call to Order and Roll Call

The<MeetNo2> 1st meeting of the Interim Joint Committee on Natural Resources and Environment was held on<Day> Thursday,<MeetMDY2> June 2, 2016, at<MeetTime> 1:00 PM, in<Room> Room 149 of the Capitol Annex. Senator Jared Carpenter, Chair, called the meeting to order, and the secretary called the roll.

Present were:

Members:<Members> Senator Jared Carpenter, Co-Chair; Representative Fitz Steele, Co-Chair; Senators C.B. Embry Jr., Chris Girdler, Ernie Harris, Ray S. Jones II, John Schickel, Johnny Ray Turner, Robin L. Webb, and Whitney Westerfield; Representatives Hubert Collins, Tim Couch, Jim DuPlessis, Daniel Elliott, Jim Gooch Jr., Chris Harris, Cluster Howard, Reginald Meeks, Rick G. Nelson, Lewis Nicholls, Marie Rader, John Short, Kevin Sinnette, Jim Stewart III, Chuck Tackett, and Jill York.

 

Guests: Dr. Jeff Stringer, University of Kentucky, Department of Forestry, Mr. Robbie McKenzie, Director Domestic Mills, Independent Stave Company, Mr. Justin Nichols, Log Procurement, Independent Stave Company, Mr. Bob Bauer, Executive Director, Kentucky Forest Industries Association, and Mr. Jason Underwood, Buffalo Trace Distillery.

 

LRC Staff: Tanya Monsanto, Stefan Kasacavage, and Marielle Manning.

 

Describing Kentuckyís Forestlands and Sustainability of White Oak

Dr. Stringer, Department of Forestry, University of Kentucky provided basic information on the supplies and sustainability of white oak, demographics of Kentuckyís forested lands, and issues facing the forest products industry. Roughly 2.5 million acres of Kentucky lands are forestlands. Kentucky has maintained stable shares of tree crops including white oak. White oak is found in the South Central part of the United States. Kentucky is one of the leading producers of white oak which is found in three principal areas: Eastern Kentucky, the Western Coal Fields and South Central Kentucky. There is also white oak on federal lands such as Daniel Boone National Forest and the Land between the Lakes (LBL). The majority of white oak is non-industrial, privately held forestland.

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The bourbon industry is the major buyer of white oak. White oak is used to make stave logs which are used in the production of bourbon barrels. Not every white oak tree has a stave log because these logs must be large, of very good quality and with no knots in the wood. Only a small percentage of white oak trees at maturity can produce a stave log.

White oak is also used for high quality lumber and veneers, and the demand for white oak by other industries affects the price of stave logs. From 2008 to 2015, the price of stave logs increased and price increases are anticipated into the future as the availability of white oak decreases in the long term.

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To sustain the future of white oak availability, forest management plans are essential to culture high quality trees. However, there must be landowner incentives and technical assistance. The management of seedling in research plots and assistance to forest landowners to implement stewardship plans are two top priorities. Biological threats need to be addressed to see tree improvement along with research into tree genetics to make them more resistance to disease and pests. There needs to be a stave log monitoring program at the mills. Right now timber reports do not include stave logs. Finally, there must be a positive environment for the logging industry.

 

In response to inquiry as to how the committee determined that this was an essential topic, Senator Carpenter explained that there was considerable discussion of white oak sustainability during the 2016 general session.

 

Senator Webb discussed the relationship between the sustainability of white oak and the support of outdoor sports such as hunting. Dr. Stringer added that forest management practices are compatible with hunting and the white oak acorns are good food supply for wildlife.

 

In response to a question by Senator Westerfield about how white oak are counted, Dr. Stringer explained that the Division of Forestry and the United States Forest Service (USFS) have physical plots and count 20 percent of the trees. The periodic physical counts allow USFS to determine gains and losses in tree types.

 

In response to a question by Senator Schickel about the percent of trees that are farmed and how long it takes to bring a tree to harvest, Dr. Stringer said that from a seedling to a stave log it takes 60 to 80 years. On low quality land, it may take as long as 90 years. The percentage of tree farmed land under forest management plan is low. Most Kentucky woodlands are not under good management.

 

In response to a question about how to fix the bottleneck in the availability of stave logs when it takes more than 75 years to produce the right sized tree, Dr. Stringer said that the problem can be minimized but not corrected. Forest management can speed up the growth of trees, which will increase availability of trees more quickly.

 

In response to a question about how to educate landowners of the need to implement good forest management practices, Dr. Stringer said that the Division of Forestry responds to specific landowner requests.

 

White Oak and The Cooperage Industry

Mr. Robbie McKensie and Mr. Justin Nichols, Independent Stave Company, described the company and one of the leading cooperages in the world with locations in Benton, Morehead, and Lexington. The company purchases white oak to make stave logs for bourbon barrels. There is a good supply of stave logs.

 

In response to a question about whether a barrel can be reused after bourbon has been aged in it, Mr. Nichols said no. The barrels are sent overseas for Scotch whiskey.

 

In response to a question from Representative Meeks about Independent Stave indicating there are sufficient supplies and Dr. Stringer stating there are shortages, Dr. Stringer clarified that the shortages will occur in the medium to long term which is in 20 to 30 years. In the short to immediate term, there are good supplies of stave logs.

 

In response to another question about whether Tennessee is looking to Kentucky for stave logs for their expanding bourbon industry, Dr. Stringer said that Kentucky is a good supply and well situated to be a supplier to Tennessee.

 

In response to a question about technology that imparts similar characteristics to bourbon that white oak offers without using white oak logs, Mr. Nichols said that there are enzymatic formulas to impart flavors but I cannot speak to that technology and its value.

 

Dr. Stringer said that incentive packages to help landowners conduct good management is very important. Tax incentives are good inducements, but there appears to be some problems with this in Kentucky. The state must also keep research and data to help with technical assistance to landowners.

 

In response to a question about what barrels are used for after usage, Mr. Nichols said that they are used for Scotch Whiskey.

 

Bob Bauer, Executive Director Kentucky Forest Industries Association discussed various aspects of the forest industry. This is a major industry for Kentucky with over 30,000 people employed and it supports other industries that use wood products such as flooring, palates. All the related industries are significant revenue streams for Kentucky and there should be as many staves going into the bourbon industry from Kentucky. At a national level, there is discussion of obtaining white oak from national forests like Daniel Boone; however, over the past several years that opportunity has closed.

 

In response to a question about why the board feet from federal lands has declined, Mr. Bauer said that ecological groups and short staff to aid in the process of locating trees and conduct the sale has closed that resource.

 

Implications for the Bourbon Industry: A Distillerís Perspective

Jason Underwood, representing Buffalo Trace Distillery, testified that national forests are being treated as parks. Forests are being managed via lawsuit and logging now occurs for purposes other than providing timber such as clearing sick and damaged trees and creating wildlife habitats. At the national level, there are some federal initiatives to add white oak to the management plan for short leaf pine. At the state level, forest management is limited. Budgets are constrained and nurseries are needed to keep white oak stocks strong and resilient.

 

From the distillerís perspective, the crisis in obtaining white oak staves occurred three years ago. The company projects that 15 percent growth in demand for stave logs each year. The supply crisis is already in effect and it is driving up prices for stave logs.

In response to a question about the percent of Kentucky stave logs going to the bourbon industry, Mr. Underwood said that Buffalo Traces buys logs from Independent Stave. Kentucky is the second largest supplier of stave logs, but the company cannot disclose the percent of purchases in state. Independent also buys from Missouri.

 

In response to a question about the bourbon industry being regulated by the state to only use barrels once and whether the bottleneck would be resolved if that were changed, Mr. Underwood said that in Scotland barrels can be used many times. In Kentucky, they are used only once, but Buffalo Trace holds to honoring the tradition to produce bourbon. The current formula is working just fine.

 

Documents distributed during the meeting are available with meeting materials in the LRC Library. There being no further business, the meeting was adjourned.