Call to Order and Roll Call
The meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on Wednesday, July 1, 2015, at 10:00 AM, in Room 129 of the Capitol Annex. Senator C.B. Embry Jr., Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator C.B. Embry Jr., Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Paul Hornback, Dennis Parrett, Robin L. Webb, and Whitney Westerfield; Representatives Mike Denham, Tom McKee, Terry Mills, Ryan Quarles, and Jonathan Shell.
Guests: Mr. Roger Thomas, Mr. Joel Neaveill, Ms. Angela Blank, Ms. Beth , Mr. Brian Murphy, Dr. Luther Hughes, and Mr. Biff Baker, Governor’s Office of Agricultural Policy; Ms. Kristen Branscum, Mr. Jonathan Van Balen, and Ms. Alisha Morris, Kentucky Department of Agriculture.
LRC Staff: Lowell Atchley, Kelly Ludwig, and Kelly Blevins.
The June 3, 2015 minutes were approved, by voice vote, upon motion by Senator Hornback and second by Representative Mills.
Governor’s Office of Agricultural Policy
Mr. Roger Thomas, Executive Director, Mr. Joel Neaveill, Chief of Staff, and Mr. Bill McCloskey, Director of Financial Services, Governor’s Office of Agricultural Policy (GOAP), testified about project funding decisions made by the Agricultural Development Board (ADB) during its June meeting.
Mr. Neaveill discussed tobacco settlement funding allocations for the previous months under the County Agricultural Improvement (CAIP), Deceased Farm Animal, and Shared-use Equipment programs.
Responding to Senator Hornback regarding the Green River Area Beef Improvement Group’s administration of several CAIP programs, Mr. Neaveill indicated some entities in the state oversee programs in multiple counties. He indicated that administrators can receive up to 5 percent of a county’s tobacco settlement funds for administering a program.
In their report, Mr. Neaveill and Mr. Thomas explained how most counties operate their shared-use programs. In answer to Senator Gibson, it was explained that counties assess fees from farmers, fees that, in turn, can be used to pay for maintenance and can be used to buy additional equipment. Mr. Thomas indicated a shared-use program is a good way to enable farmers to use particular types of farm equipment without having to buy the equipment. He mentioned the large collection of shared-use equipment in Harrison County.
After updating on the status of county accounts, the GOAP representatives turned to the projects approved for regional or statewide funding at the previous board meeting.
The first project prompted considerable discussion, that of Atalo Holdings, a company that requested $500,000 in tobacco settlement funds, in the form of grants and a loan, to buy some equipment needed for an industrial hemp seed processing facility in Winchester. According to testimony, the company has lined up several approved hemp growers in the state. The original plan was for the company to import certified seed into Kentucky under licenses issued by the Department of Agriculture and the U.S. Drug Enforcement Agency. The applicant sold the seed to permitted farmers and will contract to buy harvested seeds produced by those farmers to be used in the manufacture oil and meal for marketable products. The federal Farm Bill allowed for departments of agriculture and universities to grow hemp for research. With the Farm Bill authorization, the Department of Agriculture entered into memoranda of understanding with farmers to grow the plant.
Under the funding arrangement with the board, Atalo garnered monetary commitments from 19 of 29 counties.
Responding to Co-Chair Embry Mr. Neaveill said it was his understanding that the hemp production authorization will continue through the life of the Farm Bill.
In answer to Co-Chair Stone, Mr. Neaveill explained that most of Atalo’s endeavor will focus on hemp seeds, not the plant fiber.
Both Mr. Neaveill and Mr. Thomas responded to Representative Stone regarding steps that would occur should the applicant sell the business or should the growing or processing of hemp be prohibited by state or federal law. In those instances, the grant would be refunded on a prorated basis and a loan paid in full.
Mr. Neaveill, responding to Representative McKee, named some of the principals involved with Atalo. Some of the owners will be growing hemp.
Prompted by questions from Representative McKee, committee discussion turned to cannabinoids derived from hemp and marijuana plants and the clarification that the Atalo project will not be associated with the cannabinoid chemical derivative, rather with the plant seeds. Senator Hornback pointed out that one person involved in the venture is in the seed business. He mentioned the periodic problems encountered by Kentucky farmers in acquiring hemp seeds. Representative McKee mentioned the need to be able to not depend on foreign sources for hemp seeds. Senator Hornback said he will be growing 60 acres of hemp, and that considerable breeding needs to be undertaken to develop seeds that fit Kentucky’s climate and other conditions.
Responding to Senator Gibson, Mr. Thomas noted that hemp is a new crop with some potential. Were it not, the board likely would not have approved the project, according to his testimony. He indicated support obtained from the counties indicated there is interest in the future of the plant. He said Atalo project could be compared to other board-approved projects involving less well-known plants – golden rod, chia, and sumac. Continuing, Mr. Thomas said the hemp legislation, Senate Bill 50, passed in the 2013 Regular session, contained language authorizing the board to commit funds to hemp-related projects.
Both Mr. Thomas and Mr. Neaveill addressed other questions by Senator Gibson relating to the concerns that law enforcement personnel expressed about the potential of hemp fields being used to shield marijuana plants. Mr. Thomas indicated the Farm Bill allowed the hemp research projects extending to raising the plants for potential marketing. Mr. Neaveill commented that the Department of Agriculture requires GPS coordinates of hemp fields.
As the discussion continued, Representative Shell described the business interest and private investment that has resulted from hemp production in Kentucky. And addressing the law enforcement aspect, he said law enforcement personnel have visited farms to check out hemp fields.
GOAP staff responded to Senator Parrett that, with the amount of funds pledged by counties, the loan amount that Atalo could pursue through the board and Agricultural Finance Corporation, would be about $15,000. Senator Webb mentioned that the topic of hemp has been discussed in Kentucky for years. She indicated she was pleased that it finally is being grown in the state.
The final projected funded by the board was that of the Pulaski County Conservation District, approved for $62,500 in county funds to buy some buildings for shared-use equipment storage.
Kentucky Proud
Ms. Kristen Branscum, Executive Director in the Department of Agriculture’s Office of Marketing, updated the committee on the Kentucky Proud program, which received Agricultural Development Board approval for funding last December totaling almost $3.5 million spanning two years.
In her report, Ms. Branscum detailed the five main components of Kentucky Proud: the promotional (POP) grants, the Restaurant Rewards program, trade shows, retail support, and branding and advertising. Newer products and endeavors available include a 100 percent Kentucky grown popcorn, the new “Udderly Kentucky” brand milk, the “Kentucky Proud Kitchen” TV cooking show. Newer facets of the program include the Homegrown By Heroes farm program for veterans, the Farm to Campus program, Kentucky Proud Hemp, and Appalachia Proud, which is geared toward bolstering the economy of Eastern Kentucky counties.
A number of committee members were complimentary of the department and the Kentucky Proud program.
Responding to Representative Shell, Ms. Branscum indicated a “general buzz” has occurred in the wake of American Pharoah’s Triple Crown victories. She indicated one facet of the Kentucky Proud program is the Kentucky Proud-Kentucky Bred endeavor.
In a response to questions from Representative Denham, Ms. Branscum was joined at the table by Mr. Jonathan Van Balen, who described the international marketing of Kentucky products. Well-known products and commodities shipped from Kentucky to foreign markets are horses, hardwood lumber, livestock, and the No. 1 product, Kentucky bourbon.
Ms. Branscum explained to Representative Denham the process used to pick the Appalachia Proud counties, generally counties east of Interstate 75 and south of Interstate 64.
Responding to Senator Parrett, Ms. Branscum described the cooking educational efforts involving Kentucky Proud and local extension offices, some of which have “Plate Up” shows.
Ms. Branscum addressed Representative Stone’s question about the sustainability of the program beyond the tobacco settlement funding, such as licensure of the brand. At this point in time, she said, no one pays for use of the brand.
Responding further to Co-Chair Stone, Mr. Branscum discussed the issue of assuring that Kentucky Proud products contain predominantly Kentucky-produced ingredients. She noted Kentucky Proud producers are allowed some flexibility in their ingredients.
In answer to Representative McKee, Ms. Branscum explained how the department works with the Parks Department and other agencies in helping them acquire locally grown foods for their restaurants and cafeterias. She said the lack of funding sometimes makes it difficult for the state parks to buy locally grown foods.
Senator Webb indicated legislators need to know if there are any barriers to getting locally grown foods into state parks. According to Mr. Thomas, the First Lady is an advocate of locally grown foods, as evidenced by the Governor’s Garden initiatives. He also said the Justice Cabinet may be buying locally grown foods in the future.
Documents distributed during the meeting are available with meeting materials in the LRC Library. There being no further business, the meeting was adjourned.