This past week saw many bourbon drinkers shaking their heads in disbelief, distraught at the news that up to 9,000 barrels of whiskey had tumbled to the ground when part of a rickhouse at the Barton 1972 distillery in Bardstown, Kentucky collapsed.
Luckily, there were no injuries (or fatalities) among the employees or visitors to the distillery. Unfortunately, however, some fish in a nearby creek apparently weren’t quite so lucky. Although perhaps we can imagine that they died in good spirits (sorry – really bad pun – couldn’t resist).
In all seriousness, this episode is a good reminder on a number of fronts – the first being safety. We often think of distilling as a reasonably dangerous business. That makes sense when you consider that the process involves producing poisonous and highly flammable substances. And then for good measure, you may be required to age the flammable stuff in wooden barrels and may choose to store those wooden barrels in wooden structures with good ventilation… Add those factors together and mix with some misfortune, and you get the kind of conflagration like was seen at the Heaven Hill facility in Bardstown back in 1996.
But the fact is that even if there isn’t a fire, aging whiskey typically involves storing 53-gallon barrels in racks that may stretch for quite a ways overhead. That barrel weighs about 110 lbs when it is empty and about 520 lbs when it is full of hooch. You don’t want that to come crashing down on anyone or anything that you don’t intend to squash.
When viewing the Bardstown news, the second thing that came to mind was TTB record-keeping requirements around spirits. During the first few days after the accident, it wasn’t clear from press coverage whether there was any actual spill from the barrels. But just looking at the photos you had to assume that at least a few of those barrels sprung a leak as they crashed down.
This is a reminder that when you lose spirits that are being held in bond, you need to account for that in your records. In fact, if you find yourself short a significant amount (say, 9,000 barrels worth of bourbon), you probably want to get on the phone with the TTB pretty quickly to report the shortage and explain the circumstances. Failing to do that could mean that you end up with the privilege of paying excise tax on the spirit that you no longer have and can’t sell. Here, it would of course be pretty easy for Sazerac to explain to the TTB why they have a shortage in inventory – the pictures offer fairly concrete evidence of a problem. But they still will want to keep the agency informed of the actual amount of spirit lost as a result of the accident.
And last, this is a good reminder that the TTB may not be your only regulatory concern when you’re dealing with an incident. As noted above, it appears that some of the bourbon made its way into a local creek. Press reports indicate that the Kentucky Energy and Environment cabinet intends to fine Sazerac for the spill. Those fines could be as much as $25,000 per day, per incident. It isn’t clear from these same press reports whether the Cabinet views each leaking barrel as a separate incident (a position consistent with some other frequently levied regulatory fines) and how the number of days will be determined. But suffice it to say the fines are likely to be substantial.
HoochLaw 