WATER AND WASTEWATER CONSIDERATIONS FOR CRAFT DISTILLERS

WATER & WASTEWATER

CONSIDERATIONS FOR CRAFT DISTILLERS

The number of craft distilleries in the United States has increased dramatically in the last few years, with the Once an application is approved, the applicant will be given some time to “prove up” the water right and demondemand for craft spirits growing and slowly catching up to strate to the agency that the water is in fact being put to that of craft beers. As with many industries, this growth beneficial use in accordance with the conditions imbrings to light its fair share of challenges. One such posed by the agency. At that time, the water right may challenge is that distilling requires large amounts of be deemed “perfected” and will be appurtenant to the water, and releases similarly large amounts of waste- land, meaning it will automatically follow the land water with high amounts of organic and nitrogen when purchased. Talking about land purchase, one compounds, low pH, high temperature, and may also be well-advised to look into the availother potential pollutants. This often creates a ability of water rights when considering the purneed for wastewater or stormwater permits, chase of a property with an existing distillery which can be lengthy and costly as regula- or with plans to develop a distillery. If a signiftors are not yet as familiar with distilling icant amount of water is required for operprocesses, as opposed to the winemaking ations of the distillery, a prospective buyer process, for example. In this article we should proceed with some due diligence highlight some legal issues and consid- to determine the validity of water rights erations regarding water procurement associated with the property, if any, to and handling of wastewater, and how assess whether enough water is availto get ahead of those issues to mini- able to operate said distillery. mize risks of non-compliance. WASTEWATER & ACCESS TO WATER STORMWATER

Distilleries use almost 12 ISSUES times as much water by vol- Water considerations for disume as they produce alcohol, tilleries do not stop at prowhich, depending on the size curement, but also implicate of the distillery, may require stormwater runoffs and the ensuring that adequate water discharge of wastewater from resources are available. This is the distilling process. Those less of an issue for craft distill- discharges are considered eries located within munici- industrial wastewater regupal boundaries and served by lated under state and federal a water utility, but distilleries law and generally require an relying on well water or anoth- industrial discharge permit er source of water may need to and/or a National Pollution obtain a permit from the rele- Discharge Elimination Permit vant state agency, especially in (NPDES) or the state equivathe western United States where lent. Distilleries may be regulatwater is not always readily avail- ed through a municipal permit if able. Most western states, including discharging to a municipal wasteCalifornia, Colorado, Nevada, Oregon, water system or through a state perand Washington, follow what is referred to mit if discharging to the ground or to surface water.

as the “prior appropriation” system of water law, or “first in time, first in right.” This means that in times of drought, water users with an older water right will be prioritized over more junior users. Generally, relying on groundwater (through a well) or surface water (through a stream diversion) requires the user to apply for a water right. There are exceptions to the permit requirements for groundwater: For example, some states allow a property owner to use well water for commercial or industrial purposes without a permit if that use is limited to 5,000 gallons per day. This may allow some craft distilleries to operate without a groundwater permit, but as operations and water use increase, permit requirements could be triggered.

Because of the delays associated with securing a water right, it is good practice to keep track of water usage to understand how business growth may in turn trigger the need for permit, and work with a water attorney or a water consultant to help identify hurdles that could come up in the permitting process. Generally, when assessing a water right application, a state agency will look into whether the proposed use could cause interference with a more senior, established water right. A water consultant may be able to provide a feasibility analysis looking into the likelihood of an application being granted, and may be able to assist in finding alternatives, such as purchasing a portion of an existing water right, if no further water is available for appropriation in a particular area.

At Prairie Malt, we love whiskey, bourbon and craft spirits. It’s our distinct honor to supply passionate distillers like you with the world’s finest malts so you can continue crafting perfection. Learn more at www.prairiemalt.com

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Permit requirements may differ depending on the volume of wastewater discharged and the concentration of contaminants of concern (COCs) found in the wastewater. Low concentrations may result in the implementation of monitoring measures and reporting requirements, while more problematic discharges could result in pretreatment requirements to limit the impact of the wastewater on a municipal system or the environment. Because distilleries’ wastewater typically requires much more treatment than typical wastewater, businesses served by a municipal wastewater system are generally required to pay a higher charge for service to reflect the higher treatment costs.

Importantly, dischargers are generally required to obtain a permit prior to beginning operations. Working with an environmental attorney or environmental consultant may help you understand better which permits may apply to your operations to avoid any risks of non-compliance. Proactively engaging with the relevant agencies and providing information as to the nature of your wastewater may also help establish a good working relationship with those agencies resulting in reasonable permit requirements.

If you are already operating without a permit and realize that you may be doing so in violation of applicable state or federal laws, many states have voluntary non-compliance reporting programs, allowing the owner or operator of a facility to voluntarily disclose a non-compliant situation and avoid punitive damages, limiting liability to the payback of permitting fees for the time that the facility operated without a permit. Liability exposure can increase in the case of known violations. In one rather extreme case, a state’s Attorney General’s office and Department of Environmental Quality assessed criminal charges against a distillery after an investigation revealed that the distillery knowingly discharged industrial wastewater with excessive zinc and copper levels into a stream, highlighting the dangers of known non-compliance.

CONCLUSION

The growth of craft distilleries in the U.S. has been exciting to follow, but with that growth necessarily comes increased scrutiny from regulators. Whether it relates to water quantity or water quality, it is important for craft distilleries to understand which regulations apply to them to come up with the right permitting strategy and avoid any regulatory headache down the road. Working with water or environmental attorneys or consultants, and with the relevant governmental agencies, will go a long way in ensuring compliance with applicable laws.

Olivier Jamin is an environmental, water, and land use attorney at Davis Wright Tremaine, where he advises clients on due diligence, permitting and regulatory issues with a particular focus on water. Olivier works with a variety of clients but especially enjoys helping wineries, breweries, and distilleries make sense of federal and state regulations that may apply to their operations.