Mysterious mold and smog abound after federal inaction

By Corbin Hiar | 11/04/2019 01:23 PM EST

GREENDALE, Ind. — Mayor Alan Weiss has a whiskey fungus problem. The black mold associated with alcohol aging is all over his town. Weiss hoped air pollution violations discovered by EPA would force a nearby distillery to clean up its act. But the agency quietly decided to not pursue the enforcement case — another move spurred by intervention from the Trump administration.

Whiskey fungus grows on buildings in Greendale, Ind., which abuts a distillery that EPA accused of major air pollution violations.

Whiskey fungus grows on buildings in Greendale, Ind., which abuts a distillery that EPA accused of major air pollution violations. Corbin Hiar/E&E News

Third in a series. Click here for the first part and here for the second.

GREENDALE, Ind. — Mayor Alan Weiss has a whiskey fungus problem.

Baudoinia compniacensis, a little-studied black mold associated with alcohol aging, is growing all over the otherwise idyllic town Weiss leads here in southeastern Indiana. Sullying everything from home siding to utility poles, the fungus is most noticeable near the MGP Ingredients distillery, where his son works as a plant operator.


"It’s not a bad company," he said in a recent interview. "I just wish that the whiskey fungus wasn’t there because, if it wasn’t for that, I would say my 3 ½ years of being mayor would be really good."

A political independent who’s running unopposed for a second term tomorrow, Weiss had hoped EPA would force MGPI to reduce the facility’s fungus-forming ethanol emissions. At the end of the Obama administration, the agency had accused MGPI of building six new whiskey aging warehouses without a permit to emit ethanol, which also can create lung-scaring smog — a major problem for nearby Cincinnati.

But Weiss, who noted that he and his son "don’t talk shop," was surprised when the agency last year quietly decided not to pursue its air pollution enforcement case against MGPI.

The decision — communicated to Indiana environmental regulators only over the phone — came after the intervention of well-connected lawyers, a top Trump administration appointee and Greendale’s former member of Congress, according to EPA documents and interviews.

Now the 61-year-old former postmaster doesn’t know what to do about the whisky fungus inundating his town.

"That was the one thing I’m not able to fix," Weiss said on a rainy, August afternoon. "And I’m the type of guy that likes to fix things."

A growing problem

The Lawrenceburg, Ind., distillery locator map. Map credits: Claudine Hellmuth/E&E News (graphic); © 2019 Google Earth (map data)
The Lawrenceburg, Ind., distillery, owned for the past eight years by MGPI, has overlooked the Ohio River since 1847.

The MGPI distillery, 30 miles upwind from the Cincinnati City Hall, has straddled the border of Greendale and Lawrenceburg, Ind., for over 170 years.

Originally known as the Rossville Union distillery, the plant was bought by the Seagram Co. Ltd. in 1933, the year Prohibition ended. The Canadian spirits-maker quickly expanded the facility so that, by 1941, it sprawled across 25 acres of land and had storage space for more than 600,000 barrels.

For many decades, Seagram mainly produced and bottled the mass-market Seven Crown whiskey at the distillery. At its height, the whiskey-making and bottling operation employed more than 2,500 people, according to Cincinnati magazine.

Then in 2000, it began a series of ownership changes that ended 11 years later with MGPI purchasing the distillery, whose many tall, brick buildings are still adorned with the Seagram name. The bottling is now mainly done by a separate company in Lawrenceburg.

With one other facility and a market value today that’s around $800 million, MGPI mainly produces spirits for brand-name alcohol companies like Bulleit Frontier Whiskey.

MGPI is currently the largest U.S. supplier of rye whiskey and distilled gin, and the Kansas-based outfit has been working to protect those titles.

The unpermitted warehouse building boom that caught the attention of EPA enforcement officials in 2016 was part of a plan "to attract and retain new distillate customers, support the development of our own brands, and strengthen our market position," MGPI said in its most recent annual report. Those new buildings added nearly 240,000 barrels of storage capacity to the facility, which now covers some 80 acres but only employs about 120 people.

Around the same time, longtime residents say, whiskey fungus in Greendale transformed from a persistent annoyance for people who lived near the distillery to a significant communitywide concern.

University of Toronto Professor James Scott. Photo credit: Dalla Lana School of Public Health
James Scott. | Dalla Lana School of Public Health

The town was already home to more than enough barrels to trigger the widespread growth of Baudoinia compniacensis, according to James Scott, a professor of occupational and environmental health at the University of Toronto.

"In the northern temperate climate zones, the threshold seems to be 20,000 to 30,000 barrels of storage. And beyond that, we start to see the problem spreading out beyond the fence around the bond warehouses," said Scott, a mycologist by training who is perhaps the world’s foremost — and only — whiskey fungus expert.

The rarely researched mold is very hardy, forming on nearly any surface with elevated levels of ethanol vapor and sunlight. Such conditions mainly occur outside distilleries that make brown liquors, like whiskey and brandy. Those spirits are produced by aging alcohol — for years or even decades at a time — in wooden barrels.

During the aging process, water and alcohol absorb into the wood’s pores. At that point, the mixture either absorbs color and flavor from the lumber and then travels back into the barrel or evaporates out of it, adding water and ethanol vapors to the atmosphere.

In August 2017, MGPI told inspectors from EPA’s Great Lakes region that its barrels typically lose 2% to 4% of their weight annually due to evaporation — a reduction that distillers affectionately refer to as "the angels’ share."

MGPI fights back

Signs for MGPI in front of the whiskey fungus-stained Lawrenceburg distillery. Photo credit: Corbin Hiar/E&E News
Signs for MGPI in front of the whiskey fungus-stained Lawrenceburg distillery. | Corbin Hiar/E&E News

At that point, regional EPA staffers had already accused MGPI of violating the Clean Air Act because its warehouses were emitting nearly 827 tons of ethanol per year — more than eight times the agency’s permitting threshold for major new sources of volatile organic compounds, or VOCs.

Those emissions "can reasonably pass through" by a stack, chimney or vent, EPA concluded in December 2016. So the staffers suggested MGPI should capture the VOCs instead of allowing them to drift into Greendale, causing whiskey fungus and worsening Cincinnati’s smog problems.

But with the new Trump administration running EPA, MGPI paid a series of influential lawyers to counter the career staffers’ conclusions.

Regulators have "long concluded, and repeatedly informed the regulated community, that emissions from whiskey aging operations cannot be reasonably collected because the collection process would ruin the whiskey being aged," E. Donald Elliott, EPA’s former general counsel who now works at the law firm Covington & Burling LLP, argued in a May 2017 letter to EPA. "MGPI maintains that this conclusion is correct," he said.

That message, obtained via a lawsuit from the Sierra Club environmental group, was echoed the following month in a letter to EPA from then-Rep. Luke Messer (R-Ind.).

Now a principal at the lobbying firm Faegre Baker Daniels Consulting, Messer defended his outreach as "nothing more than the typical support that an elected official would give to efforts for economic development and job creation."

Weiss, however, was upset the former lawmaker didn’t contact him before backing the polluting, out-of-state company.

"I understand trying to help local businesses and so forth in this state. But when there are possible EPA violations and concerns by the EPA, maybe he should at least check it out first," the mayor said. "Do you think all this black stuff on homes is a good thing?"

When the messages from Elliott and Messer failed to convince EPA to drop the enforcement case, MGPI sought the services of Patrice Douglas, a lawyer at Spencer Fane LLP with ties to EPA Chief of Staff Ryan Jackson. She complained to Jackson about a "client’s difficulties" with the Great Lakes region. "We need to escalate this matter," she wrote in an October 2017 email.

A senior EPA official, who spoke with E&E News in September on the condition of anonymity, claimed to have asked a panel of career staffers to resolve regional enforcement differences regarding alcohol aging pollution.

"I didn’t take a position on it. I said we need to have one rule here," the official said.

"And before that working group sort of got off the ground," Great Lakes office staffers opted to quit pursuing the case, the official added.

EPA’s reversal essentially handed the enforcement case off to Indiana regulators, who gave the company building permits for the already-constructed warehouses and a fine of $11,250 — about a tenth of the penalty the company had suggested to investors it could have faced. Indiana regulators said they never received written notification of EPA’s decision (Greenwire, Sept. 18).

‘What you’re doing is not good’

Whiskey fungus discolors a sign, garage and house in Greendale. Photo credit: Corbin Hiar/E&E News
Whiskey fungus discolors a sign, garage and house in Greendale. | Corbin Hiar/E&E News

That fine has done little to satisfy Weiss or his 4,400 constituents, many of whom are struggling with the facility’s whiskey fungus.

The most common complaints the mayor hears relate to the mold’s potential to reduce home values. But he is also worried about possible mold-related illnesses.

"The studies that are out there suggest that there isn’t anything harmful to your health on that," Weiss said in his windowless office, a mile up the road from the distillery. "I would hope that that stays true forever.

Greendale, Ind., Mayor Alan Weiss. Photo credit:  Corbin Hiar/E&E News
Alan Weiss. | Corbin Hiar/E&E News

"I’m sure there was a time that they thought asbestos was safe to work around," he added. "Later on, they found that it wasn’t."

The mayor is right to be concerned, according to Scott.

"Even though the industry denies that this is a problem, anecdotally, they absolutely know that it’s a problem," he said. "Multiple of the organizations that I’ve worked with have watched attendance records and attrition of workers who are working in areas that are the highest risk for growth of this fungus."

"So that feeds into my thinking that there may be a hazard," Scott said. "But it’s not on the same level as a number of other fungi that grow on buildings in association with water damage."

Industry and regulators, the professor added, have been reluctant to fund research on how Baudoinia compniacensis affects human health, if at all (see sidebar).

"From my perspective, I think it would be something that’s really nice to know the answer to," the professor said.

Meanwhile, the opaque enforcement process — which the mayor feels gave MGPI more of a say than the residents of Greendale — has left Weiss feeling betrayed.

"A small town like ours, we have to rely on the state government and the federal government to regulate and take care of us," he said. "I’m not one that thinks big government should be telling everybody what to do. But there are some times when government has to step in and say, ‘Wait a minute, what you’re doing is not good for these communities that you’re in.’"

Weiss would like to see MGPI try capturing its ethanol emissions. Yet, he knows that the company isn’t likely to spend the money on controls — and potentially put any product at risk — unless regulators force it to.

"If nobody is telling [MGPI] you can’t do this, then they’re going to do it," he said. "And I understand it. That’s business."

Alternatively, the mayor would be happy for MGPI to continue making the whiskey at its Lawrenceburg distillery, so long as the company doesn’t "store the barrels right in the middle of the daggone town," he said.

Few options for Cincinnati

The MGPI's distillery is about three miles downriver from Dynegy Inc.  Photo credit: Corbin Hiar/E&E News
The MGPI’s distillery is about 3 miles downriver from the 1,378 megawatt, Dynegy Inc.- owned Miami Fort Power Station. | Corbin Hiar/E&E News

EPA’s unwillingness to crack down on MGPI has also made life harder for Larry Falkin, the director of Cincinnati’s Office of Environment & Sustainability. Part of Falkin’s job is to do what he can to clean up the city’s sometimes dangerously polluted air.

Last year, the Cincinnati area had 78 days — or more than 2 ½ months — with "moderate" or worse levels of ground-level ozone pollution, the technical term for smog, according to EPA data.

Ground-level ozone forms when ethanol and other volatile organic compounds mix with nitrogen oxides and sunlight. In moderate smog conditions, the federal government recommends that children, the elderly and others who are sensitive to air pollution "consider reducing prolonged or heavy outdoor exertion."

Much of Cincinnati’s smog problem is related to three nearby coal-fired power plants. But MGPI is a significant source of air pollution as well, which is why EPA in 2017 sought to include its home county of Dearborn in Indiana into the greater Cincinnati ozone "nonattainment" area.

Dearborn County contributes more than 3% of the Cincinnati metropolitan area’s total smog-forming VOCs, and the vast majority of the county’s VOC emissions come from the distillery, EPA data shows. Including Dearborn in the Cincinnati area would make it harder and more costly for MGPI and other polluting businesses to expand their operations there.

Larry Falkin, director of Cincinnati's Office of Environment and Sustainability. Photo credit: Corbin Hiar, E&E News
Larry Falkin. | Corbin Hiar/E&E News

Indiana regulators, however, argued Dearborn’s ozone compliance status was "unclassifiable" in part because the county lacks federally approved air monitors. The Trump EPA ultimately sided with the Hoosier State.

MGPI declined to respond to questions about its potential responsibility for adding to the whiskey fungus and smog problems of Greendale and Cincinnati. But spokeswoman Jenell Loschke noted that the company’s "operations at the Lawrenceburg distillery are in compliance with the Clean Air Act and meet all the standards under the distillery’s operating permit. That is the most pertinent news regarding our Indiana operations, followed by the fact we have made significant capital investment to ensure our historic distillery meets modern environmental standards."

On days when the smog is worst in Cincinnati, all Falkin can do now is instruct city government employees to avoid painting and using small motors, both of which also release VOCs. Cincinnati, he argued in a City Hall conference room, needs EPA’s help to fully stamp out the metropolitan area’s long-running smog problem.

"It’s not something you can do by a city enforcement action," he said. "It’s not something you can do by resident action. It really needs to be the larger regulatory structure and the larger economic motivations that are going to lead to that result."

Reporters Mike Soraghan and Kevin Bogardus contributed.