Interim Joint Committee on Agriculture


Minutes of the<MeetNo1> 5th Meeting

of the 2012 Interim


<MeetMDY1> October 10, 2012


Call to Order and Roll Call

The<MeetNo2> 5th meeting of the Interim Joint Committee on Agriculture was held on<Day> Wednesday,<MeetMDY2> October 10, 2012, at<MeetTime> 1:00 PM, in<Room> Room 171 of the Capitol Annex. Representative Tom McKee, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator David Givens, Co-Chair; Representative Tom McKee, Co-Chair; Senators Joe Bowen, Carroll Gibson, Paul Hornback, Bob Leeper, Vernie McGaha, Dennis Parrett, Joey Pendleton, Dorsey Ridley (via video conference), Damon Thayer, and Robin L. Webb; Representatives Royce W. Adams, Johnny Bell, John "Bam" Carney, Mike Cherry, Will Coursey, Mike Denham, C.B. Embry Jr., Jim Glenn, Sara Beth Gregory, Richard Henderson, Kim King, Michael Meredith, Terry Mills, Brad Montell, David Osborne, Ryan Quarles, Tom Riner, Bart Rowland, Steven Rudy, Wilson Stone, and Tommy Turner.


Guests: Commissioner James R. Comer, Kentucky Department of Agriculture; Larry Cox, Executive Director, Office for Consumer and Environmental Protection, Kentucky Department of Agriculture; Steve Kelly, Executive Director, Kentucky Department of Agriculture; Scott R. Smith, Smith Management Group; Laura Knoth, Executive Director, Kentucky Corn Growers Association, and Benjy Kinman, Deputy Commissioner, Kentucky Department of Fish and Wildlife.


LRC Staff: Tanya Monsanto, Lowell Atchley, Kelly Ludwig, and Susan Spoonamore, Committee Assistant.


The September 14, 2012 minutes were approved without objection by voice vote upon motion by Representative Wilson Stone and second by Representative Royce Adams.


Report from Subcommittee on Rural Issues and Subcommittee on Horse Farming

Senator Thayer said that the Subcommittee on Rural Issues heard from representatives from the Kentucky Horse Racing Commission, who discussed pari-mutuel wagering, including the importance of regulatory pari-mutuel oversight. They also discussed the health and safety of horses and the programs developed to enhance those initiatives. In addition, the subcommittee was updated on the Standard bred Incentive Fund, the Kentucky Sire Stakes, and the Non-Race Incentive Fund.


The report of the Subcommittee on Horse Farming was approved without objection by voice upon motion by Senator Thayer and second by Representative Osborne.


Senator McGaha stated that the Subcommittee on Rural Issues discussed three items: (1) broadband service to rural Kentucky; (2) the livestock risk protection program; and (3) crop insurance programs. He said that there were problems rolling out broadband service, especially in the rural areas. Kentucky needed affordable broadband, increased adoption, and awareness. Crop insurance programs could be a valuable tool in protecting against unforeseen events, but sometimes insurance contract decisions were complicated since crop insurance must be purchased early in the year.


The report from the Subcommittee on Rural Issues was approved without objection by voice vote upon motion by Senator McGaha and second by Representative Denham.


Fuel Lab

Commissioner James R. Comer, Kentucky Department of Agriculture explained that, during the transition phase of taking office, he requested an audit of the fuel and pesticides testing lab. The audit found significant problems with the performance of the fuel lab. The idea behind the state-operated fuel and pesticides testing lab, which was presented to the General Assembly, was that it would be a great investment for the Commonwealth. The audit found that the fuel lab was losing approximately $900,000 per year and there was no business development plan to get contracts to test more fuel. There was a huge backlog of testing, and there was no way that the fuel lab could have handled additional business from surrounding states. The department downsized the number of staff and made changes to management. Operational expenses were cut, and now the department is on track to save the Commonwealth approximately $400,000 this fiscal year. The department also appointed a fuel lab task force to review all the information on the lab and to make recommendations.


Mr. Larry Cox, Executive Director, Office for Consumer and Environmental Protection, Kentucky Department of Agriculture, stated that since 1994 the department has had the responsibility to test for volume and quality of motor fuel. In the first 14 years of testing, the department collected random samples using Weights and Measures inspectors. The samples were sent to a Tennessee laboratory that tested each sample for $38.


In 2007, construction began for a new facility to house the fuel lab equipment. At the conclusion of the construction, the department had an annual rent of $200,000 for a purpose built building and had purchased $3,100,000 in state of the art testing equipment. Testing began in 2008, but it quickly became apparent that the laboratory could not perform the volume of testing that had been the concept behind the purchase of the new testing equipment and building. From early 2012 and previous years, samples were unprocessed in an underutilized building, equipment, and staff. Mr. Cox said that the department has stopped pulling random samples and has moved to sampling only on a complaint driven basis. The lab concentrated on processing the large sample backlog, which has now been eliminated.


Mr. Cox said that the current issues facing the department are the $200,000 annual rent on the laboratory building; $3.1 million in investment in underutilized inventory equipment; underutilized staff of four; and a cost of testing that exceeds the income derived from the $50 annual fee imposed on fuel outlets. The department, through recommendations of the fuel lab task force, is attempting to resolve all issues surrounding the fuel lab. The department is consulting with the University of Kentucky College of Agriculture and the Center for Applied Energy Research (CAER) about establishing a partnership in which the University would perform all fuel testing and provide results to the department for administrative action. The department would continue its statutory obligations for the regulation of fuel quality. The department’s Weights and Measures staff would continue drawing the samples as complaints come in.


In response to Representative McKee, Mr. Cox stated that if the department started receiving numerous complaints, then KDA would go back to doing broader-based sampling. In a typical week, the department may receive one or two complaints.


In response to Senator Pendleton, Mr. Cox said that the department does not have the authority to go any further than the retailer to investigate bad fuel samples.


In response to Representative Rudy, Mr. Cox said that there is no timeline for partnering with the University of Kentucky (UK) for fuel testing. The department is in the beginning stages of conversation with UK but would like to move the negotiation process along as quickly as possible.


In response to Representative Stone, Mr. Steve Kelly, Executive Director, Office for Strategic Planning and Administration, said that the biggest expenses for the department’s fuel lab are rent, utilities, and personnel.


In response to Representative Adams, Mr. Kelly said that outside testing has only amounted to $3,025. It has not been the revenue generator that was previously thought. Mr. Cox said that the lab does have the capacity to test diesel.


In response to Representative Quarles, Mr. Cox stated that the department has tested every fuel outlet for volumnmetric delivery.


In response to Senator Thayer, Commissioner Comer stated that the previous Commissioner of Agriculture presented to the General Assembly a unique concept to generate revenue and cut costs that was embraced by General Assembly. However, there was never a business plan. Revenue projections were based on the testing of 40 or 50 samples a day, which cannot be done. The fuel lab at most could process 10 samples a day. The Commissioner stated that the department’s goal is to be transparent and accountable.


In response to Representative Gregory, Mr. Kelly stated that legislative approval of a contract between the department and UK would depend on the dollar amount of the contract.


In response to Representative Kim King, Mr. Kelly said that one outside group made known its opinion that fuel must continue to be tested.


In response to Senator Hornback, Mr. Kelly stated that it was at the suggestion of the Finance Cabinet to reach an agreement with the University of Kentucky rather than do a Request for Proposal (RFP) for privatization.


In response to Senator Givens, Mr. Kelly said that the $50 fee was for testing both the volume and quality of fuel. It does not matter if a company has one or 60 pumps; the fee is still $50 per station.


Total Maximum Daily Load (TMDL) and Floyd’s Fork

Laura Knoth, Executive Director, Kentucky Corn Growers Association, explained that Floyd’s Fork is a watershed located outside Louisville. The Kentucky Division of Water (KDW) asked the Environmental Protection Agency (EPA) for its assistance in developing the first nutrient TMDL in Kentucky. The definition of TMDL is a calculation of the maximum amount of a pollutant that a body of water can receive and still meet water quality standards. Pollutant sources are characterized as either point sources or nonpoint sources. The information collected showed that agriculture related nutrients (nonpoint source) contributed 77 percent to the problem of water quality in Floyd’s Fork watershed. The data showed a serious flaw in the amount of fertilizer being applied to the farms located within the watershed. Testing did not take into account that fertilizer is shipped on barges to Louisville. The model should be done right, and more information is needed as to the impact on agricultural communities.


Mr. Scott R. Smith, Senior Consultant, Smith Management Group, testified about performing a TMDL. The Division of Water (DOW) tests five different watersheds every five years. The results are evaluated and compared to existing water quality standards. If a stream does not meet the standards, it is listed as impaired. Mr. Smith said that it should be a state’s responsibility to set water quality standards and to develop programs to make sure that they are implemented appropriately. If a stream is listed as impaired, then that could have a negative impact on economic development in a community. The issue of TMDLs is a very important issue to agriculture and should be monitored closely.


In response to Representative McKee, Mr. Scott said the list containing the proposed TMDLs is for the whole state.


In response to Senator Givens, Mr. Scott explained the process of determining TMDLs. It starts with the Kentucky Division of Water asking the EPA for assistance, which hires a consultant. The consultant designs the model that could become a standard for the state.


In response to Representative Stone, Mr. Scott and Ms. Knoth said it was important that the agriculture community be aware of how the test results could negatively impact communities.


In response to Representative Carney’s question, Mr. Scott and Ms. Knoth said that the Kentucky Division of Water receives state funding.


In response to Representative McKee’s question, Ms. Knoth, Executive Director of the Kentucky Corn Growers Association, stated the corn yield for 2012 will average between 65 to 70 bushels an acre. Typically, the corn yield is about 140 bushels.


Asian Carp

Benjy Kinman, Deputy Commissioner, Kentucky Department of Fish and Wildlife, stated that Kentucky provides excellent fishing and hunting opportunities. For the department to maintain quality fishing, there is an effort to control Asian Carp. The primary species of concern are big head and silver carp. Asian Carp can be found in Kentucky and Barkley Lakes, Greenup Lock and Dam, and Taylorsville Lake. Carp are detrimental to native sport fish and dangerous to boaters, skiers, and the fishing industry. The fishing industry in Kentucky has an economic value of $1.3 billion. To get the word out, the department is developing regulations; using education, media outlets, and public meetings; and working with state legislators and Congress. Kentucky needs a facility to hold Asian Carp so large numbers captured can be marketed. The only way to control the carp population is to promote commercial fishing. Mr. Kinman stressed that it was imperative to control and prevent Asian Carp from entering other waters.


The meeting was adjourned.