The Osage Nation has entered into a lease agreement with a distillery to put the tribe’s 500-gallon still to use – making alcoholic beverages.
The lease says that Hunter Stone Gambill, Series LLC, will pay 7 percent of its revenues (it doesn’t specify whether gross or net) or a minimum of $5,000 a year to the Nation in exchange for about 2,000 square feet of space at Harvest Land, including the imposing copper and steel still that has occupied the southwest corner of the big red building off Lynn Avenue since the early days of the Covid-19 pandemic. The Nation bought the still new for about $327,000.
Hunter Gambill, the son of retired Osage County Associate District Court Judge B. David Gambill, is the owner of Oklahoma Distilling Co., which is based in Tulsa and owns a variety of stills in the state, producing Indian Grass vodka, a white agave kind of mescal, a floral gin, whisky orange liqueur, a bitter like the Italian Cynar made of artichokes but based on okra that it calls “Okrahoma,” and other spirits.
In a press release issued the last week of February, the Nation described the partnership with Oklahoma Distilling as one in which Gambill would be teaching Osage Nation employees how to use the still to produce hand sanitizer, a substance that was in short supply when the Nation obtained the still but is now in abundant supply.
“With CARES Act funds, we were able to secure state-of-the-art distilling equipment,” Secretary of Natural Resources Jann Hayman, who executed the lease on Nov. 17, 2022, said in the press release. “At the time, hand sanitizer supplies were in high demand with low supply, especially in our area. Currently, that is no longer the case and we want to be able to put this equipment to good use, while educating our team members on how to operate it” should a shortage of hand sanitizer recur.
The press release says that “the lease agreement includes an apprenticeship component to train Osage Nation employees on how to work the machinery, as well as food branding development for future Osage Nation products.”
The Osage News obtained the lease agreement by making an Open Records Act request, and a review of it revealed no apprenticeship clause, although Gambill said his company intends to instruct the Nation in the operation of the still.
In a written response to the Osage News, Hayman and others said that the agreement with Oklahoma Distilling is still being ironed out.
“DNR is in the process of creating an operations agreement, in cooperation with Oklahoma Distilling Company, to create hand sanitizer for the Osage Nation’s use,” the email said. “There are certain parameters that have to be met in the lease to properly navigate the licensing procedures.”
The lease says that the only permitted use of the still is “alcoholic beverage production,” and contains a clause that the tenant cannot use the premises for any other purpose but that.
In the press release, Hayman said that the still was purchased using federal CARES Act money that the federal government paid out for pandemic relief. The Nation used CARES Act money for other infrastructure investments aimed at establishing food sovereignty, including Butcher House Meats, the 40,000-square-foot greenhouses at Harvest Land, along with the adjacent 44,000-square-foot food processing facility that houses, in part, the still.
“The Osage Nation works diligently to remain compliant within the spending rules and regulations of CARES Act spending,” Hayman said in the release. “Having trained staff members ready to use the distillery if the need were to arise is a key component in this process, but finding that training has been a challenge.”
In the email sent a week after the press release, more details were offered: “Under CARES, there were only three main qualifying conditions to make it allowable. First, that it was a ‘necessary expenditure’ caused by COVID. Second is that the expenditure was not previously budgeted for and third that it was spent before the end of the project period. The overwhelming lack of hand sanitizer due to COVID met the first requirement. We had not budgeted for this equipment and we spent it before time ran out. That cleared the regulations in the CARES guidance.”
“The main provision that would apply here would be the general prohibition against economic development. We stay in compliance with this the same way with all our CARES Act food security measures at Harvest Land and Butcher House, by recycling program income back into the program to reduce costs.
“Economic development is not allowed, but sustainability measures to reduce costs and increase service is a recognized and generally encouraged best practice. Additionally, the very first CARES frequently asked question specifically asks if governments must get approval from Treasury for a CARES Act expenditure. It plainly states that ‘Governments are responsible for making determinations as to what expenditures are necessary due to the public health emergency … and do not need to submit any proposed expenditures to Treasury.’
“That said, due to the nature of this proposal, we went above and beyond and discussed this program directly with the US Treasury Department. After explaining how the hand sanitizer program got to this point and how we are staying in compliance with regulations, the Treasury Department found no issue with our proposed program in regards to the CARES Act.”
A new industry in Indian Country
The craft spirits market is a hot one, predicted to reach $124.7 billion globally by 2027. Domestically it has more than doubled since 2016, from $3 billion to $7.5 billion in 2021, according to the American Craft Spirits organization.
Indian nations, including some in Oklahoma, are pursuing profits through alcohol, not to sell to their own members but to augment their income as other tribal business enterprises start to fade, said Justin Stiefel, the chief executive of Heritage Distilling in the Pacific Northwest.
The reason is plain, Stiefel said: Tribes are facing challenges to their income streams and are adjusting their business plans to overcome those hurdles. The economic reality, he said, is that:
- Casinos attract patrons whose average age is 55, thus they are trying to appeal to a younger set by brightening up gambling spaces and offering more youthful, hip amenities;
- Craft beer has been popular, and many tribes – including the Osage Nation – featured brewpubs at their casinos, but that movement has plateaued;
- Some tribes manufactured tobacco products, but they are increasingly unpopular and the Food and Drug Administration is aiming to have all tobacco nicotine-free or close to it, a likely death knell for cigarettes; and
- Tribes with gas stations are looking at diminishing profits because electric cars are going to make them increasingly obsolete.
Meantime, Stiefel said, craft spirits are “the big thing,” a profit center that some tribes are plumbing.
To get there, an 1834 law had to be repealed
Indian tribes did not always have the ability to make spirits but won that right thanks largely to Stiefel, who was working with the Confederated Tribes of the Chehalis Reservation to building a joint brewery and distillery on their land south of Seattle when a proverbial lightning bolt struck in February 2018.
That tribe was 24 hours away from signing a construction contract when the Bureau of Indian Affairs delivered a letter with the stunning revelation that an 1834 law enacted under the administration of President Andrew Jackson made it quite illegal to build a distillery in Indian Country – and that if the Chehalis did so, they would not only be subject to a fine, but the U.S. Army could be called in to demolish the still used to produce what was called “ardent spirits” when the law was passed.
Stiefel, a lawyer and the former chief of staff to Sen. Lisa Murkowski in addition to being a distiller, embarked on a Capitol Hill campaign to repeal the archaic law.
Thanks to its relationship with Stiefel and his distillery, Heritage Distilling Co., the Chehalis Reservation accomplished something remarkable: In eight months, it had cut through the red tape and persuaded Congress to repeal the archaic law that was preventing the Chehalis from pursuing a profitable enterprise in craft spirits.
That cleared the way for other tribes to legally distill spirits in Indian Country – including the Osage Nation, whose Harvest Land facility is on land held in trust by the United States.
“The message was very clear,” Stiefel said: “Why is it that official policy of the United States government that only Indians are barred from participating in a profitable, growing industry? It was just wrong on its face.”
The origin of the act that made it illegal to distill spirits in Indian Country, he added, lay in Andrew Jackson’s policy of manifest destiny, to populate the West as fast as possible with white settlers. That inevitably led to conflicts with Native Americans, and non-Natives set up backwoods distilleries whose products lawmakers at the time believed caused conflicts.
“As more settlers came in, more conflict broke out,” Stiefel said. “Finally, Congress said enough, and created Indian agents …
“One thing forbidden was ardent spirits. They didn’t want it being used to take advantage of Native Americans.”
Tribes flocking to open distilleries
It has been less than five years since the 1834 law was repealed, and tribes are now setting up distilleries, some with turnkey help from Heritage Distilling’s Tribal Beverage Network, which advises tribes on how to keep state liquor and sales taxes, use local grains and supplies to produce liquor, create new jobs and improve profit margins at casinos and other tribal businesses.
“There’s a lot of compliance on the back end, and it takes a lot of staff and knowledge to avoid mistakes,” Stiefel said. “To take advantage of tax collections, tribes need to own their own enterprise, make it on tribal land, and sell it to consumers on tribal properties.”
He said the Tribal Beverage Network has agreements hammered out with several tribes, including at least one in Oklahoma and others all over the United States from Oregon to North Carolina, to build distilleries.
He wouldn’t name the Oklahoma tribe because he believed the tribe should make that announcement, not him.
