Lactose Distillation has been done for many years in New Zealand - over 20,000,000 litres a year.
"The technology to process deproteinated whey into ethyl alcohol was developed in Europe
about 20 years ago and was purchased from Ireland by the Anchor Ethanol Company in the
late 1970s. Since that time two plants have been established, at Tirau (using a continuous
fermentation process) and Reporoa (using a batch fermentation process). The combined
annual production of these two plants is 11 000 000 litres of ethanol. Two further
independent distilleries based on whey have subsequently been built in New Zealand,
producing an additional 6 000 000 litres. "
http://nzic.org.nz/ChemProcesses/dairy/3H.pdf