The California wine industry is huge; in terms of retail sales, wine is the state's top finished agricultural product. California produces approximately 450 million gal. of wine per year, and total revenue from the wine industry and its associated support functions–from trucking to equipment to wine labels–runs to more than $28 billion a year. Napa Valley alone has more than 300 wineries of various sizes.

Other industries are watching closely to see how local governments finally cope with the industry–on a project-by-project basis or under a general classification–and how government and industry divide the financial burden of determining compliance.

Federal and State Regulations

In 1987, Section 319 was added to the federal Clean Water Act (CWA), requiring each state to assess nonpoint-source (NPS) pollution problems, identify sources of pollution, and implement management programs to control NPS pollution. All states by now have begun the process of assessing watersheds, identifying beneficial uses of the water bodies in each, identifying stressors (pollutants) that are negatively impacting those beneficial uses, and inducing stakeholders within each impaired watershed to reduce discharges of the known stressors. A water body identified as having impaired beneficial uses is placed on the federal 303(d) list, and the state is then charged with establishing numerical limits (total maximum daily loads, or TMDLs) on the stressor at appropriate locations within the water body and reducing total discharges of the target stressor to levels that do not impair beneficial uses.

One of the most common stressors identified in 303(d)-listed waters is sediment or siltation. Stormwater runoff is probably the most common mode of transport for sediment. Many activities not previously covered by an existing National Pollutant Discharge Elimination System (NPDES) general stormwater permit clearly have the potential to contribute sediment to local water bodies.

State and local governments with oversight responsibilities in 303(d)-listed watersheds are coming under increasing pressure to ensure that the cumulative effect of all activities within a watershed will not lead to a persistent violation of the inevitable TMDL target discharge levels. In California, the California Environmental Quality Act (CEQA) provides the legal framework for the manner in which local governments implement the TMDL process.

The CEQA Process and Its Exemptions

The CEQA process is defined in Division 13 of the California Public Resources Code, Articles 21000-21178, and is further clarified in Title 14, Sections 15000-15387 of the California Code of Regulations (the CEQA guidelines). CEQA provides that public decision-makers and the public are informed about the potential, significant environmental impacts of a proposed project.

PRC§§21065 and CCR14§15378 define the scope of projects subject to review under CEQA. A proposed enterprise is a "project" under CEQA if it "has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment," if the project is undertaken, subsidized, or permitted by a public agency (CCR14§15378).

Complying with CEQA is typically approached in the same manner as establishing compliance with most regulations seeking to govern the conduct of commerce: by exploring possible avenues to exemption from the regulation.

Statutory Exemption (Stat Ex) from the CEQA process is allowed for a number of classifications of projects, most of which are ministerial under the lead public agency's statutes and ordinances (PRC§§21080). Ministerial projects are defined under the CEQA guidelines as "involving little or no personal judgment by the public official as to the wisdom or manner of carrying out the project. The public official merely applies the law to the facts as presented but uses no special discretion or judgment in reaching a decision. A ministerial decision involves only the use of fixed standards or objective measurements, and the public official cannot use personal, subjective judgment in deciding whether or how the project should be carried out. Common examples of ministerial permits include automobile registrations, dog licenses, and marriage licenses. A building permit is ministerial if the ordinance requiring the permit limits the public official to determining whether zoning allows the structure to be built in the requested location, the structure would meet the strength requirements in the Uniform Building Code, and the applicant has paid his fee." (14CCR§15369).

CEQA provides that neither a public review period nor a public notice of exemption (NOE) from CEQA is required when the project is statutorily exempt from CEQA, and the basis for exemption is that the agency's project review process is completely ministerial.

For projects sufficiently complex as to require discretionary judgment on the part of the public agency in evaluating the potential for environmental impacts, Stat Ex from CEQA is not an option. Where the public agency, in its judgment, considers the impacts to be less than significant, a Categorical Exemption (Cat Ex) from CEQA may be issued.

CEQA does not require a public review period for Cat Ex projects. Although not required under CEQA, public agencies generally file NOEs, but only after the agency has determined to carry out the project. In the interest of keeping the public informed, Subsection 15061(d) allows the NOE to be completed during the preliminary review and to be kept with the project file during the processing of the project application. By including the notice in the file, the agency would show any people reviewing the file that CEQA had been considered, that the agency regarded the project as exempt, and that the agency would be ready to file the notice as soon as the decision was made on the project.

Cat Ex determinations generally withstand legal scrutiny. But when a large number of essentially identical projects are proposed to be conducted in close geographical proximity to each other, the cumulative impact of all of the projects considered together becomes a consideration. CEQA denies Cat Ex status to a project when "the cumulative impact of successive projects of the same type in the same place, over time is significant" (CCR14§15300.2[b]).

Where the Cat Ex is not an option, CEQA requires either a Negative Declaration (ND), a Mitigated Negative Declaration (MND), or a full-blown environmental impact review (EIR). In all cases, an initial study is the first step in the process. This study may support the preparation of an ND or an MND, or it may serve as the basis for an eventual EIR.

CEQA requires public review periods of three to six weeks as part of the approval process for any projects not statutorily or categorically exempt. In addition, public noticing is required before all public review periods and after all decisions have been reached.

A project that cannot achieve Stat Ex or Cat Ex status and goes instead to the initial study level turns into a costly and lengthy process. Regulatory approval time frequently increases from months to years. Costs can increase from tens of thousands to millions of dollars.

Vineyard Development Regulation in Napa and Sonoma Counties

A topographical map of the Napa Valley illustrates the runoff potential of the surrounding hillsides.

In the wine country of northern California, a critical battle is being played behind the scenes as local governments grapple with the dilemma of how to shepherd their constituent base through the expanding CEQA maze. This battle could set precedents for how future stormwater regulations are enforced and administered in many industries and localities–and who pays for it.

In 1987, a vineyard development operation was found to be the cause of a significant movement of soil into Bell Canyon Municipal Reservoir, an important drinking-water source for the Napa Valley. Napa County was stimulated to generate California's first hillside vineyard ESC ordinance. In 1991, Napa County adopted the state's first county ordinance specifically regulating vineyard development. The planting of new vineyards on slopes greater than 50% was prohibited, and vineyard development activities on slopes greater than 30% were restricted.

In response to public comment regarding the application and enforcement of the new Napa vineyard ESC ordinance over the first seven years of its existence, the Napa River Watershed Task Force (NWTF) was formed in December 1998 to develop recommendations for possible improvements to the ordinance. The task force was originally funded with $100,000 of county money and anticipated producing, in less than a year, a set of recommendations for conservation strategies to protect natural resources. Seventeen local citizens representing a cross-section of stakeholder interests served on the task force.

In September 1999, the Sierra Club sued Napa County, the county planning director personally, and a private winery/vineyard developer, claiming that the county's administration of the original Napa vineyard ESC ordinance failed to provide for adequate environmental review of proposed vineyard development projects and so did not provide effective protection of water quality and wildlife habitat.

The lawsuit challenged the county's tendency to judge the projects as categorically exempt from CEQA and therefore not subject to public review before approval. The lawsuit also charged that the cumulative impacts of all the projects were not being adequately considered.

The final release of the NWTF recommendations was delayed so that the stakeholders could attempt to reach unanimous consensus on as many issues as possible. The goal was to develop guidance for revisions to the vineyard ESC ordinance that would make its administration more ministerial and thus less susceptible to legal challenge.

On October 1, 1999, the first version of the Sonoma County Vineyard Planting and Replanting Ordinance became effective after approval by local government in June. The original Sonoma ordinance required that vineyard erosion control plans be submitted to the agricultural commissioner for technical review, to determine whether or not proposed vineyard ESC plans would adequately control erosion associated with vineyard development.

The Sonoma ordinance explicitly asserted exemption from CEQA under another section of the state CEQA guidelines, CCR14§15308, which provides that actions by regulatory agencies for the protection of the environment are categorically exempt from CEQA. Within two months of its implementation, after considering the issues raised by the Sierra Club lawsuit against Napa County and the prospect of challenges to Cat Ex determinations based on the cumulative impacts issue, Sonoma County sent the new ordinance back to the attorneys, with instructions to propose modifications that would address the Napa issues.

In February 2000, Sonoma County adopted a more carefully crafted Vineyard ESC Ordinance that specifically prohibited any technical review of project ESC plans by county personnel. Under the revised Sonoma County ordinance, all of the county's functions were to be strictly ministerial, applying explicitly defined standards that required no discretionary judgment on the part of county personnel during the review process.

The most critical revision to the ordinance removed the responsibility for technical evaluation of proposed ESC plans from the county, delegating that function instead to county-certified professional plan preparers (private land development engineering consultants). The county's role was limited to classifying the project on the basis of the average slope of the land before development, determining the presence or absence of previously existing vineyard on the land, adjusting deadlines for the completion of required site work, and certifying whether the ESC plan preparer was qualified to perform the work. The methods for determining predevelopment slope were rigidly codified.

After requirements for discretionary judgment on the part of the county were removed, and its role limited to administering purely ministerial decisions, the nature of the process was changed to be essentially the same as the issuance of building permits and business licenses and the approval of final subdivision maps. By structuring the ordinance in this way, Sonoma County sought to ensure that proposed vineyard development projects that met Sonoma County review standards under the revised protocol would qualify for Stat Ex from CEQA review, as described in the Public Resources Code Section 21080. Stat Ex projects require no public review and no public noticing and are generally tougher to challenge in court than Cat Ex projects.

The revised Sonoma ordinance retained the claim of Cat Ex from CEQA under §15308 of the CEQA guidelines. By adding the claim of Stat Ex under PRC§§21080, Sonoma hoped to eliminate legal challenges at the county level over vineyard development projects. The burden of demonstrating compliance with CEQA was shifted to the private consultants developing the ESC plans.

On April 25, 2000, Napa County settled the 1999 Sierra Club lawsuit. The county continued to assert that the replanting of existing vineyards on the same footprint would not be considered as projects under CEQA. The county acknowledged, however, that CEQA did apply to many agricultural projects involving earthmoving activities on slopes of 5% or greater. A process was defined by which county staff had the discretion to apply the Cat Ex to projects they judged would not produce significant impact, and would also be responsible for the decisions involved in the initial study phase of the CEQA process. This settlement placed significant responsibilities and liabilities on the involved county agencies. In the following 12 months, about 100 proposed vineyard projects were fed into the county's new review process, and very few made it out the other end, as the county struggled to train staff for their expanded review responsibilities.

In September 2000, two years and approximately $400,000 after its formation, the NWTF released a 228-page final report of recommendations. It was able to agree on specific recommendations for nearly all issues except the width of the setback zone through riparian corridors to be required when replanting existing vineyards. Many vineyards in Napa County had long been established relatively close (less than 50 ft.) to streambanks because of the limited availability of land and the high cash value of the crop produced. Although NWTF members generally agreed that activities associated with vineyard replants should be restricted in some way within 50 ft. of top of bank, the NWTF stopped short of recommending explicit guidelines on what those restrictions should be. A primary impediment to consensus was the thorny problem of mandating a net loss of vineyard acreage when replanting vineyards adjacent to streams, as well as who would bear the financial burden of such a loss.

On March 23, 2001, the director of the Napa County Conservation, Planning, and Development Department (the agency administering the vineyard ESC permitting process) was replaced. By December 2001, about 65 projects had been approved for construction, many of them on the basis of the Cat Ex.

In November 2001, the Sierra Club once again took issue with Napa County's permit process, asserting as it had in 1999 that the cumulative impacts of all of the projects considered together were not being taken into account. Another lawsuit was threatened if the county continued to evaluate each project in isolation from other similar projects proposed in the same watershed.

In January 2002, Napa County responded to the Sierra Club's concerns by initiating an effort expressly intended to study and report on the cumulative effects of vineyard development over the entire 269,000-ac. Napa River watershed. A $130,000 contract with a private consultant was approved to revise the County Conservation Ordinance in areas on which the NWTF was able to reach consensus. The scope of the revisions includes the development of explicit performance standards and recommended best management practices to reduce the number of projects requiring discretionary permits by the county. The consultant will also be preparing an initial study to address the cumulative impacts issue. The process is tentatively anticipated to lead to the preparation of an ND by July 2002.

Significantly, the current conservation ordinance revision is not scoped to include the critical subject on which the NWTF was unable to reach consensus: stream setbacks. The conservation code revision dealing with stream setbacks is still to be planned. The potential for the process to go beyond the ND phase to a full EIR still exists if, after all issues including stream setbacks are considered, it is concluded that water-quality impacts cannot be avoided.

Local Enforcement Strategies

In California, primary enforcement oversight for CEQA regulations related to NPS water pollution issues is vested in the State Water Resources Control Board (SWRCB). The SWRCB has developed a three-tiered approach to the task of addressing watershed-scale water pollution issues, with each tier employing increasingly stringent policies and enforcement mechanisms. The rationale behind the three-tiered approach is that many NPS problems are best addressed through the self-determined, cooperative efforts of the stakeholders themselves (Tier 1), but there might be cases where persistent NPS pollution problems are not effectively addressed by self-determined actions alone. In such persistent cases, Tier 2 and Tier 3 strategies have been developed and may, if necessary, be brought to bear.

Nine regional water-quality control boards (RWQCBs) serve as the local enforcement agencies for the SWRCB. Each regional board determines which tier is appropriate for particular locations and issues within its local region. The regional boards have considerable latitude in choosing which policies and enforcement mechanisms are to be used, but all have demonstrated a clear tendency to achieve CWA water-quality goals through voluntary action whenever possible.

The first tier of implementation efforts involves self-determined implementation of water quality management practices (public outreach, education, and programs to induce voluntary efforts at the local level). The NWTF was one response to this first-tier enforcement effort.

If Tier 1 efforts fail to achieve water-quality goals, then the regional boards become more involved in the process and pursue regulatory-based encouragement of management practices (Tier 2: increased monitoring, increased involvement in ranch management by the regulating agencies). No one will like this very much. If Tier 2 fails to achieve water-quality goals, then the regional boards will move on to Tier 3 measures: enforcement actions that direct future actions by dischargers (nasty things that we don't even want to think about, such as waste discharge requirement orders, cleanup and abatement orders, cease-and-desist orders, and administrative civil liability).

The Way Things Stand Today

A Phase I TMDL study on the Napa River is in progress, as required by that water body's 303(d) listing for sedimentation and nutrients. A report is tentatively expected by June 2004. The San Francisco Bay RWQCB has warned that Napa County could find itself moving toward Tier 2 of the local CWA implementation process, with the potential for increased monitoring requirements and increased regional board involvement in ranch management.

At this point the current effort to rewrite the Napa County Vineyard ESC Ordinance will probably be completed in draft form and back before the board of supervisors in July 2002. The draft may be proposed as a complete statute, but alternatively it may be subjected to a deeper review for conformance with CEQA, which would take at least another year. The approach to the stream setback issue will be key in determining how the process plays out from here.

Elsewhere in California, other counties with significant wine-grape industries are holding off producing any vineyard ESC ordinances at all. The Salinas River in Monterey County, Chorro Creek and San Luis Obispo Creek in San Luis Obispo County, and the Santa Ynez River in Santa Barbara County are all 303(d)-listed for siltation, nutrients, or both due to agriculture. How far Napa and Sonoma are compelled to go with the CEQA process might well turn out to be a blueprint for other counties in the future.

Who Will Pay?

As local government begins to develop compliance strategies for evolving CEQA standards, we are starting to see significant public resources deployed in pursuit of the goal of reducing discharges of 303(d)-listed constituents. A county government could reasonably be expected to incur expenses reaching seven figures to develop a CEQA-compliant, industry-specific ordinance focusing on certain types of activities anticipated to occur within its jurisdiction. Alternatively, 75 project proponents could spend $20,000 each to pursue their for-profit business activities and could achieve regulatory compliance by defining their projects as construction and complying with the NPDES general construction permit. The net cost is the same order of magnitude. Why should the entire citizen base subsidize a small group of private developers? Where do you draw the line between serving the public interest and subsidizing a politically efficient interest group?

In most stormwater discharge situations in California, project proponents shoulder the burden of CEQA compliance themselves, usually by filing a notice of intent and complying with the conditions set forth in one of the general permits for stormwater discharges that have been developed by SWRCB. Each general permit defines the performance criteria and monitoring requirements associated with one discrete, narrowly scoped, and rigidly defined classification of projects. SWRCB ensured conformance with the requirements of CEQA on all the general permits as a part of the process of promulgating the general permits. The various general stormwater permits constitute waste discharge permits, and projects regulated under a general permit would be exempt from the CEQA process by Stat Ex under CCR14§15263. By complying with an NPDES general permit, a project fulfills the requirements of CEQA. This approach would shift environmental compliance responsibilities from the county to the individual project proponents.

But in some cases, local government might find that a certain classification of local projects not covered by an existing general permit cumulatively would incur an unreasonable level of expense and effort if permitted individually through the CEQA process. Where supportable and verifiable scopes of activity and standards of performance can be defined for such local projects, local government can attempt to intercede in the CEQA process, crafting ordinances and regulations that define the standards for performance so narrowly as to relieve individual project proponents of the burden and expense of formal, project-specific reviews under CEQA.

It might sound like a simple matter to define appropriate and verifiable scopes of activity, and standards of performance for them, but in fact the process generally ends up costing millions of dollars.

Why It Makes Sense for Government to Pay

Responding to a 303(d) listing and the TMDL stipulations that follow requires a coordinated response on the watershed scale. A certain level of oversight and coordination of resources is appropriate, when the potential costs of long-term nonattainment of water-quality goals can be more burdensome overall than the short-term costs of addressing the issues in a collective, organized manner. When local governments can demonstrate to the state water board that a clear and reasonable program is in place to address water-quality issues on the watershed scale, compliance issues for many types of projects within in the government's jurisdiction are made significantly simpler–and less costly overall.