California Wine Country May See Increased Water Use Regulation

California Wine Country May See Increased Water Use Regulation

The epicenter of California’s wine industry is now grappling with the prospects of curtailments and other water use regulations. The California Department of Water Resources (DWR) proposes to “reprioritize” several groundwater basins to implement the Sustainable Groundwater Management Act (SGMA). The affected basins include portions of Napa-Sonoma Valley, Alexander Valley, and Russian River Valley, which DWR proposes to elevate to medium priority. 

For basins elevated to medium priority, SGMA requires the development of a Groundwater Sustainability Plan designed to achieve safe yield within 20 years. Groundwater users in these basins can be impacted in a myriad of ways. For instance, local Groundwater Sustainability Agencies can impose groundwater pumping fees, require metering, and restrict pumping.

Wineries and grapegrowers must now scramble to catch-up. Groundwater users in other medium and high priority basins have been actively engaged for months or years in the plan development process. These users have taken the steps necessary to ensure that their Groundwater Sustainability Agencies adequately consider their interests. For each basin in Napa-Sonoma Valley, Alexander Valley, and Russian River Valley now designated as medium priority, a Groundwater Sustainability Agency will be formed, and an appropriate Groundwater Sustainability Plan must be developed by the deadline imposed by SGMA. 

SGMA represents a dramatic shift in California groundwater law, which traditionally afforded overlying land owners the nearly unimpeded right to extract groundwater for use on their land. Therefore, in the past, vineyards could irrigate their crops with groundwater with very few restrictions. The wine industry has made tremendous investments in reliance on groundwater rights, and those investment-backed expectancies are now in jeopardy. 

California is not the first Western state to grapple with an overhaul of its system of groundwater management in response to groundwater overdraft. In Arizona, the businesses that were effectively represented fared much better than the groups that stood on the sidelines. As a result, some water users enjoyed widespread protection of existing groundwater uses, while others were cut off from valuable supplies that would have supported significant economic growth. For instance, certain agricultural users were well-represented, and, as a result, vast agricultural irrigation uses were grandfathered in to Arizona’s Groundwater Management Act. Other unrepresented business sectors, whose land values were tied to future groundwater development, faced uncertainty and increased water supply acquisition costs.

Turning water into wine is big business in California, and wineries and grapegrowers should take the necessary steps to ensure that they are adequately protected in the plan development process. Simply put, the wine industry is essential to California and its economy. California wineries are responsible for more than 80% of domestic wine production, and is valued at $35.2 billion in annual retail sales in the U.S. alone. The industry is estimated to support 325,000 jobs in California. It is therefore critical that the Groundwater Sustainability Agencies tasked with developing plans in wine country are made to appreciate and account for these important water uses. 

The good news is that each Groundwater Sustainability Agency is required to consider the interests of all groundwater users in the basin. The wine industry has the advantage of a very compelling story in regards to the economic value, relative to other water uses, of an acre-foot of water used to grow grapes; the vast tourism generated and supported by the industry; and in regards to the overall economic importance of winemaking to the state. Accordingly, wine industry stakeholders who participate and demonstrate the importance of their water uses to their Groundwater Sustainability Agencies are likely to find themselves in a much better place than those who sit on the sidelines and wait for the dust to settle.

Winery owners should actively engage in the plan preparation process, which involves a complex mix of legal and scientific issues.  Accordingly, best practice is to assemble a multidisciplinary team including water law expertise and the necessary technical background in areas that may include agriculture and hydrology. Retaining a water lawyer and a technical consultant in these early stages is the best way to influence the terms under which each user will be allowed to continue to pump groundwater in the future.

In addition, it is wise to use the plan development process as an opportunity to impress upon your Groundwater Sustainability Agency that you are committed to doing whatever is reasonably necessary to protect your water uses and your business. From the Groundwater Sustainability Agency perspective, a strong plan development participant will be perceived as a strong litigant, and as someone who is better befriended rather than alienated during the plan formulation process.

Each stakeholder should also create a comprehensive written record reflecting the information that the Groundwater Sustainability Agency is required to consider, and do it in a way that is likely to have a positive influence on plan development. This written record serves the secondary purposes of supporting a potential legal challenge if your concerns are not adequately considered. This is important, because the measures that will be required to achieve sustainable yield are likely to involve unacceptable levels of future economic risk for many stakeholders, and it therefore seems inevitable that many Groundwater Sustainability Plans will be litigated. A stakeholder who helped to create the written record of the plan development process will be in a much better position, whether that stakeholder ultimately seeks to defeat the Groundwater Sustainability Plan, or defend a plan against others who fare worse under its measures.

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