Liquid gold in a glass

The future of North County’s wine industry — crucial to a $1.2 billion tourism economy — depends on an aquifer facing unprecedented crisis

jlynem@thetribunenews.comJune 18, 2013 

Correction: An earlier version of this story incorrectly referred to Susan Harvey as a board member of PRO Water Equity. Harvey supports the PRO Water Equity group but is president of North County Watch.

Editor's note: This is the third installment in a five-part series. Coming Wednesday: For years, Paso Robles leaders thought their city sat on an endless reservoir of water. The past three decades have revealed a harsh reality: It’s just not true.

With its miles of vineyard-covered hills, Paso Robles is a wine enthusiast’s dream and a boon to the local economy. Wine and its related businesses generate thousands of jobs, from the workers who tend the vines to those who design the wine labels, and it has helped spawn a booming tourism industry.

Although the wine industry’s growth over the past 30 years has been one of the key economic drivers for San Luis Obispo County, it has come at a high price. The Paso Robles groundwater basin has suffered declining water levels, and that has fueled grave concern about whether there will be enough water to sustain North County residents and businesses — as well as the wine industry.

Wine-grape growers have been at the center of the debate over the basin because agriculture — primarily vineyards — pumps more water from the aquifer than any other user, about 67 percent, according to the latest basin study in 2006.

Although growers are improving their water conservation methods, critics say it’s not enough to stop the precipitous drop in water levels, mainly because demand is outpacing the aquifer’s supply. Some are urging the county to adopt a variety of regulations, much to the dismay of local wine-grape growers who believe compromises must be found to ensure the industry’s economic viability.

“Wine has been a wonderful industry for our economy, but it could be short-lived if nothing is done,” said Laura Edwards, of the Upper Salinas-Las Tablas Resource Conservation District and a member of the Paso Robles Groundwater Basin Blue Ribbon Steering Committee tasked with developing solutions to replenish the groundwater basin.

The power of grapes

Whether it’s visitors hiking through vineyards, sipping wine in tasting rooms or attending annual festivals such as Sunset Savor the Central Coast, wine touches many facets of local tourism. As the county’s top economic driver, tourism generated $1.2 billion in visitor spending in 2011, according to the latest information available from Visit San Luis Obispo County, the county’s visitors and conference bureau, and the U.S. Travel Association.

Tourism employs nearly 16,000 people in the county in jobs ranging from hotel and food service to arts and entertainment, retail and transportation, according to the bureau. Paring back wine-grape growth could have a ripple effect on the county’s overall economy, cautioned Jordan Levine, an economist with Beacon Economics, a Los Angeles-based firm that keeps track of the region’s economic health.

It would mean fewer jobs at wineries, in the vineyards and in other sectors that help to support the industry, including the harvesting of wine grapes, processing and production. It could impact utility providers, people who produce fertilizers, “agri-business stuff that forms the supply chain for the wineries,” he said.

Moreover, if grape growers and wineries aren’t as successful, it could have an adverse effect on county tourism.

“Lots of people go to San Luis Obispo County for the climate, the cities and the beaches, but alongside of that, there’s that wine-tourist element,” he said. “If you mitigate that incentive, then there might be more competitive pressure from other parts of California for those tourists.”

Tourism engine

The current economic impact of the county’s wine industry is unknown because no recent studies have been done. The latest study, released in 2007 by MKF Research LLC, found that wine and its related products and services generated nearly $1.8 billion in economic value for the Paso Robles American Viticultural Area and greater San Luis Obispo County wine and wine-grape industries, including more than 8,000 full-time jobs with wages of more than $240 million, more than $86 million in state and local taxes and 1.2 million winery tourist visits.

Although there is no current data — the MKF study was based on 2006 data — a visit to North County wine country, with its rows of vineyards and wineries tucked into the hills, is proof that viticulture reigns.

“Wine gives another dimension to the tourism market in SLO County,” Levine said. “It’s what differentiates it from Santa Barbara or even someplace like Monterey. In SLO, it goes hand in hand. It’s part of the package that makes tourism in SLO attractive.”

Since wine grapes were first planted in the 1970s and 1980s in the North County, they have steadily replaced traditional nonirrigated field crops — such as barley, wheat and oat hay — as well as almond and walnut orchards. County officials attribute the move toward wine-grape production to economics, as property owners discovered they could get a greater return per acre on wine-grape crops.

Wine grapes now exceed every other agricultural crop in the county in cash value except one — strawberries, grown in the South County. Last year, the county’s wine grapes set a new record for value at more than $197 million. Total production of wine grapes increased 31 percent in 2012, largely because the crop rebounded from the previous year’s April frost.

Grape acreage continues to grow as wineries expand and plant new varietals.

In 1972, wine-grape acreage stood at 540 acres. By 1989, it had increased to 7,649 acres, and by 1998 to 11,897. As of last year, county agriculture officials reported that there are 36,550 bearing acres of wine grapes and more than 38,000 planted acres in the county, with the majority of them — about 32,000 — in the North County.

No one knows for sure how many acres of North County wine grapes will be planted in the future or which property owners are planting because there are no land-use permitting requirements for crop production, and the county’s agriculture officials do not track vineyard plantings outside of pesticide use.

Last year, though, planted wine-grape acreage expanded by 3 percent, again mostly in the North County. It has been estimated that an additional 3,000 to 8,000 acres will be planted this year. That’s a jump of 8 to 21 percent.

Paso Robles well understands the impact.

Nearly 40 years ago, many buildings downtown sat empty, and on a “Saturday in July, you could have driven to the city park at 6 p.m. and had any parking space you wanted,” recalled Gary Eberle, one of the North County’s early wine pioneers.

“Now, you drive to the city park at 5 or 6 and you have to go blocks to find a parking space,” he said.

Wineries’ water use

Like many wine-grape growers, Eberle argues that wine grapes use less water than other crops such as alfalfa, and contends that those outside the industry have a misconception about how much water it takes to grow wine grapes. The less water used on the vine, the better quality the grape, and it’s the quality that helps them to remain competitive, growers say.

“Vineyards have gotten a bum rap,” Eberle said. “Grapes at maturity on drip irrigation are not using that much water.”

Regardless of whether wine grapes are an efficient crop, the “fundamental issue is whether the industry is consuming enough to make the groundwater table drop,” said Mark Battany, who conducted a study measuring annual irrigation over a three-year period at 84 vineyards in an area of the basin that experienced significant declines in water levels.

“If you look at an individual vineyard, the chances are that the vineyard itself isn’t using that much water,” said Battany, a viticulture farm adviser with UC Cooperative Extension. “If anything, it might be using too little. But what we have to look at is the totality of all the vineyards, which is a large number of water users.”

If total acreage expands and the average amount of water use per acre remains the same, “then yes, the vineyard acreage as a whole will consume more groundwater and thus place increased stress on the groundwater basin,” Battany said.

Sue Harvey, president of North County Watch and a supporter of PRO Water Equity, a group of rural landowners seeking the equitable allocation of groundwater, believes the county has mismanaged the basin.

She and others want an urgent moratorium on all agricultural overhead irrigation, including frost protection measures, as well as a moratorium banning construction of all reservoirs for the storage of water for irrigation purposes.

Aside from the harm of dropping water levels for homeowners, vineyard owners likely to suffer most are those small, family-owned operations that “won’t have the financial ability to dig deeper wells,” she said.

Nat Sherrill, vice president of the PRO Water Equity group and a former winery owner in the Santa Cruz Mountains, agreed.

“It’s a politically charged thing, and I think the smaller growers are much more in fear of what’s going on than the large growers,” who have enough money behind them and will be able to take their investment and amortize it over a short period of time, he said. “If water runs out, they can walk away and do something else.”

Small farmers don’t have that option, he said. “They have got problems, and I know some that are scared to death they will run out of water.”

Sherrill added: “I think it’s fair to say there are a number of growers that are very responsible about water use, and a number of them that have used far more than they needed to.”

There was a time, Eberle acknowledged, when “people said water from the basin could never be depleted.”

But there’s broad agreement among growers now that dropping water levels are a problem, water is expensive and that it pays to use less, said Eberle, noting that paying for water is about a third of his budget. Eberle is using a quarter of what he used to.

“When you get to a point where water is so expensive that you can’t compete, it (vineyards and wineries) will go away,” he said.

Seeking compromise

From an economic standpoint, the community cannot afford to run out of water or lose vineyards, said Dana Merrill, a blue ribbon steering committee member, owner of Pomar Junction Vineyard and Winery in Templeton and Mesa Vineyard Management, a firm that manages thousands of North County vineyard acres.

Merrill isn’t in favor of broad restrictions for wineries, but he is open to a solution that balances the needs of citizens with that of agriculture.

“You can’t stop everything,” said Merrill, also a member of a new agriculture group pushing for the development of a water management district. “To me, we need a viable sustainable economy, and wine grapes are the key component of this whole thing.”

Battany of UC Extension said putting limits on vineyard development would “create winners and losers.”

“Winners being those with established vineyards and access to water; losers being those with undeveloped land that they paid a high price for expecting to be able to plant a vineyard, but were later denied the ability to do so,” he said. “That will be a very difficult issue to deal with. The expectation of some future limit on vineyard plantings may be in part driving the current vineyard planting boom in the Paso Robles area.”

Lowell Zelinski, owner of Precision Ag, a vineyard management and consulting firm, believes the wine industry would survive, even if there were big changes in the law that forced growers to pump less groundwater or transition to dry farming.

“If you could only pump half of what you’ve been pumping, it wouldn’t cut yields in half, maybe 30 percent or so,” he said. “It would make a vineyard less profitable, but it wouldn’t put many out of business.”

The solution, say many on both sides of the issue, might call for obtaining supplemental water from an outside source such as Lake Nacimiento or the State Water Project, which could be costly and unreliable. Another action would be to create a local agency that would have the authority to manage groundwater resources.

Whatever the outcome, there will be no perfect fix, said Merrill, who has spent thousands of dollars digging new wells to support his own operation. Like many players on both sides of the issue, he would rather not see the matter adjudicated, which means that one aggrieved party has filed a lawsuit over water rights.

“We need water to be in the wine-grape business,” Merrill said. “But we’re all going to have to solve the problem, and we’re all going to have some discomfort. Water has been cheap and easy to find, and we took it all for granted. Now, we have to wake up, and each person has to understand the other person’s perspective, and build a consensus. We don’t want to wind up in a courtroom.”

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