1. CALIFORNIA WATER ISSUES Survey of Wine Institute Advocacy Efforts Wine Institute Board of Directors Meeting – March 8, 2016 Tim Schmelzer, Director of Legislative and Regulatory Affairs

2. Winery Wastewater Region 1 – North Coast (North Sonoma, Mendocino) Adopted General Order for Wineries on January 28, 2016 Small Winery Rules: Conditional Waiver for wineries with < 3,000 gallons a day discharge (approx. 10,000 case winery). The waiver requires these wineries to follow best practices and comply with minimal reporting requirements. Larger Wineries Rules: Larger wineries are required to monitor and report their discharges on a semi-annual basis, meet specified effluent limits, and ensure any ponds meet permeability standards. Advocacy: WI advocacy focused on ensuring effluents limits were manageable, waiver eligibility was expanded, reporting frequency was reasonable, additional CEQA analysis was not required, and groundwater could be monitored on a regional basis. In addition, we worked to ensure and compliance was on a reasonable timeline (If unpermitted or covered under previous General Order – applications due in July, if individually permitted, no action currently required). CALIFORNIA WATER ISSUES

3. Winery Wastewater (Cont’d Region 2 – SF Bay Area (Napa, Southern Sonoma, Alameda) Have not yet issued their draft regulations, but have expressed they would like to adopt a General Order for wineries this June. WI met with Board Staff in January to discuss concepts. They’re proposing: Multi-tiered approach depending on risk, with similar waiver applicability. Wineries with poor groundwater conditions will likely face tougher requirements. Allows for 3rd Party Implementation. The County of Napa will likely implement the program in that County. Statewide The State Water Resources Control Board has floated the idea of adopting a General Order for wineries with Statewide applicability. WI met with Board Members and Staff to discuss concepts in February. Very little detail was revealed and concerns were raised about how it will work with Regional Board requirements. CALIFORNIA WATER ISSUES

4. Water Storage Wine Institute and Trout Unlimited jointly sponsored legislation in 2011 to create a ministerial process for the approval of small irrigation ponds. These ponds provide the environmental benefit of allowing vineyards to divert water when it was plentiful for later use. Unfortunately, only a handful of ponds have successfully registered since the program’s inception. WI-sponsored AB 1704 (Dodd) has been introduced to address the program’s shortcomings. Requires Fish & Wildlife to adopt General Conditions. Delineates specific project categories for fast-track. Expands the program beyond the North Coast region. CALIFORNIA WATER ISSUES

5. Groundwater The Sustainable Groundwater Management Act was enacted in 2014. Requires local agencies to form groundwater management agencies and adopt sustainability plans for regions deemed medium or high priority. Agencies are empowered to assess fees and regulate pumping. The State Water Board would adopt a plan if local agency fails to do so. WI successfully advocated for expanded ability to participate in the adoption of sustainability plans, and protection of existing water rights. DWR released draft regulations last Month to provide guidance for sustainability plans. The EWG will discuss and possibly submit comments, which are due later this month. Likely topics for comment include the absence of economic analysis requirements and implementation schedule. CALIFORNIA WATER ISSUES

6. Storm Water Permitting State Water Board Adopted Revised Permit April 2014, with rules becoming effective July 2015 Most significant change was elimination of the exemption for “light industrial facility” which most wineries benefitted from. New Permit Requires: NOI: If storm water can contact your industrial facilities and reach the waters of the US: Payment of a significant fee ($1,282), completion of a storm water pollution prevention plan, and monitoring and reporting requirements. NEC: If industrial facilities are not exposed to storm water, filing of a “No Exposure Certificate” and pay a reduced annual fee of $200. NONA: If storm water from your site cannot reach the waters of the State, you can file a “Notice of Non-Applicability” that is certified by a licensed professional engineer. No fee is required. WI has disseminated fact sheets and developed templates to assist our members with compliance. CALIFORNIA WATER ISSUES

7. Drought Governor Adopts Drought Declaration in January 2014 Mandatory 20% reductions in use ordered, but agriculture was exempt Mandatory Curtailments Ordered Nonetheless, curtailments were ordered in certain regions due to diminishing water availability Emergency Legislation Adopted (SB 88 – 2015) The bill was amended and passed within a 1 week period in June. Purpose was for State to obtain more data on water use. We successfully obtained amendments to exempt smaller diverters (< 10 acre ft) and allow flexibility in measuring procedures. CALIFORNIA WATER ISSUES