Movie theaters with restaurant-style food service will reach a broader audience with the recent signing into law of a bill passed by the Washington State Legislature allowing service of food and alcoholic beverages to their patrons. The law as currently written allows some service of alcohol in movie theaters, but requires exclusion of minors from the premises. The new law will create a new, more family friendly, beer, wine and spirits license for theaters. The license will allow minors if certain conditions are met and approved by the Washington State Liquor Control Board, such as submission of an alcohol control plan outlining the methods to prevent minors from obtaining alcohol, similar to plans that are required for clubs and show venues that host all‑ages concerts. Theaters will also be required to meet food and service requirements, similar to restaurants, to qualify for the license. (Senate Bill 5607 as Passed by Legislature)
When the new license goes into effect this summer, not only will it provide an opportunity for luxury theaters to expand their market in the competitive entertainment industry—as more families and groups combine dinner with watching first release films—but it has the potential to create new outlets for Washington’s craft breweries, wineries and distilleries that are likely to promote their products and services to venues that offer up-scale in-theater dining options.
Stoel Rives, LLP had the pleasure of working with our client iPic Entertainment to craft and support passage of this new class of Washington State liquor license.
Expanding on its pilot programs in Seattle and Portland, Starbucks will begin selling wine and beer at a few select locations in Orange County, CA by the end of this year. The program will reportedly sell California vintages and micro-brews. You can read more about the story here and can I get that in a Venti?
In a recent 3-0 decision, a California Appeals Court sided with Freemark Abbey Winery in its attempt to move its wine store and tasting room into a building in St. Helena which already contained a restaurant. The decision reversed the district courts granting of a preliminary injunction which would have stopped Freemark’s move entirely until a trial.
The building is owned by Freemark and the move was challenged by Silverado Brewing Co., the current operator of the existing restaurant. The challenge stems from Silverado’s lease, which gives it exclusive rights to run a restaurant in the building. Silverado claimed that moving Freemark’s tasting room into the same building would violate that exclusivity.
The court based its decision on the word “purvey” which, it stated, in this context simply meant selling. Any other reading, said the court, would lead to “absurd results.” The decision remanded the case back to district court with an order to vacate the broad preliminary injunction the district court had previously granted and an order to institute a new narrow injunction which would “prohibit[s] Freemark Abbey from selling food or beverages for consumption on the premises in any portion of the building” pending trial.
A copy of the court decision can be seen here.
On March 8 and 9, Stoel Rives cosponsored, with Kennedy/Jenks Consultants, the 6th Annual Best Practices for Owning and Operating a Winery, held in Napa, CA. The well attended event covered such topics as valuation, water, energy, and branding. Stoel attorney’s Chris Hermann, John McKinsey, and Jake Storms were all panel speakers with John McKinsey acting as emcee for the second day of the conference.
On December 5, 2011, the TTB published a Notice of Proposed Rulemaking (Notice No. 125) regarding the establishment of the Inwood Valley Viticultural Area in Shasta, California. If established, the new AVA would consist of a 28,000 acre area, the vast majority of which is currently not dedicated to, or known for, vineyards. The TTB invites comments on the proposed rulemaking, with any comments due on or before February 3, 2012. A full version of the Notice and the documents relating to the underlying Petition can be found here.
On Wednesday November 16, the TTB published a ruling (T.D. TTB-97, available here) amending the federal definition of the Russian River Valley viticultural area and the Northern Sonoma viticultural area, by expanding each. The action first began in August of 2008 when Gallo Family Vineyards submitted a petition for the amendment. After receiving numerous comments both for and against, the TTB ruled to expand the Russian River Valley viticultural area south and southeast by 14,044 acres to 169,029 acres, an increase of 9%. This expansion will include land just west of Rohnert Park and Cotati.
The decision will also expand the Northern Sonoma viticultural area to include the entirety of the Russian River Valley viticultural area. The expansion will add 44,244 acres to the Northern Sonoma area, bringing its total to 394,088 acres, also an increase of 9%.
The TTB specifically noted in the ruling that the expansion will not affect currently approved wine labels but will allow winemakers in the expanded area to utilize the two viticultural designations not previously available to them.
The ruling goes into effect on December 16, 2011.
On April 15th, a California Superior Court Judge denied a challenge to San Diego County’s new Winery Ordinance. The Ordinance, passed in 2010 and available here, eases restrictions on tasting rooms and sales for smaller producers and allows others to essentially “fast-track” registration as a “small winery” with such designation allowing for pre-approved events, such as weddings.
The challengers claimed that the Ordinance’s Environmental Impact Report (“EIR”) under the California Environmental Quality Act (“CEQA”) was inadequate. Judge Timothy Taylor disagreed, stating “[t]he Board of Supervisors was, by the EIR, adequately informed about the consequences of its decisions. The public (including petitioner) was provided with adequate information regarding the decisions of their elected leaders.”
The challengers have 30 days from the issuance of the ruling to appeal.
The State Water Resources Control Board (“Board”) held a workshop last week on a proposed regulation designed to assess and mitigate water use from the Russian River by growers in Mendocino and Sonoma Counties during frost season. Though no formal action took place, the Board received numerous comments on the proposed regulation.
The regulation would add Section 862 to the California Code of Regulations establishing that any water diversion from the subject area from March 15 to May 15 not in accordance with a Board-approved Water Demand Management Program (“WDMP”) would be deemed unreasonable. This includes the pumping of hydraulically connected groundwater, but excludes diversions upstream of the Warm Springs and Coyote Dams.
In addition, the new regulation would require the WDMP to include:
· An inventory of the frost diversion systems within the area subject to the WDMP
· A stream stage monitoring program
· Annual assessment of potential risks to salmonids from frost diversions
· Identification and implementation of any corrective actions deemed necessary to protect salmonids
· Annual reporting of the WDMP
The workshop was heavily attended by stakeholders from both government and industry and included a presentation of the projected cost of the proposed regulation. The draft economic report, available here, states that the average cost for those diverters in Mendocino County not requiring corrective actions would be $105.86 per acre in initial capital outlay and $28.50 per acre in annual costs; for Sonoma County, those numbers would be $59.98 and $18.74, respectively. For a 40-acre vineyard in Mendocino, this puts the total cost at $4,234 for initial capital outlay and $1,140 in annual costs; for Sonoma County, these numbers would be $2,399 and $749, respectively.
A common theme from the Board and the audience was that several important terms in the proposed regulation had yet to be satisfactorily defined. Chairman Hoppin, himself a farmer, repeatedly stated his hope that both sides would strive for a balance between protecting species and the water needs of farmers.
Several commentators expressed a need for the Board to address the permitting of offstream storage (i.e., storage ponds) as a tool to help address Russian River overdraft. Chairman Hoppin assured the audience that steps needed to be taken in this arena and that it was on the Board’s radar.
Formal rulemaking and the program’s environmental report are expected in mid-May, with final regulations in place by March 2012.
This past week, Stoel Rives partners Chris Hermann and John McKinsey and associate Jake Storms all participated as panel speakers at the Best Practices for Owning and Operating a Winery conference, held at the Hyatt Vineyard Creek in Santa Rosa, CA. John also acted as co-host of the conference, which covered a wide variety of topics affecting wineries and vineyards, from siting and permitting and valuation to how to build a brand and protect trademarks.
Chris, Chair of Stoel’s Winery and Vineyard Management group, spoke on custom crush agreements and the pitfalls that can affect those who do not adequately protect themselves. John, California Co-Chair of Stoel’s Winery and Vineyard Management group, educated attendees on energy use and utilizing renewable electricity sources. Jake, an associate in the group, spoke on industry trends and California-specific legislative and project actions, including AB 605 and the California High-speed Rail.
The event was well attended, with over 40 stakeholders present at the two-day event. This marks the fifth year of the event, which was sponsored by Stoel Rives and Kennedy/Jenks Consultants, along with industry mainstay, Wines & Vines.
The Sonoma County Board of Supervisors has adopted the final measures for moving ahead with the County’s Frost Protection Program (the “Program”). This final act was merely a carry-over from the February 8 meeting where the Board adopted the fee structure for the Program and extended the time frame for implementation of the Program until 2012.
Under the new Section 11B of the County Code, the Program will be used to gather information on vineyard and orchard water usage in the Russian River Watershed. As previously blogged, creation of the program started after complaints were made by the U.S. Fish and Wildlife Service that frost protection measures that use water from the Russian River Watershed were causing the death of certain protected salmonid species. The federal agency threatened to take action under the Endangered Species Act if the County did nothing. The County moved to create the Program ahead of State action, which is expected to occur in the next 12-18 months.
Implementation of the Program was originally planned for the 2011 frost season. However, County staff informed the Board at the February 8 meeting that two hurdles had sprung up that would delay actual implementation until the frost season of 2012. The first was a seemingly 11th-hour move by certain vineyard stakeholders to not back the program due to concerns of the public nature of the information gathered. The second was the negotiations over the issue of indemnification between the County and the non-profit organization created to assist in the implementation and that would oversee the gages in the long-term.
While a delay in implementation to the 2012 frost season was acceptable to the U.S. Fish and Wildlife Service, it was stated that any further delay would require action on the part of the agency. One Board member suggested that, due to the delay, the Board consider scrapping the Program and creating a fully voluntary concept. This idea was not acceptable to the U.S. Fish and Wildlife Service and was quickly discarded.
Vineyards and orchards within the Program’s umbrella must register with the County Agricultural Commission annually between January 1 and March 1. This year’s registration must occur by June 1. The fee set for the Program is $64.00 per site. This fee will be assessed annually with the required registration. The County estimates there are some 360 sites within the Program’s boundaries.
The Program will have to conform to any future State action regarding the Russian River Watershed. However, the Board was confident that the Program would meet with acceptance at the State level.
For those interested in the status of Washington State wine legislation, the Washington Wine Institute provided this useful legislative update to various wine-related bills moving through the House and Senate.
While wineries and vineyards have long been moving toward being “green,” several have taken the next step by installing renewable energy generation onsite. One of the most recent is August Cellars, just outside Newberg, Oregon. The winery recently installed a 150-foot-tall, 50-kilowatt wind turbine. August Cellars maneuvered around the somewhat prohibitive cost of the project (between $70,000 and $100,000) by not actually owning the turbine, but instead leases the turbine from a third party with an option to buy.
August Cellars is following in the footsteps of such giants as Constellation Wines, which, in September 2010, announced it would increase its solar photovoltaic (PV) usage to nearly 4MW with new installations at its Estancia, Ravenswood, and Clos du Bois wineries in California. These systems would expand on the company’s already existing use of solar PV at its Gonzales winery. Constellation will own the systems and take advantage of the tax credits. Once completed, the installations will cover nearly 100% of the energy needs of Estancia and Ravenswood, 75% of Clos du Bois, and 60% of Gonzales and is projected to save the wine giant nearly $1 million annually from reduced energy costs.
The move by wineries toward renewables is not merely a “West Coast thing” either. Red Caboose Winery, a 10,000-case rural winery located in Meridian, Texas, recently released a statement that it would be using a USDA Rural Energy for America Program (REAP) grant of $15,617 to help install a solar PV system. According to the owners, the new system will allow the winery to have a net annual energy consumption of zero.
If structured properly, installation of renewables can make economic sense for a winery/vineyard, creating significant financial savings from reduced energy costs. In addition, for a wine business, there is substantial public relations value to going “green.” When combined with other energy efficiencies, installing renewables can substantially reduce a winery/vineyard’s carbon footprint. This can, in turn, generate substantial brand goodwill from a public that is becoming increasingly aware of environmental consequences. This is especially true among the wine-drinking demographic.
Wineries and vineyards looking to install renewable energy often encounter a host of obstacles. Two of the largest are variability and cost.
Simply put, the wind doesn’t always blow and the sun doesn’t always shine. Nor does power always cost the same or do governmental entities offer the same incentives. A winery or vineyard contemplating installation of a wind turbine or solar array should look closely at the available resource. This may mean paying for ancillary costs, such as scientific studies. It will assuredly mean a closer look at long-term planning to establish acceptable rates of return given the attendant risk and variability.
In 2009 and the first part of 2010, installation of a commercial solar PV system in the United States with a capacity of 250-500kWDC averaged around $7.10 per installed watt before incentives and tax credits (click here for a more in-depth look). That price can drop to $4.00 per watt or lower after incentives and tax credits, with some larger projects (>2MW) seeing prices as little as $2.50 per watt. While this cost is projected to decline further, it still creates a significant initial capital outlay that may require many years to recoup. It therefore becomes important to view renewable installation in the long term.
With this in mind, wineries and vineyards have several ways of making the use of renewables cost-effective and attractive. These include using tax credits and grants, third-party ownership as in the August Cellars example, and taking advantage of such programs as Net Metering or Feed In Tariffs, where such programs are available.
- Net Metering – This uses a special metering system that credits you for the excess power you generate. Net Metering allows a winery to avoid the full retail cost of electricity and pay only for its “net” use in each billing or truing up period.
- Feed In Tariff (FIT) – A Feed In Tariff allows smaller renewable generators to sell their generation at set rates back to the utility. FIT contracts can be very restrictive and often run from five to 20 years. They also have modest, yet very predictable, rates of return. However, installations being used under a FIT program are generally not eligible for other programs, such as Net Metering.
While the obstacles can be daunting, installing renewable energy at your winery or vineyard can have substantial economic and marketing benefits. An owner contemplating installing a renewable energy system would best be served by having a good understanding of the local resources and looking into all avenues of funding. With proper planning, renewable energy can make your “reds” and “whites” feel green.
With the turn of the calendar and after nearly a year of political wrangling, conjunctive labeling will be the norm for Sonoma County wineries beginning in 2014. Passed by unanimous vote in both the state assembly and senate in August and signed by Governor Schwartzenegger at the end of September, AB 1798 will require wineries using the name of any of the 13 recognized American Viticulture Areas (AVA) within Sonoma County on their labels to include “Sonoma County” as well. The bill is not retroactive as it applies only to wines bottled after January 1, 2014. Failure to comply is considered a misdemeanor and subjects the violator to possible revocation of their ABC license. To achieve compliance, it will be necessary to file for and receive a new Certificate of Label Approval (COLA) from the TTB for those labels already approved.
Response to the new requirements has been mixed. Pushed heavily by the Sonoma County Winegrape Commission and the Sonoma County Vintners, Nick Frey, the Commission’s president, stated, “In this increasingly competitive wine market, building awareness for Sonoma County and the wine regions within the county is critical to Sonoma County grape growers and the wineries they supply. AB 1798 will ensure that consumers recognize every bottle of wine produced from Sonoma County grapes.” However, several large, well-known wine producers in the region see the legislation as diluting their already well-established brands, in addition to the added cost and confusion of including “Sonoma County” on an often already crowded label.
Some of the better known of Sonoma’s AVAs are the Russian River Valley, Sonoma Coast and Dry Creek Valley. California requires conjunctive labeling for three other viticulture areas: Napa Valley, Lodi, and Paso Robles.
On the list of California laws affecting the wine industry in the New Year is AB 605 – the Instructional Tasting Events License. Introduced in 2009 and signed into law September 23, 2010, AB 605 adds to the Business and Professions Code sections 23396.6 and 25503.56. The additions allow the ABC to issue a single “instructional tasting license” to any holder of an off-sale retail license, thus doing away with the need for retailers/suppliers to get a permit for every “instructional tasting” event. Retailers granted an instructional tasting license would be allowed to hold an “event for consumers on the subject of wine, beer, or distilled spirits, including, but not limited to, the history, nature, values, and characteristics of wine, beer, or distilled spirits, and the methods of presenting and serving wine, beer, or distilled spirits.” These events may include the consumption of alcohol.
The retailers may not conduct the events themselves. However, they may invite “authorized licensees” (i.e., holders of manufacturing or supply licenses) to conduct them. The retailer may hold the event if, among other things, the authorized license holder is unable to attend and the event has been advertised and scheduled. In addition, the retailer can’t supply the alcohol for the event; it must be supplied by the authorized licensees or purchased from the retailer by the authorized licensees at the going rate.
The events must be located at a cordoned-off section of the retailer’s premises. The law also sets stringent restrictions on servers and attendees (no one under 21), types of alcohol (wine, spirits, or beer but no combinations), charge (can’t have one), serving amount (one ounce for wine), and event times (between 10 am and 9 pm).
The new licenses are not permitted to be issued to any off-sale licensee at a location where gasoline is sold, unless the licensee operates a “fully-enclosed” off-sale retail space of at least 10,000 square feet (i.e., Costco, Walmart, Safeway, etc.). Nor can they be issued to licensees at locations “with a total of less than 5,000 square feet of interior retail space” unless yearly gross sales of alcohol at that location are at least 75% of total gross sales (i.e., liquor stores).
The fee for the new license is $300. Violations of the age limit are a misdemeanor and carry a penalty of $200 (for both the retailer and the minor). A violation of any section carries a penalty of suspension of the instructional license for the retailer and suspension of the privilege of conducting instructional tasting events for the authorized licensee for a period of six months to a year.
On Tuesday, the Sonoma County Board of Supervisors unanimously passed an ordinance creating a plan designed to protect both vineyard frost protection measures and endangered species in the Russian River. After nearly a year of negotiations, the Board added Section 11B to the County Code, creating a registration program for grapegrowers and plan to assess water use practices for frost protection by utilizing over 100 gauges placed throughout the watershed. Information on usage will be presented to the Board on a yearly basis and will be used to potentially mitigate effects of diversions on a real-time basis.
The move to create a program started when Federal officials informed the California State Water Resources Control Board (State Board) that overuse of water from the Russian River and its tributary, Felta Creek, for frost protection was negatively impacting endangered Coho and Chinook salmon and steelhead smelt. Officials from the National Oceanic and Atmospheric Administration stated that continued overuse and endangerment could result in a ‘take’ under Section 9(a)(1) of the Federal Endangered Species Act, subjecting those responsible to fines and penalties.
The adopted program will be supervised by Sonoma County and includes a scientific review panel. The ordinance provides that the gauges will be overseen by an entity comprised of members of the grapegrowing community. The State Board had rejected an earlier proposal by grapegrowers to voluntarily adopt preventative measures, demanding there be some method to “…kick out bad actors.” On October 27, 2010, the State Board published a Notice of Preparation of an Environmental Impact Report (EIR) and Public Scoping Meeting for their own proposed regulations applicable to the grapegrowers diverting from the Russian River watershed. The State’s plan would cover water diverted for frost protection from the Russian River in Sonoma and Mendocino Counties and hydraulically connected groundwater.
Section 11B creates a mandatory registration program for all Sonoma county grapegrowers. Growers will be required to register with the County Agricultural Commissioner starting in mid-January, 2011 and running through March 1, 2011. Failure to comply could subject violators to fines ranging from $500-$1,000. The Board of Supervisors will vote on a fee schedule for the program in January.
Portland-area food cart owners are innovative, creative, and continue to contribute to Portland’s food and beverage culture. The range of food options varies greatly, but it is easy to find what you are looking for, or get updated on the recent cart happenings, with the likes of Food Carts Portland. Portland’s food cart culture has even been featured in Sunset Magazine and the New York Times.
Recently food cart owners have been exploring the possibility of serving alcoholic beverages to complement your burrito, panuchos, grilled peanut butter and jelly sandwich, falafel, or whatever else you may be enjoying. A limited few are already serving up beer and wine. For example, Pizza Depokos at North Station has a limited on-premises license to serve beer and wine, and Captured by Porches Brewing Co. appears to be serving beer out of a mobile bus under its existing brewery license, as described in an OregonLive.com article. However, whether we will see more food carts serving up beer or wine depends on whether a cart owner can convince the Oregon Liquor Control Commission (OLCC) that it qualifies for a license under the current regulatory scheme.
The first, and probably biggest, hurdle a food cart owner has is the issue of defining the licensed premises. State law prohibits the OLCC from issuing a license to a location that does not have defined boundaries. While a licensed premises does not need to be enclosed by a wall, fence or other structure, it must have defined boundaries that are discernable. Further, state law prohibits the OLCC from licensing premises that are “mobile” unless the premises is a licensed public passenger carrier (like an airline, a railroad, or a tour boat operator). What constitutes “mobile” is up for interpretation at this point and may likely be the subject of the OLCC’s upcoming request to the Oregon Attorney General for an opinion.
Other likely licensing issues include, but of course are not limited to, minor posting, premises control, and local endorsement. These issues exist whether a food cart owner pursues a limited on-premises license, a temporary sales license, or some other privilege like a second or temporary location under another license type (i.e., brewery or winery license). In addition to these license-specific issues that an applicant must address, food cart owners must also be aware of the potential for increased site liability as well as increased regulatory scrutiny through the local endorsement process, which will trigger a compliance review of all applicable zoning, building, and health codes.
Figuring out what information must be on your wine label can be tedious. Adding terms like "organic" or "sustainably-grown" can be even more challenging. Extra steps are required for adding organic certifications or claims to a wine label, although the regulation of such claims under the TTB COLA process has been made more clear with the Memorandum of Understanding between the TTB and the USDA concerning organic labeling and adverting. The MOU clarifies and delineates the enforcement responsibilities of each agency with respect to labeling and advertising of alcohol beverages produced under the Organic Foods Production Act of 1990 (OFPA).
The USDA has authority over domestic and imported agricultural products to be sold, labeled, or represented, as organically produced. Under OFPA, the USDA has established the National Organic Program (NOP). Agricultural products that are sold or labeled as organically produced must be produced and handled in accordance with NOP. Any use of the term "organic" on a wine label or in adverting of wine must comply with the USDA's NOP regulations. Now, with the adoption of the MOU, it is clear that TTB has the regulatory authority to determine whether proposed labels are consistent with NOP.
The Advertising Labeling and Formulation Division (ALFD) of the TTB has guidance for organic labeling applicants. The guidelines provide a step-by-step process of what is required to obtain label approval, including the need for proof of USDA-accredited certifying agent (ACA) preview, a certification statement, a sulfite statement, an ingredient statement, the USDA seal, and so on. The guidelines also contain an organic label quick reference sheet that explains the requirements for the various organic claims, like "100 percent organic," "organic," or "made with organic (specify ingredient)." Additional TTB guidelines on variations of "organic" labeling are available at www.ttb.gov/pdf/wine.pdf.
For fun, I looked at four different bottles of wine that made some claims for "green production." The first was a NSA Organic, USDA certified wine from the Columbia Valley. The bottle was blazed with the "organic" nature of the wine, from the foil marked with "NSA Organic" to the "certified organic vineyard" on the "back" label. The USDA Organic stamp was also featured. Comparatively, an Oregon pinot from Eola-Amity Hills was simply marked with a small "made with organic grapes" statement and certified organic by Oregon Tilth. Then there was another wine from Columbia Valley that, while not having any "organic" claim, was described as a "wine of sustainable and environmentally friendly farming." Finally, the fourth was an Austrian wine certified "Demeter," a biodynamics certification. However, notably many wines that are known to value biodynamic or sustainable farming practices do not make such claims on their labels. Recognizably, this allows for more flexibility and avoids the extra steps of having to prove organic label claims.