Calistoga wine dispute divides Capitol Hill loyalties

WASHINGTON -- California lawmakers are now taking sides in a long-running wine fight begun in quiet Calistoga.

Winemakers in the famed Napa County region want federal recognition that they can use on labels. One hundred eighty-nine such viticultural areas have already been recognized nationwide, and usually they pose no controversy.

This time, though, two existing Calistoga-area wine companies fear the restrictions that accompany viticultural area designation will hurt them. And while federal regulators offer a compromise, it has ruffled more feathers than it has smoothed.

"We have very serious concerns that (the compromise) ... could do lasting harm to the growing American wine industry," Reps. George Radanovich, R-Mariposa, and Mike Thompson, D-St. Helena, wrote in a letter to Treasury Secretary Timothy Geithner.

The proposed compromise involves "grandfathering" two existing wineries so that they can keep their Calistoga labels even though they don't meet standard grape production requirements. The two wineries call this fair. So do their allies, who happen to include the chairman of the Senate Agriculture, Nutrition and Forestry Committee.

Critics, including the California congressmen, say it dangerously dilutes the meaning of a wine label.

"(It) would have substantial, complicated and irreparable consequences for the future," Radanovich and Thompson declared.

The melodramatic-sounding warnings reflect the significance the California wine industry places on labeling. Some of these designated viticultural areas are huge, like the 2.6 million-acre Sierra Foothills region. Others are mid-sized, like the 230,000-acre Madera region. Some are tiny and unheralded, like the 9,000-acre River Junction area straddling San Joaquin and Stanislaus counties.

Radanovich and Thompson co-chair the Congressional Wine Caucus, one of Capitol Hill's largest with some 250 members. Both lawmakers formerly worked in the wine industry. In the Calistoga fight, they are aligned with the industry's major players and opposed to the two wine companies seeking "grandfather" protection.

But with the underlying Calistoga dispute now in its sixth year, even the congressional kibitzing may not quickly calm the waters.

The conflict stems from 2003, when Napa Valley wineries announced plans to seek designation of Calistoga as a new American Viticultural Area. The proposed area would include about 2,500 acres suitable for vineyards.

Winemakers figure the federal recognition provides some marketing buzz.

"It makes sense that the distinct wine-growing regions of California are reflected in the name on the bottle so consumers have a sense of the origin of the wine they are enjoying," Chateau Montelena owner James Barrett explained when the Calistoga petition was filed.

But two companies doing business as Calistoga Cellars and Calistoga Estate then weighed in, warning the federal designation could restrict their ability to use their label names. Neither company meets the standard requirement that 85 percent of the grapes in wines sold with a viticultural area label come from that region.

"Collectively, we have all invested millions of dollars and years of effort in good faith, to build the trade name, trademark and brand name 'Calistoga Cellars,'" attorney Robert L. Young advised the Treasury Department. "The loss of that name or restrictions on its use will materially impact sales, growth and profits of Calistoga Cellars."

The Senate Agriculture Committee chairman, Sen. Tom Harkin, D-Iowa, added in a letter that he would "strongly encourage" Treasury Department officials to take account of Calistoga Cellars and other companies "which have made significant commercial investments over a period of time."

Harkin went to college with one of the winery founders, he explained.

In 2007, the Treasury Department concluded that the Calistoga winemaking region deserved federal recognition. At the same time, regulators suggested that Calistoga Cellars and Calistoga Estate still be permitted to use their existing labels even though they didn't meet the 85 percent local-grape requirement.

This proposed compromise expands the current "grandfather" rules already permitted for viticultural areas, and it now confronts Obama administration regulators with the dilemma of what do to next.