Status of Discussions with Unpermitted Wineries Napa Sanitation District Board of Directors Meeting June 18, 2014 1
Presentation Outline 1. History 2. Why does this matter? 3. Board Direction 4. Implementation Strategy 5. Status of Discussions Mondavi / Constellation Brands Mi Sueño 6. Options moving forward 2
History Winery Study, Oct. 2009 Recommendation: All winery-related facilities should be part of Industrial Pretreatment program. This is the first step to determine the magnitude of their impact to NSD s treatment facilities. Board Discussions Nov. 2009 Discussion with Board re: Winery Study May 2011 Board creates Strategic Plan Objectives July 2012 Draft Enforcement Policy Oct./Nov. 2013 Proposed Enforcement Policy 3
Why Does This Matter? Impact to the system 13+ unpermitted facilities 6.3 million gallons (2012) 682 EDU Extra capacity paid by ratepayers Ratepayers have invested $23 million in capacity in excess of capacity charges Fairness/Level playing field 4
Board Direction Negotiate one-on-one with businesses to develop compliance plans Wineries need to Tell District what they are doing Propose way to come into compliance 5
Strategy Pick 2 facilities to start with Mondavi/Constellation (901 Kaiser Road) Mi Sueño Winery (910 Enterprise Way) Use lessons learned to apply to others 6
Strategy Start with IU Application Type of activities Quantity of wastewater Estimated strength 7
Status of Discussions Mondavi Jan. 17 Meeting District: Explained IU Program and how it relates to the NPDES permit Discussed differences between commercial and industrial use Requested IU Application Mondavi: Did not agree that IU permit was required Requested time to review IU permit and application Would gather information and decide whether to apply Jan. 28 & 30 Facility Inspection Dye-testing of process wastewater flow Plumbing consistent with building drawings 8
Status of Discussions Mondavi 9
Status of Discussions Mondavi 10
Status of Discussions Mondavi 11
Status of Discussions Mondavi Mid Feb. Several emails exchanged Mondavi does not concede the requirement for an IU Permit Agree to let attorneys discuss legal issues of IU compliance Agree to meet to discuss non-legal issues March 3 Phone meeting with Attorneys Mondavi attorneys and Meyers Nave discuss IU permit requirement March 3 In-person Meeting March 5 Letter from Meyers Nave to Mondavi Mondavi is an industrial user / Industrial User permit is required Request proposal from Mondavi re: permit terms by March 28 Request Application for Permit by April 4 Failure to meet deadline may result in following Enforcement Response Plan 12
Status of Discussions Mondavi March 27 Letter from HolmanTeague to Meyers Nave Surprised by threatening tone of March 5 letter Request all communications be through legal counsel Disagreed with Meyers Nave legal analysis Would miss the March 28 and April 4 deadlines, but would respond by April 11 13
Status of Discussions Mondavi April 11 Letter from Constellation Brands to Meyers Nave Provided a history of building permitting and use Asserts that there is no evidence that discharges adversely affected the system (NSD met its NPDES requirements) therefore IU program should not apply Permit requirements (paying for sewer service fees based on actual flow and strength) are unreasonable Willing to discuss sewer service charges if issue of capacity charges are removed discussion 14
Status of Discussions Mondavi May 7 th Letter from Meyers Nave to Constellation Brands Confirmed NSD desire to work with Mondavi to 1. Obtain an Industrial User Permit 2. Determine capacity charges and sewer service charges Confirm District intentions Protect the environment Fairness to all ratepayers Not intent to terminate service to impose huge fines Requested Application for Permit by May 28 Ability to withdraw application or request relief from Board Information needed to understand facility operations 15
Status of Discussions Mondavi May 27 th Email from Constellation Brands to Meyers Nave Will not meet May 28 deadline Will respond by June 21 When asked why the delay was necessary, responded that it was taking time to coordinate a response from various parts of the company, including executive management 16
Summary Status of Discussions Mondavi Mondavi continues to argue that they are not subject to the Industrial User program requirements Mondavi has not submitted an application (applications tell us in writing what the applicant does) Mondavi has not proposed a plan or method to come into compliance No meaningful discussions toward resolving capacity charges, SSC or sampling concerns 17
Status of Discussions Mi Sueño March 3 Initial meeting History of building permits Historical uses of building Mi Sueño operations (generally) Building conditions (interceptor tanks) March 14 Facility Inspection Dye-testing of process wastewater flow 18
Status of Discussions Mi Sueño March to April Series of emails Discussions about existing uses, historical use, and applicable capacity charges On hold awaiting engineering analysis April to June Series of emails April 1 Request time to do additional engineering analysis May 12 Confirmation of hiring engineer May 20 NSD provides deadline of June 10 to complete engineering analysis and submit Application for Permit June 11 Mi Sueño informed NSD that engineering results will be complete by end of June 19
Options Moving Forward 1. Continue with current strategy Continue discussions/negotiations with Mondavi & Mi Sueño Issue industrial user permits Use as model for remaining dozen+ facilities 20
Options Moving Forward 1. Continue with current strategy Complete discussions/negotiations with Mondavi & Mi Sueño Issue industrial user permits Use as model for remaining dozen+ facilities 2. District s Enforcement Response Plan Establish deadline for submitting application If non-compliant, then issue Notice of Violation If persists, then issue Compliance Order If persists, then discontinuation of sewer service 21
Options Moving Forward 3. Develop incentive Set Strength Factor for winery-related industrial uses at 9.5. Start charging sewer service charges based on water usage and new Strength Factor Charge a lease rate for capacity charges used, based on water use and 9.5 strength factor (approx. $35 per EDU per month) Once an industrial user permit is issued, can charge actual strength based on sampling SSC Revenue lost to District since January by delays in paying based on actual strength = $135,400 22
Options Moving Forward 4. Revisit Winery Enforcement Policy 4 months to issue permit, but no capacity fees upfront 1 year to collect data on actual usage Capacity charges paid over time (1-3 years) 23
Options Moving Forward 1. Continue with current strategy 2. District s Enforcement Response Plan 3. Develop incentive 4. Revisit Winery Enforcement Policy 24