[Federal Register Volume 71, Number 115 (Thursday, June 15, 2006)]
[Rules and Regulations]
[Pages 34525-34527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-9365]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 9

[T.D. TTB-49; Re: Notices No. 29 and 35]
RIN 1513-AA72


Realignment of the Santa Lucia Highlands and Arroyo Seco 
Viticultural Areas (2003R-083P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule; Treasury decision.

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SUMMARY: This Treasury decision realigns a portion of the common 
boundary line between the established Santa Lucia Highlands and Arroyo 
Seco viticultural areas in Monterey County, California. This 
realignment moves approximately 200 acres from the Arroyo Seco 
viticultural area to the Santa Lucia Highlands area. We designate 
viticultural areas to allow vintners to better describe the origin of 
their wines and to allow consumers to better identify wines they may 
purchase.

DATES: Effective Date: July 17, 2006.

FOR FURTHER INFORMATION CONTACT: Nancy Sutton, Regulations and Rulings 
Division, Alcohol and Tobacco Tax and Trade Bureau, 925 Lakeville St., 
No. 158, Petaluma, California 94952; telephone 415-271-1254.

SUPPLEMENTARY INFORMATION:

Background on Viticultural Areas

TTB Authority

    Section 105(e) of the Federal Alcohol Administration Act (the FAA 
Act, 27 U.S.C. 201 et seq.) requires that alcohol beverage labels 
provide consumers with adequate information regarding a product's 
identity and prohibits the use of misleading information on those 
labels. The FAA Act also authorizes the Secretary of the Treasury to 
issue regulations to carry out its provisions. The Alcohol and Tobacco 
Tax and Trade Bureau (TTB) administers these regulations.
    Part 4 of the TTB regulations (27 CFR part 4) allows the 
establishment of definitive viticultural areas and the use of their 
names as appellations of origin on wine labels and in wine 
advertisements. Part 9 of the TTB regulations (27 CFR part 9) contains 
the list of approved viticultural areas.

Definition

    Section 4.25(e)(1)(i) of the TTB regulations (27 CFR 4.25(e)(1)(i)) 
defines a viticultural area for American wine as a delimited grape-
growing region distinguishable by geographical features, the boundaries 
of which have been recognized and defined in part 9 of the regulations. 
These designations allow vintners and consumers to attribute a given 
quality, reputation, or other characteristic of a wine made from grapes 
grown in an area to its geographical origin. The establishment of 
viticultural areas allows vintners to describe more accurately the 
origin of their wines to consumers and helps consumers to identify 
wines they may purchase. Establishment of a viticultural area is 
neither an approval nor an endorsement by TTB of the wine produced in 
that area.

Requirements

    Section 4.25(e)(2) of the TTB regulations outlines the procedure 
for proposing an American viticultural area and provides that any 
interested party may petition TTB to establish a grape-growing region 
as a viticultural area. Section 9.3(b) of the TTB regulations requires 
the petition to include--
     Evidence that the proposed viticultural area is locally 
and/or nationally known by the name specified in the petition;
     Historical or current evidence that supports setting the 
boundary of the proposed viticultural area as the petition specifies;
     Evidence relating to the geographical features, such as 
climate,

[[Page 34526]]

soils, elevation, and physical features, that distinguish the proposed 
viticultural area from surrounding areas;
     A description of the specific boundary of the proposed 
viticultural area, based on features found on United States Geological 
Survey (USGS) maps; and
     A copy of the appropriate USGS map(s) with the proposed 
viticultural area's boundary prominently marked.
    A petition requesting the modification of an established 
viticultural area must include the appropriate evidence and maps 
described above to support the requested modification.

Santa Lucia Highlands and Arroyo Seco Viticultural Areas Realignment 
Petition and Rulemaking

General Background

    Paul Thorpe, on behalf of E. & J. Gallo Winery, submitted a 
petition to TTB requesting the realignment of a portion of the common 
boundary between the established Santa Lucia Highlands viticultural 
area (27 CFR 9.139) and the established Arroyo Seco viticultural area 
(27 CFR 9.59). Both viticultural areas are within the Monterey 
viticultural area (27 CFR 9.98) in Monterey County, California, which 
is in turn within the larger multi-county Central Coast viticultural 
area (27 CFR 9.75).
    A portion of the original common boundary between the Santa Lucia 
Highlands and Arroyo Seco viticultural areas follows a straight line 
drawn between the intersection of Paraiso and Clark Roads and the 
northeast corner of section 5, T19S, R6E, as shown on the USGS Paraiso 
Springs, California, quadrangle map. The proposed realignment moves 
this portion of the two viticultural areas' common boundary line 
approximately 1,000 feet to the east of the Paraiso and Clark Roads 
intersection and slightly less than 500 feet to the east of the 
northeast corner of section 5, T19S, R6E. Overall, the proposed 
realignment transfers approximately 200 acres of land from the Arroyo 
Seco viticultural area to the Santa Lucia Highlands area.

Rationale and Evidence for the Proposed Realignment

    The proposed realignment of this portion of the common boundary 
between the Santa Lucia Highlands and Arroyo Seco viticultural areas 
serves three purposes: (1) It brings the western boundary of the Arroyo 
Seco viticultural area into conformity with the western boundary of the 
historical Arroyo Seco Land Grant, which lends its name to the Arroyo 
Seco viticultural area; (2) it conforms the boundary line to land 
ownership boundaries; and (3) it ends the current division of the Olsen 
Ranch vineyards between the two viticultural areas.
    Currently, a thin strip of land outside of the Arroyo Seco Land 
Grant lies in the western-most portion of the Arroyo Seco viticultural 
area. By moving the common Santa Lucia Highlands and Arroyo Seco 
boundary line to the east, this portion of the Arroyo Seco viticultural 
area's western boundary will match that of the historic Arroyo Seco 
Land Grant.
    The vast majority of the Olsen Ranch lies within the Santa Lucia 
Highlands viticultural area, while a small portion falls within the 
Arroyo Seco viticultural area. Thus, the vineyards on the Olson Ranch, 
which were planted after the establishment of the two viticultural 
areas, are divided between the Arroyo Seco and Santa Lucia Highlands 
viticultural areas. The proposed eastward realignment of the portion of 
the two viticultural areas' common boundary line between Clark Road and 
section 5, T19S, R6E allows the Olson Ranch vineyards to be totally in 
the Santa Lucia Highlands viticultural area.
    The dominant physical feature of the proposed realignment area is 
the alluvial terracing that differentiates the highlands along the 
western edge of the Salinas Valley from the lower elevation valley 
floor. These terraces, which are above 600 feet in elevation, match the 
terrain found in the Santa Lucia Highlands viticultural area, generally 
between 600 feet and 1,200 feet, as shown on USGS topographic maps. 
Also, the terraces and higher elevations of the Santa Lucia Highlands 
area contrast to the flatter terrain and lower elevation valley floor 
found in the Arroyo Seco viticultural area.
    The primary soils of the proposed realignment area are of the 
Arroyo Seco and Chualar series. These soils are generally loam or 
gravelly, sandy loam, with underlying very gravelly material, and they 
coincide with the dominant soils of the Santa Lucia Highlands 
viticultural area.
    The climatic conditions of the realignment area are similar to 
those of the Santa Lucia Highlands viticultural area. The rainfall in 
the realignment area and the Santa Lucia Highlands area is 10 to 15 
inches a year. In contrast, the lower valley floor found in the Arroyo 
Seco viticultural area averages less rain, totaling approximately 9.5 
inches a year.

Notice of Proposed Rulemaking and Comments Received

    On January 24, 2005, TTB published a notice of proposed rulemaking 
regarding the realignment of the Santa Lucia Highlands and Arroyo Seco 
viticultural area boundaries in the Federal Register (70 FR 3333) as 
Notice No. 29. In that notice, TTB requested comments by March 25, 
2005, from all interested persons. In response to a request for more 
time to study the proposal, on March 8, 2005, we published a notice to 
extend the comment period in the Federal Register (70 FR 11178) as 
Notice No. 35. In that notice, TTB requested comments by May 25, 2005, 
from all interested persons.
    In total, TTB received three comments in response to the two 
notices. One comment strongly supported the proposed realignment. 
Kendall-Jackson Wine Estates submitted two comments, the first of which 
requested the additional time to review and evaluate the petition 
information. The second Kendall-Jackson comment proposed an additional 
boundary realignment of the Santa Lucia Highlands and the Arroyo Seco 
viticultural areas common boundary involving approximately 1,200 acres. 
This proposed boundary realignment lies north of the originally 
proposed Gallo boundary realignment. Although TTB believes the Kendall-
Jackson proposed boundary realignment may have merit, we did not adopt 
the proposal in this final rulemaking since it has not been the subject 
of prior public notice and comment procedures. Kendall-Jackson may at 
any time submit its proposal as a separate viticultural area rulemaking 
petition with the required supporting evidence and maps as described 
above.

TTB Finding

    After careful review of the petition and the comments received, TTB 
finds that the evidence submitted supports the boundary realignment 
proposed in Notice No. 29. Therefore, under the authority of the 
Federal Alcohol Administration Act and part 4 of our regulations, we 
realign the boundaries of the Santa Lucia Highlands and Arroyo Seco 
viticultural areas in Monterey County, California, effective 30-days 
from this document's publication date.

Boundary Description

    See the amendments to the narrative boundary descriptions of the 
Arroyo Seco and Santa Lucia Highlands viticultural areas in the 
regulatory text published at the end of this notice.

Maps

    The petitioner provided a copy of the USGS Paraiso Springs 
quadrangle map to document the proposed boundary

[[Page 34527]]

realignment. There are no changes to the lists of maps required to 
document the boundaries of the amended Arroyo Seco and Santa Lucia 
Highlands viticultural areas.

Impact on Current Wine Labels

    Part 4 of the TTB regulations prohibits any label reference on a 
wine that indicates or implies an origin other than the wine's true 
place of origin. With the realignment of the Santa Lucia Highlands and 
Arroyo Seco viticultural areas, wine bottlers using ``Santa Lucia 
Highlands'' or ``Arroyo Seco'' in a brand name, including a trademark, 
or in another label reference as to the origin of the wine, must 
continue to ensure that the product is eligible to use the relevant 
viticultural area's name as an appellation of origin.
    For a wine to be eligible to use as an appellation of origin the 
name of a viticultural area specified in part 9 of the TTB regulations, 
at least 85 percent of the grapes used to make the wine must have been 
grown within the area represented by that name, and the wine must meet 
the other conditions listed in 27 CFR 4.25(e)(3). If the wine is not 
eligible to use the viticultural area name as an appellation of origin 
and that name appears in the brand name, then the label is not in 
compliance and the bottler must change the brand name and obtain 
approval of a new label. Similarly, if the viticultural area name 
appears in another reference on the label in a misleading manner, the 
bottler would have to obtain approval of a new label.
    Different rules apply if a wine has a brand name containing a 
viticultural area name that was used as a brand name on a label 
approved before July 7, 1986. See 27 CFR 4.39(i)(2) for details.

Regulatory Flexibility Act

    We certify that this regulation will not have a significant 
economic impact on a substantial number of small entities. This 
regulation imposes no new reporting, recordkeeping, or other 
administrative requirement. Any benefit derived from the use of a 
viticultural area name is the result of a proprietor's efforts and 
consumer acceptance of wines from that area. Therefore, no regulatory 
flexibility analysis is required.

Executive Order 12866

    This rule is not a significant regulatory action as defined by 
Executive Order 12866 (58 FR 51735). Therefore, it requires no 
regulatory assessment.

Drafting Information

    Nancy Sutton of the Regulations and Rulings Division drafted this 
document.

List of Subjects in 27 CFR Part 9

    Wine.

The Regulatory Amendment

0
For the reasons discussed in the preamble, we amend 27 CFR, chapter 1, 
part 9, as follows:

PART 9--AMERICAN VITICULTURAL AREAS

0
1. The authority citation for part 9 continues to read as follows:

    Authority: 27 U.S.C. 205.


0
2. Section 9.59 is amended by revising paragraph (c)(13), redesignating 
paragraphs (c)(14) through (c)(19) as (c)(16) through (c)(21), and 
adding new paragraphs (c)(14) and (c)(15) to read as follows:


Sec.  9.59  Arroyo Seco.

* * * * *
    (c) * * *
* * * * *
    (13) Then east-northeasterly along Clark Road for approximately 
1,000 feet to its intersection with an unnamed light-duty road to the 
south.
    (14) Then in a straight south-southeasterly line for approximately 
1.9 miles to the line's intersection with the southeast corner of 
section 33, T18S, R6E (this line coincides with the unnamed light duty 
road for approximately 0.4 miles and then with the eastern boundaries 
of sections 29, 32 and 33, T18S, R6E, which mark this portion of the 
western boundary of the historical Arroyo Seco Land Grant).
    (15) Then straight west along the southern boundary of section 33, 
T18S, R6E, to its southwest corner.
* * * * *

0
3. Section 9.139 is amended by revising paragraphs (c)(9) and (c)(10), 
redesignating paragraphs (c)(11) through (c)(21) as (c)(12) through 
(c)(22), and adding a new paragraph (c)(11) to read as follows:


Sec.  9.139  Santa Lucia Highlands.

* * * * *
    (c) * * *
* * * * *
    (9) Then east-northeasterly along Clark Road for approximately 
1,000 feet to its intersection with an unnamed light-duty road to the 
south.
    (10) Then in a straight south-southeasterly line for approximately 
1.9 miles to the line's intersection with the southeast corner of 
section 33, T18S, R6E (this line coincides with the unnamed light duty 
road for about 0.4 miles and then with the eastern boundaries of 
sections 29, 32 and 33, T18S, R6E, which mark this portion of the 
western boundary of the historical Arroyo Seco Land Grant).
    (11) Then straight west along the southern boundaries of sections 
33, 32, and 31, T18S, R6E, to the southwest corner of section 31.
* * * * *

    Dated: April 16, 2006.
John J. Manfreda,
Administrator.
    Approved: May 25, 2006.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
 [FR Doc. E6-9365 Filed 6-14-06; 8:45 am]
BILLING CODE 4810-31-P