A wealthy family’s plans for a Napa vineyard have exploded into controversy. The outcome could define the valley’s future

Esther Mobley, Jess Lander
SF Chronicle Feb. 27, 2022
Updated: Feb. 28, 2022 9:24 a.m.

The decision over whether to clear forest for grapes on the land west of Circle Oaks may be crucial to the future direction of the Napa Valley. Santiago Mejia/The Chronicle

In the hills overlooking the Napa Valley, a wealthy family has waged a long effort to clear trees from an expansive piece of land and plant grapes. Any vintner can see the potential: The property sits in the Atlas Peak appellation, prized for its high elevation and volcanic soils, producing wines that routinely sell for $100 a bottle or far more.

But 17 years after the family bought the property, known as Walt Ranch, the dispute over their plans has proved existential, raising questions about who should decide land use in the nation's wine mecca and whether the valley's abundance should face limits.

Now that debate - the subject of a Napa County Board of Supervisors hearing Tuesday - has exploded after a supervisor with connections and support in the wine industry voted in favor of the vineyard deal without revealing that he and his family had, in the previous months, acquired a financial stake in the property next door.

At the heart of the tension is a 2,300-acre swath of land on the east side of the valley. Walt Ranch's owners, Dallas billionaires Craig and Kathryn Hall - he a real estate mogul, she the former U.S. ambassador to Austria - paid $8 million for the undeveloped parcel in 2005, with big dreams.

Nearly from the beginning, though, environmental groups opposed the Halls and sought to block them from planting vines. The project, these groups argue, would remove too many trees, ruin animal habitats and deplete the water supply, among other concerns.

Nonetheless, in December, the Halls seemed poised to win their fight. County supervisors tentatively approved the Walt Ranch development by a 3-2 vote. Early this month, final approval seemed certain - until a Napa resident Beth Nelsen came forward with what they considered a bombshell.

Nelsen discovered that the father-in-law of Supervisor Alfredo Pedroza, who had voted in favor of the project, bought land adjacent to Walt Ranch last year through a limited liability company, or LLC. Pedroza had not publicly disclosed the purchase.

The supervisor, according to records reviewed by The Chronicle, later helped secure a $2.7 million loan with his wife, using their Napa home as collateral. Pedroza said in an email that the Oct. 12 loan was a personal guarantee for the property adjacent to Walt Ranch. A personal guarantee is defined as a promise to assume a debt in case of default.

Critics of big development in the Napa Valley seized on the revelations, saying approval of the Walt Ranch project would set a precedent and increase the value of nearby properties.

And while Pedroza asserted he had no financial interest in his father-in-law's property - and said he faced no conflict of interest before tentatively approving Walt Ranch - he recused himself from the final vote, which was delayed to Tuesday in light of the allegations.

Now, that vote is likely to be delayed further. Attorneys for Napa County will recommend Tuesday that the Board of Supervisors push another vote to March 22.

Pedroza's recusal has not satisfied the supervisor's critics, who contend his actions since last year prove the county privileges the interests of the wine industry over those of residents and the environment. The Halls' supporters, meanwhile, say that blocking the Walt Ranch development would effectively impede all but the wealthiest landowners from planting vineyards in Napa in the future.

Whatever the outcome for Walt Ranch, all factions see a watershed moment, the fulcrum of a much larger divide over land-use issues that go to the core of Napa's identity: Does the valley have too many vineyards? If agriculture has made the region what it is, could it also be its undoing?

For practically all of Napa's modern history, a vocal contingent of residents has argued that vineyards were spreading too far, harming the natural landscape.

The Walt Ranch project galvanized this side in a new way, because of the site's size, its remote location on Atlas Peak and the status of the Halls, who own more than 3,000 acres of land in Napa and Sonoma counties and run Hall Winery in St. Helena.

The couple met resistance as soon as they began seeking permits to plant grapes on their new property. Environmental groups objected to their plans to clear approximately 14,000 trees to make way for vineyards and said these plantings would deplete the groundwater supply.

Meanwhile, neighbors in a nearby housing development, Circle Oaks, said that growing a vineyard there would diminish their quality of life by adding traffic, noise and lights to a tranquil place.

"This is a massive conversion of otherwise undeveloped, intact, heterogeneous ecosystems into a monocrop," said Ross Middlemiss, staff attorney for the Center for Biological Diversity in Oakland, which has fought the Walt Ranch development in court.

Public debate around Walt Ranch has dragged on for years, a constant presence in the opinion pages of local newspapers. The Halls fought for their right to plant, arguing that their plan to put vines in an area zoned for agriculture was appropriate. They and the county commissioned studies to show the impact that a vineyard might have on wildlife, erosion, the water supply and other factors.

In late 2016, after four days of hearings, the Board of Supervisors, including Pedroza, voted to approve the proposal. But that was hardly the end of it. Groups such as the Center for Biological Diversity appealed the decision.

In 2019, a state appellate court found that the Walt Ranch permits had not adequately addressed greenhouse gas emissions, which contribute to global warming. That sent the project back to the Halls, requiring them to prove to the county that they had a plan for mitigating those emissions.

The Halls amended their initial plans for Walt Ranch: They asked for 209 acres of grapevines, down from their originally proposed 356 acres, and said they would put 650 acres into a conservation easement while planting more than 32,000 trees.

The Halls declined an interview with The Chronicle, but Kathryn Hall said in an email that they reduced the planting size to 9% of the property.

That compromise was "a step in the right direction," said Middlemiss, but didn't go far enough. "Does the world need more $300 bottles of Cabernet?" he asked. "At what cost?"

Nevertheless, it looked all but guaranteed that a vineyard at Walt Ranch would proceed, based on the board meeting in December, when the supervisors tentatively approved it. The Feb. 8 meeting, in which the board would issue final approval, was viewed as a formality.

Then Nelsen made their discovery.

In May 2021, she found that Vinedos AP LLC - headed by Pedroza's father-in-law, Esteban Llamas, a vineyard manager for E. & J. Gallo Winery - had purchased 400 acres of undeveloped land adjacent to Walt Ranch for $2 million.

Should the Walt Ranch project win approval, neighboring properties like Vinedos AP could stand to gain in value. The precedent set by Walt Ranch's approval would probably make it easier for an undeveloped parcel like Vinedos AP to be converted to a lucrative vineyard, too.

Pedroza said he had no ownership, and thus no financial interest, in his father-in-law's property. In an interview with The Chronicle, he praised Llamas for realizing "the American dream, to be able to go from being a farm worker to having your own vineyard." He said his father-in-law hoped to plant vines on the property and retire there. (Llamas did not respond to a request for comment.)

Pedroza sought guidance from the California Fair Political Practices Commission, which ensures that public officials act in a fair and unbiased manner. In informal correspondence, Senior Commission Counsel Erika Boyd told Pedroza that California law does not consider a father-in-law to be "immediate family." Therefore, Boyd wrote, "you do not have a financial conflict of interest" in a property owned by Llamas.

Still, Pedroza recused himself from the upcoming Walt Ranch vote, citing a desire for public confidence in the final decision. He maintains there was no conflict of interest, despite acknowledging he signed a personal guarantee on the loan for the neighboring property. "We do not have any equity," he said.

Yet other documents link Pedroza to his father-in-law's land: The property deed was sent to the supervisor's home, and he signed property tax checks on Dec. 10, four days before casting his vote in favor of Walt Ranch's tentative approval. Pedroza had previously stated that his involvement with his father-in-law's company ended on Nov. 1.

Pedroza confirmed to The Chronicle that he signed the checks, saying he was an authorized signer on the account "to be able to pay bills." Napa County Treasurer-Tax Collector Bob Minahen said this sort of arrangement was not uncommon. "We accept money from anybody," he said. "If you want to pay your neighbor's bills, we're more than willing to accept that."

Pedroza once worked for Poppy Bank of Santa Rosa, which provided financing for the property next to Walt Ranch. He said he acted as a consultant for the bank while it opened a Napa office, but said the relationship ended last year. Poppy Bank did not respond to a request for comment.

California public officials are prohibited from making decisions involving parcels adjacent to properties in which they have a financial interest, according to Fair Political Practices Commission regulations.

An agency spokesperson declined to comment on the specifics of Pedroza's case, but said seven complaints had been filed against Pedroza. Those complaints are now under review as the commission determines whether to open an investigation. Six of the complaints were filed anonymously; Nelsen filed the seventh.

Pedroza's critics also noted he has received political contributions from Craig Hall as well as from Peter Read, who sold the land to Llamas. Since the 2016 election, the two men have contributed $35,000 and $23,100, respectively, records show.

"When you look at the history of my fundraising activities, I've supported people that have donated to my campaign and I've voted against individuals and businesses that have supported my campaign," Pedroza said. "There's a track record here."

Pedroza defended his actions, pointing out instances in the past where he had recused himself from decisions based on conflicts of interest. "I understand the concerns around money in politics," he said. "But there's a body of work here that I can point to that shows what I stand for and what my values are."

The debate over Walt Ranch has become about much more than one supervisor and one vineyard. What happens, many residents believe, could have a lasting impact on the future of the valley.

To the development's supporters, this is a potentially dangerous moment for the wine industry. "It's already had a chilling effect," said Stu Smith, owner of Smith-Madrone Vineyards in St. Helena. By mounting more than a decade's worth of complaints, lawsuits and appeals, he said, environmental groups "have intimidated everyone except the wealthiest people from any development in the hills."

The opposition has sent a message, Smith said: If you want to plant a vineyard, come with "an open-ended checkbook" for the fight.

For years, Smith has wanted to plant a 7-acre vineyard on his Spring Mountain property, which now has 34 acres of vines, but the potential litigation costs have spooked him. "I don't have enough money in my lifetime to risk going through with those 7 acres, which I would dearly love to plant," he said.

Halting Walt Ranch could intensify the "ridiculous" stringency of new plantings in Napa Valley, said Dario Sattui, owner of Castello di Amorosa and V. Sattui wineries in Calistoga and St. Helena.

He's been trying to plant 25 acres of vines in an unforested, flat area of Carneros. Four years and hundreds of thousands of dollars later, "We still don't have a permit, and that's not fair," he said.

Those who oppose Walt Ranch see this battle as particularly significant, too. Pedroza has become a symbol of the pro-development political establishment, which some want out of office.

"We're after new supervisors that are more environmentally conscious," said Mike Hackett, a Napa resident and environmentalist. "We have two candidates that are much closer to the middle and are certainly way left of what Alfredo Pedroza is."

Michael Honig, proprietor of Honig Vineyard and Winery in Rutherford, sees this moment as crucial for other development battles being waged in Napa Valley, including one he is leading against a Frank Family Vineyards property in Rutherford.

"I think the pendulum has gone too far to the development side, but this could force it back," Honig said. "The day of reckoning is here."