How Much Will Napa's Earthquake Cost?

The dust may have settled from California's Aug. 24 earthquake, but Napa Valley’s wine industry is still calculating the cost, with early estimates running beyond $80 million. In the weeks that followed the 6.0 magnitude quake (downgraded from 6.1), wineries labored to clean up just as harvest was moving into high gear, all the while dealing with damaged tanks, fractured walls and fewer oak barrels than anticipated. As crush winds down, the financial impact has begun coming into focus.

Surveying nearly half of Napa’s wine industry in early September, Silicon Valley Bank estimated that businesses suffered $80 million in damages, but cautioned that their appraisal was “conservative.” The bank's wine division, based in St. Helena, reported that 60 percent of the county’s wineries had some level of damage, and up to 25 percent sustained moderate-to-severe damage, resulting in damage to individual wineries that ranged from $50,000 to $8 million.

“I suspect those figures will go higher,” said Rob McMillan, executive vice president of the wine division. “Once everybody gets the contractors out there, the costs will likely go up.”

Aid so far is just trickling in. California Gov. Jerry Brown declared a state of emergency in the days after the quake, and on Sept. 11, Pres. Barack Obama declared Napa a federal disaster area, opening Washington coffers to local governments to fix streets, public structures, etc.

Others have stepped in to help as well. Napa Valley Vintners, for example, donated $10 million to create a community disaster relief fund. Companies such as Constellation Brands and E. & J. Gallo Winery donated $100,000 apiece and even the Oakland Raiders football team pitched in $50,000. That money will initially go to organizations such as the Red Cross and Salvation Army to assist the most urgent in need.

Many homes and businesses remain uninhabitable and no quick solution is at hand. Earthquake insurance is rare in the region because deductibles run $50,000 or more, and are often even higher for businesses like wineries.

The biggest losses were found in south and southwest Napa County, particularly wine regions such as Carneros, Mt. Veeder, Yountville and Oak Knoll. Among the hardest hit wineries were Trefethen Vineyards and The Hess Collection.

At Trefethen, the historic McIntyre winery building shifted and sagged. The building, erected in 1886, was used as a tasting room and offices, and after it was shored up, engineers went inside to assess the damage. “Given the many variables at play, we do not yet have a total projected cost for the restoration,” said Trefethen president Jon Ruel.

Trefethen’s production facility suffered minimal damage. “We were able to keep bringing in fruit with virtually no interruption," said Ruel. "However, given the clean-up and repairs going on around the property, everyone on the cellar crew was wearing safety vests and hard hats."

It was a different story at The Hess Collection. Racks holding about 3,000 barrels collapsed or fell together like dominoes. Dave Guffy, director of winemaking, said it took more than a week to clean up the barrel cellar. The bottling line was also damaged and a floor buckled in the winery’s art museum.

Even worse, two 10,000-gallon tanks ruptured, leaking almost 15,000 cases worth of 2013 Cabernet Sauvignon into the surrounding meadow and courtyard, and six other tanks were damaged beyond repair. Duffy, like many after the quake, scrambled to find a new home for the rescued wine and for the new juice soon to arrive. Many vintners in the area made room in their cellars for the stricken wineries.

James Caudill, director of publicity and hospitality at Hess, said it is too soon to know the true cost of the quake. The roof in the tank room, for example, might have to be lifted to remove the damaged tanks and install new ones. “We’re not talking specifics on the cost right now, in part because we haven’t got it all figured out,” Caudill said. “To make us whole again, costs will be several million dollars.”

Despite all they have suffered, winemakers know it could be worse, especially if the quake had struck mid-harvest. “The silver lining in all this was the cool weather in August. Most of the grapes were basically still on the vine,” said Cate Conniff, communications manager of Napa Valley Vintners, who helped keep information flowing to wineries and the community as they cleaned up. “If August had continued to be hot, most of the [fallen] barrels would have been full of wine.”

For his part, McMillan believes wineries should seriously reconsider how they store barrels. Custom crush facilities that stacked barrels to the ceiling were hurt the most, he said. “How high should you stack barrels? Does the racking need to be rigid or flexible?”

As for reports that wine prices will rise, McMillan said consumers should not be concerned. The 2012 and 2013 vintages produced large crops. “As far as supply goes,” McMillan said, “it doesn’t really matter.”

There is one thing consumers should look for when the 2014s are released, Conniff predicted. “We don’t know how much harvest 2014 will be impacted. But I’m sure there will be some fancifully named wines.”