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Agreements in Place to Fund Largest California Reservoir Proposal

The Sites Reservoir project in Colusa County has funding commitments from 32 water agencies throughout California. But the developers still plan to seek state bond funds to leverage environmental benefits.

Written by Matt Weiser Published on Read time Approx. 6 minutes
California drought water storage2
Cattle graze in the Sites Valley, location of the proposed Sites Reservoir, near Maxwell, Calif. After building several dams, water would be pumped into the valley from the Sacramento River during wet years. The 1.8 million-acre-foot project has enough funding commitments from water agencies to proceed toward construction, but organizers also plan to seek state bond funds.Rich Pedroncelli, AP

California voters in 2014 approved a ballot measure that allocates $2.7 billion for water storage projects. It’s likely there will be hot competition for the money when the California Water Commission gets around to awarding it next year.

But it turns out one of the largest projects, the proposed Sites Reservoir, already has enough funding commitments and doesn’t necessarily need the state bond money. Some 32 water agencies throughout California have already signed agreements to invest in the Sites project and disclosed how much water they might want to buy. These range from Metropolitan Water District of Southern California (the biggest buyer), to more local entities like the city of American Canyon.

It’s a major milestone for the largest water storage project currently under consideration in California. Sites, to be located in Colusa County northeast of Sacramento, would cost an estimated $4.7 billion to construct, with a total capacity of 1.8 million acre-feet. About 500,000 acre-feet would be available for delivery to customers on an annual average basis. It is an “off-stream” reservoir, meaning it would receive water diverted from the Sacramento River via pumps and canals.

Yet Jim Watson, general manager of the Sites project, said he still hopes to secure state bond funds for the project. This is because the money would not only reduce costs for the water investors but also secure a role for Sites as a next-generation water storage reservoir that also benefits endangered species.

Water Deeply recently interviewed Watson about how the Sites project crossed this funding hurdle, and why the project is still a good candidate for state bond funds.

Water Deeply: How did you get to this point?

Jim Watson: For quite a while we’ve had requests for participation in a significant amount of water that the reservoir can produce. It’s now to the point that it’s about 80 percent of what we would be proposing to the Water Commission for the full reservoir. If we didn’t have Proposition 1 funds, we would essentially have enough support to go forward with the project.

We estimate we’ll be able to deliver between 450,000 and 500,000 acre-feet of water per year. That’s based on a long-term average. And now we have 404,000 acre-feet of requests. And quite frankly, my feeling is if we needed to after the Water Commission decision, we could go back out and see if there were additional requests. Because a lot of the feedback we got back from some water agencies was they wanted to see the Water Commission process completed before they would make an investment decision in the project.

They’ve signed agreements for what we call Phase One of the project, which is now through essentially the Water Commission decision process. Then, based on where the Water Commission lands, we will have new agreements and a reason to rebalance the water amount, and new funding. So essentially, at that point every participant gets to re-evaluate their positions, and we expect some of them will change their minds. And we will still be able to go forward based on their requests.

But one of the reasons we have such strong support is these water agencies agree with us that the Proposition 1 process, with the state having a water asset that they could manage, is unique and a better way to go in terms of managing our future. So everyone is committed to wanting to maximize the state’s investment in the project.

Water Deeply: How will your funding commitments mesh with the Water Commission process?

Watson: Ideally, when the state comes in and says this is how much funding we’re interested in, then we have enough requests to essentially go forward. We can then tell these water agencies, for example, you asked for 20,000 acre-feet but I can only give you 15,000 and the state is taking the rest. So at that point, we do have a very strong project and we look forward to having the state as a partner.

And we’re planning to go to the next step, which is the WIIN Act approved by Congress in December. It allows the federal government to acquire water for the environment, which sounds very similar to Proposition 1. So maybe the state does not come in and invest as much as we would like. We would then offer the federal government a water asset they could manage for the environment, with the hope that between the state resources agencies and federal government, they would pool their assets together to improve conditions on the Sacramento River and the Delta.

Water Deeply: Could you build the reservoir without state money?

Watson: Today we’re going forward under Proposition 1 with the investment we have. We’ll make a decision based on where the water community lands. At a minimum, we still plan to pursue the federal government water asset for the environment.

Water Deeply: How do these funding commitments from your water agency partners work?

Watson: Right now we do not have a permittable project. We’re using the acre-foot measure as a way to apportion the study costs. So for all the work to produce the Proposition 1 application and advance our environmental documents, we’re using the acre-foot as a way to allocate those study costs.

After the Water Commission makes a decision, we will look at how much water has been asked for and we’ll rebalance. Not everybody is going to get the allocation of water they requested, and we’ll rebalance based on what is a permittable project and keep moving forward.

When we get the permits, then that acre-foot would be expected to become their share of the construction and finance costs that they would then have an obligation to repay. We’re really developing this project on a “beneficiary pays” principle, with the expectation that if a third of the water is for environmental benefits, then a third of the costs should be borne by the public.

A map of the proposed Sites Reservoir project. (Graphic Courtesy The Sacramento Bee)

Water Deeply: Why should the state still support your Proposition 1 application if you already have all your funding lined up?

Watson: A lot of what we can do is provide water to help the salmon runs on the Sacramento River. And we can help Shasta Reservoir maintain its cold-water pool, and improve flow stabilization, to allow the juvenile salmon eggs to hatch into fry.

We can also help get water into the Yolo Bypass and Cache Slough area. This is the food for fish concept, where water is released into the Colusa Basin Drain and then into Cache Slough, where it creates the right kind of phytoplankton to feed the fish. Part of the problem is lack of food, so there’s a food-producing function that we can provide. And we can provide it in an area where we know smelt populations exists. So if they are struggling from a lack of food, we can help get them more food at critical times of year.

The beauty of it is, the state would manage and decide how they want to apply that water. What we’re trying to do is show them all the different opportunities, and then allow them  as the resource agencies – to manage that water and prioritize where it would produce the best bang for the acre-foot.

Water Deeply: Where do you plan to acquire water to fill the reservoir?

Watson: From the Sacramento River, and we still have to go through the water rights process. We’ve analyzed the project so that, on top of all of the current environmental requirements, we actually added an additional requirement to make sure there is additional flow going into the Delta. So we’re technically putting a little more out there to make sure we’re conservative. Then we’ve got to make sure all the senior water-rights holders’ demands are met, and that includes the State Water Project and Central Valley Project. After their demands are met, that’s the only time we could start to divert. And that would only occur in winter storm events, or storms over a certain size.

Water Deeply: How does the Water Commission process work?

Watson: We have to submit our application before August 14. Then the Water Commission, their staff will review the applications and thoroughly tear them apart and determine how accurately we’ve portrayed the project. Then they will come back in about January and say here’s a ranking of all the projects they’ve received based on return for investment. Then there will likely be an appeals or hearing process to allow applicants to add information.

Roughly in March, the commission will say, here is the ranking of these projects. And by June, they plan to assign a dollar amount to each project. And that becomes the indication of the state’s investment.

It’s going to be conditional on us completing all the work to get the water rights and the permits. When that happens, then they will encumber funds for plan design and construction.

Water Deeply: And what’s the construction schedule?

Watson: It’s aggressive, but we would like to have construction begin in 2022 and we’d finish up 2029.

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