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U.S. Department of Agriculture Announces $449 Million Loan to Assist In Developing the Sites Reservoir Project in California

The U.S. Department of Agriculture has committed to a $449 million loan for the Maxwell Water Intertie, a component of the Sites Reservoir Project. The Sites Reservoir Project in California is a proposed off-stream reservoir, designed to provide new water storage to increase water supply flexibility, benefit fish and wildlife, and aid in drought relief. The Sites Reservoir Project would accomplish these goals by creating an additional source of water, which would allow existing water sources to retain more water when demand is high.

 

Background

A Joint Powers Authority composed of local public agencies, the Sites JPA, is pursuing the Sites Reservoir Project, a project intended to provide another source of water storage for the state. Located in the Sacramento Valley, the Sites Reservoir would divert high winter flows and storm event flows from the Sacramento River and would receive water diverted from the Glenn-Colusa and Tehama-Colusa Canals.

With this new water storage source, one goal of the Sites Reservoir Project is to relieve the stress on California’s water system by allowing other reservoirs to hold more water for a longer period of time. The addition of an extra reservoir would effectively increase the total storage in northern California by about 500,000 acre-feet of water. The project will also benefit the environment by providing up to half of its annual water supplies to environmental flows and lessen the impact of drought on sensitive species. Specifically, the project will improve water quality for endangered fish, reduced salinity levels in the Sacramento-San Joaquin Delta and improve habitat for migratory birds.

 

The Loan

After the California Water Commission approved $816 million of Proposition 1 bond funding earlier this year, the Sites Reservoir Project received yet another source of funding in the form of a loan from the U.S. Department of Agriculture and the Department of the Interior. This loan totals $449 million, the largest ever given by the Department of Agriculture. The loan will be used to build the Maxwell Water Intertie, a pipeline between the Tehama Colusa Canal and Glenn Colusa Irrigation District canal, which will deliver water for Sites Reservoir during high Sacramento River flows. However, the money received does come with a cost. The loan will need to be paid off in 40 years at 3.875 percent interest.

The Sites Reservoir Project is still undergoing environmental review, but the MWI  is expected to be completed by 2024 and the reservoir is set for completion in 2030. As of the time of the receipt of this loan, the total amount of the project is estimated to be $6.4 billion. Most of this price tag still lacks a significant source of funding.

 

Conclusion and Implications

Taken together with the allocation of Proposition 1 bond funds, the U.S. Department of Agriculture loan provides a boost as the Sites JPA seeks more funding for the Sites Reservoir Project. However, it remains to be seen just how the rest of the project, which has a projected $5.1 billion price tag, will be financed. Given the current status of water management in California, the Sites Reservoir Project remains an attractive option to address future water concerns. For more information, see:Sites Project: Introduction, Sites Projects Authority, 30 Nov. 2017, https://www.sitesproject.org/

USDA Invests in Innovative Management of California Water Supply, Sites Project Authority, 27 Nov. 2018, https://content.govdelivery.com/accounts/USDAOC/bulletins/21e5d9b

(Geremy Holm, Steve Anderson)