Two huge dam projects are being planned in Santa Clara County at a price tag in the billions. The Biden administration has decided to help fund one of them but — at least for now — not the other.
At a news conference scheduled for Thursday, the U.S. Environmental Protection Agency is set to announce it has approved $727 million in low-interest loans to the Santa Clara Valley Water District to help fund the rebuilding of Anderson Dam near Morgan Hill. The largest reservoir in Santa Clara County, Anderson has been drained for earthquake repairs since 2020, exacerbating Silicon Valley’s water shortages. Federal dam safety officials were concerned that its 240-foot earthen dam, built in 1950, could fail in an earthquake.
But the water district also asked the EPA for twice as much in other low-interest loans — $1.45 billion — to help fund construction of a huge new dam near Pacheco Pass and Henry W. Coe State Park.
That $2.5 billion project has been mired in cost overruns, a lawsuit from environmentalists and a growing disagreement among the district’s board members over whether it should even be built or killed. It did not receive a loan from the EPA.
The news is a boost for the Anderson project, whose price tag increased last month from $1.2 billion to $1.4 billion. Construction crews currently are building a new outlet tunnel that they expect to finish in late 2024. They then plan to tear down most of the existing earthen dam and rebuild it, with a completion date of 2032.
Rick Callender, CEO of the Santa Clara Valley Water District, a government agency that provides water and flood protection to 2 million people in Santa Clara County, said the EPA’s Anderson loan, at a 3.7% interest rate, will save the district $256 million compared to funding it with municipal bonds
“It’s a really big deal,” he said. “It’s the best way to use public dollars to finance the project and pass along the cost savings to the public. We’re very excited.”
But for the Pacheco Pass project, which would be the largest new dam built in the Bay Area in 25 years, the EPA’s move is the latest in a long line of setbacks.
Callender said he has met with EPA officials, and they have not denied funding for Pacheco outright. Rather, he said, they have delayed a decision until after March 16 when the district’s board is scheduled to vote on whether to move forward with the project by authorizing its staff to take it from 30% design completion to 60%.
“They pulled apart the loan,” Callender said. “They left in Anderson and authorized that. The Pacheco portion is on hold pending future discussions and direction from our board. They wanted to see what happens on March 16.”
Critics contend the dam is too expensive and would harm the rustic environment adjacent to Coe park. The EPA’s hesitancy is telling, they say.
“It’s significant that there won’t be an announcement about Pacheco,” said Osha Meserve, a Sacramento attorney representing a group called the Stop the Pacheco Dam Coalition, which has partnered with the Sierra Club and Amah Mutsun tribal band. “It indicates uncertainty about whether the project will go forward. I hope the EPA is taking a closer look.”
EPA officials in San Francisco declined to answer specific questions Wednesday about the status of the Pacheco loan.
The district’s plan calls for building a 320-foot-high earthen dam on the North Fork of Pacheco Creek in the rugged canyons about 2 miles north of Highway 152 in Southern Santa Clara County.
Construction would start in 2025 and finish in 2032. The new reservoir would hold 141,000 acre feet of water, replacing a small reservoir there that was built in 1939.
With a 35-mile-long shoreline, it would be the largest new reservoir built in the Bay Area since 1998 when the Contra Costa Water District constructed Los Vaqueros Reservoir in eastern Contra Costa County. It also would rank as the fourth largest reservoir in the Bay Area, behind Lake Berryessa in Napa County, Lake Sonoma in Sonoma County and Los Vaqueros.
The district hopes to take water it now stores nearby in the massive San Luis Reservoir and pipe it to a new Pacheco reservoir, filling it during wet years.
The project received a major boost in 2018 when former Gov. Jerry Brown’s administration awarded it $485 million from Proposition 1, a $7.5 billion water bond passed by voters in 2014.
But it has run into big problems with cost overruns. In 2017, the district estimated the project would cost about $800 million. The following year, the price jumped to $969 million, then $1.3 billion by 2020. In January 2021, the district announced the cost had risen to $2.5 billion after geological studies found rock in the area was unstable — a finding geologists had noted 20 years earlier when the water district considered, and then dropped, the idea.
At a board meeting Jan. 10, district officials said the price tag now is $2.78 billion, a jump they said was due to inflation. The district has had no luck so far in securing partnerships with other Bay Area water districts to help pay for the project and share its water.
Former San Jose Mayor Sam Liccardo opposed the plan, saying that the water was too expensive, would cause spikes in water bills for San Jose-area residents and that the money should be spent on cheaper projects, such as water recycling, storm water capture, conservation and helping the Contra Costa Water District enlarge Los Vaqueros Reservoir.
His successor, Matt Mahan, also is skeptical.
“I have concerns about whether several billion dollars for a project like Pacheco, which doesn’t meaningfully increase our water supply, is a good use of scarce resources at a time when we have so many other needs,” said Mahan, who will appear at Thursday’s press conference.