The peripheral canal was once like plutonium in California water politics, yet a new report embraces it as the answer to environmental problems threatening the Sacramento-San Joaquin Delta.

The report released Thursday by a team of UC Davis experts and the Public Policy Institute of California, says a peripheral canal is the best way to balance the state economy's thirst for Delta water against the environmental consequences.

The report reflects a change in thinking now under way in government and academia.

"The Delta is the pre-eminent problem in the long-term sustainability of California's water supply system," said Jay Lund, a UC Davis professor of environmental engineering and one of seven co-authors of the report. "Ultimately there are two choices: no exports or a peripheral canal. Keeping the Delta as it is, is not one of them."

Gov. Arnold Schwarzenegger already has directed the state Department of Water Resources to begin preliminary designs for canals to divert water around or through the Delta. His appointed Delta Vision blue-ribbon panel also is studying canals.

The Delta is the hub of the state's fresh water system, serving 23 million Californians from huge state and federal pumping systems near Tracy.

But environmental troubles this year limited deliveries to protect declining fish species. In the long run, deliveries could be cut permanently by a rise in sea level, floods or earthquakes.

A peripheral canal would protect against those threats, diverting some Sacramento River water into an isolated channel that leads to the pumps. Theoretically, this also would prevent the pumps from killing threatened fish and altering water flows within the Delta.

California voters rejected the idea in 1982, fearing it was a Southern California water grab. Many questions remain unanswered about a canal project today, such as how it would affect salmon in the Sacramento River, and whether adequate rules could be devised to limit diversions.

"We do not have confidence that it would be built and maintained in a way that wouldn't bring about greater harm to the Delta," said Barbara Barrigan-Parrilla, campaign director of Restore the Delta, a Stockton-based coalition of farm and environmental groups.

The researchers recommend that rather than restricting the canal's size to limit diversions, it should be large enough to handle surplus flows during flood conditions.

This water could be stored in the Bay Area and Southern California for use during droughts, and so that diversions can be halted when water is needed for migrating salmon.

The work of restricting diversions would fall to a new governing body with new legal powers, under the researchers' recommendations.

They also recommend dedicating a significant share of the canal's capacity to the ecosystem. This would allow water quality and fishery needs to restrict diversions.

"It's guaranteeing the environment some water rights it doesn't currently have," said Ellen Hanak, PPIC associate director and a report coauthor.

Water interests praised the report as a vital affirmation that California will suffer unless bold steps are taken.

"If we build a better water system in tandem with improvements to the ecosystem, we can have a healthy environment and healthy economy," said Laura King-Moon, assistant general manager of the State Water Contractors, in a written statement.

A recent preliminary report by the state estimated costs for a peripheral canal at between $4.2 billion and $7.4 billion but didn't account for costs such as pumping plants and environmental protection.

Canal costs should be covered by water diverters, not taxpayers, the authors said.

Recently, some policymakers have come to favor a "dual conveyance" approach they believe would allow more flexibility – a peripheral canal and a "through-Delta" canal built from existing levees.

The Public Policy Institute rejects this, saying a through-Delta canal eventually would be doomed by sea-level rise or earthquakes. A peripheral canal, they found, would be cheaper and more effective.

"The bottom line is, if we are to pump water from north to south, then a peripheral canal is the only way you can do it and be somewhat environmentally friendly," said William Bennett, a UC Davis fisheries ecologist and co-author of the report.

A peripheral canal should be coupled with broad habitat improvements, the authors said. Water diverters should also pay for these measures, and they should include intentionally flooding certain islands for habitat, and decisions not to recover others that flood naturally.

An analysis conducted as part of the report found that more than half the Delta's islands don't support enough economic activity to justify rebuilding after a flood.

Steve Mello, a second-generation farmer on Tyler Island in Sacramento County, objects to that analysis. The report found the island's levees may not be worth rebuilding after a flood.

Mello, president of the local levee maintenance district, said the island is home to many businesses important to the area's agriculture industry, as well as two natural gas pipelines serving the entire state. The levee district is also in the midst of a multimillion-dollar effort to improve levees to meet federal standards.

"We need a certain critical mass of acres in the Delta to support our farm industry," he said. "The legacy that my mother and father worked a lifetime to create is something worthy of being carried on."

Call The Bee's Matt Weiser, (916) 321-1264.