Cal. Water Code § 79205.8

(a) The money in the subaccount, upon appropriation by the Legislature to the department, may be used by the department to provide grants or loans, or any combination thereof, which are approved by the Governor, to local agencies located in the delta export service areas for programs or projects that can be completed and provide the intended benefits not later than March 8, 2009, and are designed to increase water supplies, enhance water supply reliability, or improve water quality. (b) The department shall provide grants for programs or projects located outside the delta and which meet one of the following requirements: (1) The project or program constructs new or expands existing groundwater storage and recovery projects or acquires rights to use storage in existing reservoirs. (2) The project or program implements measures that facilitate improved water treatment, water transfers, or exchanges, including, but not limited to, a project that improves water quality by shifting reliance from lower quality to higher quality water supplies. (3) The project or program implements state of the art agricultural water conservation programs, and programs that treat or manage agricultural drainage water for reuse or instream water quality benefits. (c) The department shall list the projects that are proposed to be funded from the subaccount.