After years of gridlock and failure, California lawmakers reached a historic agreement in Wednesday's pre-dawn hours to address one of California's most vexing problems: its vulnerable water supply and a dying Delta ecosystem.

Gov. Arnold Schwarzenegger called it "one of the greatest accomplishments" of the Legislature, crediting Senate President Pro Tem Darrell Steinberg, D-Sacramento, with "shuttle diplomacy" in the face of intense pressure from competing interests.

"I'm so excited that finally my vision is one step closer to becoming a reality, which is to fix our water infrastructure," Schwarzenegger said. "This is the best investment in the future of California anyone can make."

The package would require state residents to cut water use by an average of 20 percent over the next decade and, for the first time, require water users to measure and report their use of underground water — ending California's status as the lone Western state that does not regulate groundwater.

It beefs up environmental protection in the Delta and puts an $11.1 billion bond measure before voters next year to pay for new dams, regional water projects, groundwater cleanup and land preservation.

Schwarzenegger is expected to sign the five bills.

"I can't think of anything this big that has been acted on in a bipartisan way in the recent past," said Wally Bishop, general manager of the Contra Costa Water District. "This sets the framework

The bills declare that the state will reduce its reliance on Delta water and elevates environmental protection of the Delta to a "co-equal goal" along with water supply reliability.

"At its core, this moves California from the extraction policies of the past to the sustainability policies of the future to protect the environment and the economy," said Tim Quinn, executive director of the Association of California Water Agencies.

In late amendments, lawmakers ditched provisions meant to crack down on illegal water diversions. The plan also contains no fees to pay for a new "Delta Stewardship Council" that would oversee developments in the Delta.

The legislation does not authorize a peripheral canal to divert water around the Delta, but it does lay out a clear path that would make the project easier to build and better able to withstand court challenges, so long as it can be designed in a way that meets a high environmental standard.

The bills require that the ongoing plan to build a canal, the Bay Delta Conservation Plan, meets the standards of the state's Natural Community Conservation Planning Act. In effect, that means the canal would have to be part of a plan that actually restores the Delta ecosystem rather than meeting a lower standard in federal law that requires the plan to contribute to the recovery of species.

The bills also include a requirement for state regulators to determine how much water must remain in the Delta to protect "public trust" values such as clean water and healthy fish populations.

"Overall, it is a big step forward for California," said Laura Harnish, regional director for the Environmental Defense Fund, one of several major environmental groups that supported the policies in the package.

Other environmental groups, however, opposed the deal and are expected to campaign against the bond measure.

"The water package that passed in the dead of night epitomizes the dysfunction that has gripped our Legislative process," said Barbara Barrigan-Parrilla, campaign director for Restore the Delta, a local group of environmentalists and businesses strongly opposed to a new canal.

Delta interests say building a canal will take farmland out of production, reduce tax rolls and harm water quality.

The East Bay Municipal Utility District argued that the plan could force the district to release more water from its dams on the Mokelumne River to protect the Delta if the canal is built.

"It leaves our customers vulnerable to being required to provide make-up water for the Delta as a result of a peripheral canal, and also does not protect our customers from being asked to provide more than their fair share of water for Delta restoration efforts," said EBMUD general manager Dennis Diemer.

The package is perhaps the most important action lawmakers have taken to address the state's water system since it authorized construction of the State Water Project in 1960. It is arguably as important as more recent reforms enacted in other venues.

In 1992, Congress passed the Central Valley Project Improvement Act, co-authored by Rep. George Miller, D-Martinez, which re-allocated water from San Joaquin Valley farms to the environment to improve salmon populations and the Delta ecosystem.

In 2000, state and federal agencies, environmentalists and water agencies signed off on a plan known as CalFed, which claimed to be "the largest, most comprehensive water management program in the world "... (and) the most complex and extensive ecosystem restoration project ever proposed."

Neither of those reform efforts reached their goals.

The Central Valley Project reform was meant to double salmon populations, but salmon numbers have collapsed. An independent science review ordered by the Bush administration found that federal water managers transferred less water to the environment than the bill envisioned. The adjustments were legal but defied common sense, the scientists found.

CalFed was supposed to restore the environment, protect water supplies, improve water quality and stabilize Delta levees, but none of those goals have been reached.

Staff writer Steven Harmon contributed to this story.