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In a dramatic decision that could significantly impact Silicon Valley’s water supply, federal dam regulators have ordered Anderson Reservoir, the largest reservoir in Santa Clara County, to be completely drained starting Oct. 1.

The 240-foot earthen dam, built in 1950 and located east of Highway 101 between Morgan Hill and San Jose, poses too great of a risk of collapse during a major earthquake, the Federal Energy Regulatory Commission, which regulates dams, has concluded.

“It is unacceptable to maintain the reservoir at an elevation higher than necessary when it can be reduced, thereby decreasing the risk to public safety and the large population downstream of Anderson Dam,” wrote David Capka, director of FERC’s Division of Dam Safety and Inspections, in a letter to the Santa Clara Valley Water District on Thursday.

Anderson Reservoir is owned by the Santa Clara Valley Water District, a government agency based in San Jose. When full, it holds 89,278 acre feet of water — more than all other nine dams operated by the Santa Clara Valley Water District combined.

In a statement Monday, Norma Camacho, the water district’s CEO, said the impacts of draining the largest reservoir in Santa Clara County will be significant.

“With these new requirements, we expect to see an impact to groundwater basins that are replenished with water released from Anderson Reservoir, including South County and southern San Jose,” Camacho said. “Staff is already exploring other sources of water that will have to come from outside of the county. While residents have done an excellent job of conserving water since 2013, another drought during this time frame could require everyone to significantly decrease their water use.”

Camacho also said that draining the reservoir starting in seven months is likely to kill wildlife downstream in Coyote Creek, including endangered steelhead trout, amphibians and reptiles. Coyote Creek flows from the dam through downtown San Jose to San Francisco Bay.

Complicating the issue, California may be heading into a new drought. On Monday, amid a dry winter, Anderson Reservoir was just 29% full. Nevertheless, the 26,133 acre feet of water stored there is an important part of the South Bay’s water supply — holding enough water for the annual needs of at least 130,000 people, and what the district considers an emergency supply.

The water district, a government agency based in San Jose, became aware of the dam’s problems a decade ago.

In December 2008, an engineering consultant found that a 6.6 magnitude quake centered on the Calaveras Fault directly at Anderson Reservoir, or a 7.2 quake centered one mile away, could cause the reservoir’s huge dam to fail.

Although unlikely, if that occurred when the reservoir was full, such as during a wet winter, it could send a wall of water 35 feet high into downtown Morgan Hill within 14 minutes, and eight feet deep into San Jose within three hours, potentially killing thousands of people, studies from that time showed.

The largest earthquake recorded on the Calaveras Fault was a 6.5 in 1911. But the U.S. Geological Survey has estimated the Calaveras Fault can produce a quake of up to 7.2.

During test borings in 2008, consultants found that the dam’s foundation was not built on solid bedrock in the 1950s. Rather, there is some sand and gravel under it, which could liquefy in a big quake, causing the dam potentially to slump and fail.

The district has worked on a project to rebuild the dam, but it has faced numerous delays and cost overruns. The project’s cost estimate is now $563 million. Construction was scheduled to begin in 2022, but the district has said it has had difficulty obtaining permits from other government agencies.

In October, after federal officials raised concerns about delays, the district said that the most balanced course of action was for it to fill Anderson Reservoir to no more than about 45% full. That, the agency wrote, would balance water supply and environmental needs and also reduce the risk of damage to the dam’s intake structure.

But FERC rejected that approach, essentially saying the agency hadn’t done enough fast enough.

“Your actions to date do not demonstrate an appropriate sense of urgency regarding the interim conditions at the project,” Capka wrote in Thursday’s letter.

Three years ago, FERC and the State Department of Water Resources came under criticism after the spillway at Oroville Dam in Butte County, the nation’s tallest dam, crumbled during heavy winter storms, causing the emergency evacuation of nearly 200,000 people. As a result, both agencies have taken a sharper view of safety.

“I think people are waking up to the reality of seismic instability and the consequences for Silicon Valley,” said Jeffrey Hare, a San Jose attorney who is suing the water district on behalf of roughly 200 people whose homes and businesses were flooded in 2017 when Coyote Creek went over its banks.

“The risk is well beyond what happened with Oroville,” he said, “in terms of economic and human losses, if Anderson Dam failed.”

The water district, which provides drinking water to 2 million people in Santa Clara County, produces nearly half of its supply from groundwater wells. After two wet winters, groundwater supplies are in good shape, district officials have said.

The agency also holds contracts with the federal Bureau of Reclamation and State Department of Water Resources to buy water from the Central Valley Project and the State Water Project — two massive systems of dams and canals that deliver it from across the state. And the agency produces roughly 5 percent of its supply from recycled wastewater.

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Anderson Dam: Water shortages not expected in Silicon Valley this summer, officials say Also, although California’s 2012-17 drought ended three years ago, the district’s customers are using 21 percent less water now than they were before it began, due to conservation measures such as low-flush toilets and water-efficient landscaping that were put in place during the drought.

It’s likely the district will work to bring water it has stored underground at Semitropic Water Storage District in Kern County to make up the difference from Anderson’s drained reservoir.

The district also is sponsoring a bill in the state Legislature, introduced Friday, AB 3005, that would expedite permits for the dam rebuilding project. On Monday, many questions remained unanswered. Nevertheless, the news that the biggest reservoir in the county will go dry sometime after Oct. 1 is a major development in Silicon Valley’s water picture.

“Lowering the reservoir water level below the current restricted normal pool would impair the water delivery mission of Valley Water dramatically,” Christopher Hakes, deputy operating officer for the water district’s dam safety division, wrote Dec. 31 in a letter to FERC.