The Windy Gap Firming Project won key approval Tuesday from the Grand County Commission in a deal applauded by fishing interests but criticized by an environmental group.

The approval marks a major step forward for the Northern Water Conservancy District's proposal to build Chimney Hollow Reservoir west of Carter Lake near Loveland, according to Northern Water.

Chimney Hollow Reservoir will provide storage to improve the reliability of the Windy Gap Project, which diverts Colorado River water from Windy Gap Reservoir. Water is then moved through Colorado-Big Thompson Project facilities for delivery to Northern Colorado.

The proposed Chimney Hollow Reservoir will help the project's participants — 10 cities, two rural water districts and a power provider — to meet their growing water needs. The municipal water providers are expected to serve about 825,000 residents by 2050. A municipal "sub-district" for Northern Water is coordinating the project's permitting on behalf of the 13 groups.

Gary Wockner, director of Fort Collins environmental group Save the Poudre, said the deal "makes strides" toward offsetting the damage done to the Colorado River in Grand County by Northern Water.

However, Wockner said, "The Windy Gap Firming Project would likely be used to fill Glade Reservoir of the Northern Integrated Supply Project, which would also be used to drain and destroy the Poudre River."

In addition, the project would divert "even more" river water across the Continental Divide, depleting flows and potentially harming endangered fish species, as well as support operations of coal-fired power plant Rawhide north of Fort Collins, he said.

Brian Werner, Northern Water spokesman, denied that Windy Gap water would be used to fill Glade Reservoir.

In granting the permit, the Grand County Commission included measures aimed at protecting the Colorado River.

"Grand County has secured protections for water quantity and quality in the Colorado River that never would have happened without the project and this permit," said Grand County Commission Chairwoman Nancy Stuart.

Under the deal, 4,500 acre-feet of Windy Gap water stored in Lake Granby will be released to benefit aquatic life in the Colorado River.

That's in addition to more than 5,400 acre-feet of water that will be released each year to aid endangered fish while also increasing flows in the Colorado between Grand County and Grand Junction.

The permit advances another agreement, drafted between Trout Unlimited and the Upper Colorado River Alliance of landowners, addressing the potential construction of a pipeline around Windy Gap Reservoir to improve fish habitat. The pipeline could lessen the accumulation of dirt that harms fish in the river.

The municipal sub-district committed $2 million toward construction and maintenance of the pipeline. It will be built if studies show it would benefit Colorado River habitat.

Trout Unlimited, a group of conservation-minded anglers, welcomed Tuesday's news.

"These permit conditions provide critical measures for protecting the health of the Upper Colorado River and its world-class trout fishery," said Mely Whiting, counsel for Trout Unlimited. "TU has not been able to support this project in the past. But the sub-district and the project participants have gone the extra mile to try to address our concerns and do what's right for the river."

The U.S. Bureau of Reclamation is expected to issue a final decision on the firming project next year.