Right now, Sacramento River water is funneled through the delta’s fragile maze of levees and islands. 

But Anthony Saracino with The Nature Conservancy, which released the report, says a canal around the delta could help restore the region's natural habitat. 

“The peripheral canal will move some of the water from the northern part of the delta to the southern part while allowing the delta itself to act much more like a natural estuary that it evolved to be.” 

It's the first endorsement of the canal by a major environmental group. Most environmentalists fear water diversions would deprive the region's fish, wildlife and farms of much-needed fresh water. 

The report comes a week after Governor Schwarzenegger’s top water advisers also recommended a canal as a way to restore the delta.