BENTON CITY — Wine grape growers on Red Mountain, the Kennewick Irrigation District and state officials said Tuesday that an agreement to supply Yakima River water to the prestigious wine area will be an economic and environmental boost to the region.

About 1,785 acres within and near the Red Mountain American Viticultural Area will receive Yakima water, thanks to a $12.5 million project that will include construction of a diversion at Kiona to deliver water to the mountain through a pressurized, metered pipe system.

The Department of Ecology estimates the project ultimately will inject $9.2 million into the economy and create up to 103 jobs.

On Thursday, Gov. Chris Gregoire is scheduled to tour Hedges Family Estates on Red Mountain during a "Feeding Washington" tour of the eastern part of the state to promote agriculture, bioenergy and exports of Washington products, according to her office.

Under the agreement, KID will move part of its water right diversion from Prosser to the new Kiona pump station. That is expected to improve flow in the Yakima River by 7,500 acre-feet and provide instream benefits for salmon and steelhead, Ecology said.

"It benefits the wine, the fish, the state, the landowners out there and our ratepayers," said Scott Revell, planning manager for KID.

The Red Mountain AVA includes more than 4,000 acres, but not all of it is under cultivation.

A guaranteed water supply means more acreage can be cultivated on Red Mountain, which is considered by some wine experts to be the premier wine grape-growing AVA in Washington.

Longtime Red Mountain grower Jim Holmes, owner of the Ciel du Cheval Vineyard, and the Hedges family have tapped well water for years to irrigate their vineyards and produce noted wines.

More premium wine being produced will benefit the industry and state, and could encourage development of a wine village on Red Mountain, said Christophe Hedges, national sales director for Hedges Family Estates.

"Red Mountain is kind of the jewel in the crown of Washington AVA's. Our wine consistently gets really great reviews from wine critics," said Holmes, who supplies grapes to 26 wineries from his 160 acres on Red Mountain.

Those signing the landmark memorandum of understanding for the Red Mountain AVA Pump Project include Ecology, the Bureau of Reclamation, the Washington Department of Fish and Wildlife, the KID and several dozen landowners on Red Mountain who formed a local improvement district in 2007 to seek irrigation water from KID.

Yakima water to be pumped to Red Mountain will come from the re-allocation of water once destined for farmlands that have been converted to subdivisions or commercial development, said Tom Tebb, director of Ecology's Central Region Office.

Under the agreement, Ecology -- through its Office of Columbia River program -- will commit $10 million for construction of the Kiona pump station and another $500,000 for Fish and Wildlife to mitigate loss of shrub-steppe.

KID will contribute the other $2 million and another $500,000 for shrub-steppe mitigation, according to Ecology.

Members of the LID then will repay the money over time.

Construction will not start anytime soon, however. The project will have to undergo National Environmental Policy Act review and obtain permits.

"We have been targeting the end of 2012, but there are several variables that will need to be met," Revell said.

Gregoire is expected to tout the agreement during her visit to Eastern Washington. Among her stops will be a tour of a water pump project in Walla Walla, a meeting with members of the Yakima River Basin water enhancement work group and a visit to a farm in the Yakima Valley.

She also could make an announcement, possibly in the Tri-Cities on Thursday, on whether she will ask for a federal disaster declaration for hay growers and other farmers who lost crops because of a wet and cool late spring.

State Agriculture Director Don Newhouse, Ecology Director Ted Sturdevant and Commerce Director Rogers Weed are expected to join Gregoire, who wants to promote the state's $38 billion agricultural industry and exports, according to her office.

"The governor knows Washington wine can't be replicated anywhere else in the world, and with this influx of investment we can take advantage of it," Hedges said of the Red Mountain project.

"What she is saying is, 'Let's show the world Washington is not just Microsoft or Boeing.' We're agriculture and world class wines as well," he said.

* Kevin McCullen: 509-582-1535; kmccullen@tricityherald.com