The California state water board on Monday formally announced that the Sites Reservoir project failed to get federal approval, a situation they say isn’t permanent and can be rectified.

The rejection by the U.S. Army Corps of Engineers is the latest setback for the estimated $4 billion project in Northern California that would capture water during the rainy season. Officials have said the reservoir would hold up to 1.5 million acre-feet of water, or enough for 3 million homes a year.