Nestlé is scaling back its plans to build what would have been the largest water bottling plant in the US in Northern California by more than 60%.

The announcement by Nestlé Waters North America follows years of opposition by environmentalists and a group of residents in the rural town of McCloud.

David Palais, Nestlé's Northern California natural resource manager, said: "Our need for bottling capacity in this location has changed since the inception of this project five years ago. In that time, we have built another plant in Denver and expanded both water supplies and capacity at other water sites. These supply increases, coupled with the rising cost of transportation and fuel mean that a plant of the size we first proposed in McCloud no longer makes economic sense for the company."

Nestlé signed a contract in 2003 with the McCloud Services District to pump up to 521m gallons of water a year. Palais said the company will now seek permission to pump a fraction of that water and build a much smaller plant of about 350,000 sq ft.

Palais declined to say whether Nestlé would now seek to have the fees of US$250,000 to $350,000 per annum, agreed under the 2003 contract, lowered.