This is the first I can recall hearing about the Palermo tunnel/canal.
Is that yet another way to get water out of Oroville Lake?
This canal predates the dam. The Palermo canal was originally constructed to facilitate a water source for gold mining. It looks now to run through areas that have agricultural uses. It is more of a stream flow than any type of a release source for the dam. Since the Dam would have cut off this supply, a 6ft avg dia tunnel was constructed in the side dam bedrock to re-connect it to on the other side of the dam.
Zoom in on the picture - you can see the white water ripples in the stream flow.
The flow rating of the Palermo tunnel is 40 cfs.