Initial planning was completed in 1959, and amended in 1961 to increase the capacity of Fontenelle Reservoir to 345,400 acre-feet (0.4260 km3), making the construction of a powerplant feasible.

[3] The dam featured unusually large outlet works, capable of discharging 18,000 cu ft/s (510 m3/s) (compared with a spillway capacity of 20,200 cu ft/s (570 m3/s)) because the outlet works could be increased in size at lower cost than the spillway.

[3] Problems with the embankment became apparent in May 1964, when part of the backfill slid into the stilling basin downstream, attributed to too-fast lowering of the reservoir level.

A significant leak appeared on September 3, 1965 at the west abutment, starting as a wet spot that grew with time.

[8] The weakened downstream face lost 10,000 cubic yards (7,600 m3) of material that slid into the stilling basin, accompanied by continuing water flow, a condition known as "hydraulic piping.

The emergency release of water flooded areas along the Green River downstream, damaging ranches and homes.

[3] The unusually large outlet works allowed the reservoir to be drawn down by as much as 4 feet (1.2 m) per day,[7] a measure not available eleven years later at Teton Dam.

[7] Water was released through the power penstock with the turbine and generator removed while the outlet works were repaired.

"[10] The near-failure was not widely reported, but did cause organizations, other than the Bureau of Reclamation, to change their design and construction practices for embankment dams.

Plans were advanced in 1984 to build a 600-foot (180 m) long concrete wall at the east canal outlet works to evaluate its efficacy.

In September work began on the trenching of an 840-foot (260 m) test section of 24-inch (61 cm) thick concrete diaphragm wall into the core of the dam, using the "Hydrofraise" system of grout trenching, extending 40 feet (12 m) to 50 feet (15 m) below the base of the dam into bedrock.

An environmental assessment of the repair program noted that the only alternative was an intentional and permanent breaching of the center section of the dam, leaving local industries without water.