The water impounded by the 625-foot-tall (191 m) dam forms New Melones Lake, California's fourth-largest reservoir,[6] in the foothills of the Sierra Nevada east of the San Joaquin Valley.

Daily releases are made on a peaking basis; seasonal totals are dictated by irrigation (in summer) and flood control (in winter) requirements below the dam.

[20] The modern development of the Stanislaus River began with the Oakdale and South San Joaquin Irrigation Districts, which were created in 1909 under the Wright Act to serve farmers in the area.

[24] The Corps downplayed these additional benefits, intending to keep it primarily as a flood-control structure, because an irrigation project would then fall under the authority of the U.S. Bureau of Reclamation.

[21][23] The Corps objected to the Tri-Dam Project because the additional storage provided by these smaller dams further decreased the potential flood control benefit of New Melones.

[26] The Bureau cited numerous benefits to a larger reservoir, which it estimated would capture 335,000 acre-feet (0.413 km3)[n 1] of extra water per year to increase irrigation, supply other units of the Central Valley Project, and maintain a minimum flow in the Stanislaus River to protect fish (before New Melones was built, diversions often dried the river completely in summer).

[36] In addition, more than one hundred archaeological and historical sites, left over from Native American inhabitation and the Gold Rush period, were all situated in the reservoir flood zone.

On April 4, 1973, the SWRCB issued Decision 1422 which held that the public interest requires the use of the Stanislaus River for whitewater boating, stream fishing and wildlife habitat be protected to the extent that water is not needed for other beneficial purposes.

Development-related interests such as PG&E, the California Chamber of Commerce and the contractors working on the dam spent millions of dollars lobbying against Prop 17 (see images on the Stanislaus River Archive).

argued that this part of the Stanislaus River was not untouched wilderness (as dams already existed both upstream and downstream of the 9-mile segment) and therefore was ineligible for Wild and Scenic designation.

[32] On May 22, 1979, Mark Dubois, one of the founders of FOR, hiked into the Stanislaus River Canyon and chained himself to a boulder, forcing the Corps to stop filling the lake or risk drowning him.

Dubois hid in the canyon for five days while local authorities tried unsuccessfully to find him; he had written letters to the Corps and Governor Jerry Brown telling them of his plans in advance (see documents and images of this event on the Stanislaus River Archive).

"[32][48] The irrigation districts, Reclamation officials, and local representatives including John Garamendi and Norman S. Waters, argued that to complete the dam only to not fill it was absurd.

On November 20, 1980 the State Water Resources Control Board set the temporary upper limit for lake level at the old Parrott's Ferry Bridge.

[32] Over the next two years the state continued to delay allowing the reservoir to fill because the Bureau of Reclamation had not convincingly demonstrated that "the irrigation need will outweigh any damage that results to fish, wildlife and recreation in the watershed above New Melones Dam.

"[49][50] Further studies by the California Department of Fish and Wildlife and the Bureau of Reclamation itself showed that completely filling New Melones Lake would, in fact, offset some of the benefits of the project.

The Stanislaus River swelled to such high levels that it exceeded what could be safely released through the dam's outlets, and the reservoir rapidly surpassed the temporary limit.

The potential water yield, and thus the supply contracts, of the Melones Project were calculated based on stream flow data between 1922 and 1978; however, this period may have been somewhat wetter than the long-term average.

Originally, Reclamation had planned to extend the water supply to other users, but even from the start, the Melones Project was barely able to meet these existing targets.

[30][60] One of the new requirements was for spring and autumn "pulse flows" intended to help migration of anadromous fish (Chinook salmon and steelhead trout in particular).

This policy has been criticized by local irrigation districts as a waste of water during dry years, as fish populations have continued to struggle despite the additional flows.

[63] A further constraint is that water released in autumn must be cold enough for anadromous fish to survive, and thus must be made from the lower level outlets at New Melones Dam.

[65][66] A 2016 study by independent environmental consulting group FishBio showed that the artificial spring pulse flows from New Melones Dam do fairly little to support salmon and steelhead out-migration in the Stanislaus River.

[67] The state of California has further proposed that between 20 and 60 percent of the unimpaired, or natural flow of the Stanislaus River be allowed to run downstream during the spring to support ailing fish populations.

[68] In addition, the minimum level of New Melones Lake would be set at 700,000 acre-feet (0.86 km3) (29 percent capacity) at all times in order to preserve the cold water pool.

[69] This plan has been met with outcry from local cities and irrigation districts, which contend that it would heavily damage the farming economy and cause thousands of seasonal jobs to disappear.

[69] Furthermore, it does not address other major problems including introduced striped bass in the San Joaquin River, which eat many if not most of the juvenile salmon and steelhead before they even reach the sea.

[38] The dam was constructed at a time of growing public support for environmental preservation, as compared to development or utilitarian conservation of natural resources.

[80][81] It considerably changed the California state government's approach to water resources development, switching focus from massive dam projects to conservation and policy improvements.

"[82] However, the relative lack of new storage has severely strained California's water system, which now serves 15 million more people than it did when New Melones Dam was completed in 1979.