Government efforts to restore salt ponds around San Francisco Bay to healthy wetlands earned an embarrassing black eye Tuesday, with the disclosure that state and federal officials released millions of gallons of contaminated water into the bay last summer in violation of their environmental permits.

Starting in July, and continuing for nearly two months, the U.S. Fish and Wildlife Service released water from former Cargill salt evaporation ponds near Mountain View, Sunnyvale and Alviso into the bay with levels of dissolved oxygen up to 20 times lower than a state permit required.

About the same time, another agency, the California Department of Fish and Game, made similar releases, although at less toxic levels, from former salt ponds it is restoring at Eden Landing near Hayward.

Water with low levels of oxygen -- usually caused by bacteria-consuming algae or other material -- can create ``dead zones'' that kill fish, shrimp, clams and other marine life.

Although no fish were reported floating on the bay's surface at the time, an Alviso shrimp fisherman says shrimp levels crashed after the releases, costing him $100,000 in lost business.

Further, the Fish and Wildlife Service failed to report the incident to state regulators for almost two months, even though its permit requires it to report violations within 24 hours.

And the service did not take samples of animals living on the bottom of nearby sloughs, such as worms or clams, before the discharges, as its state permit required, so there is no way to measure now how much wildlife was harmed by the releases.

Learning experience

``These were procedural errors. We're working hard to learn from our mistakes. We're all interested in protecting the bay,'' said Clyde Morris, manager of the Don Edwards San Francisco Bay National Wildlife Refuge, based in Fremont.

``I'm focused on this,'' he added. ``We are going to do it right this year.''

The disclosure comes at an awkward time. On Thursday, U.S. Sen. Dianne Feinstein, D-Calif., is set to appear at a ceremony in Alviso to open the tide gates on nine other salt ponds, totaling 2,512 acres, that the service is restoring.

The pond restorations are part of a landmark project to bring back natural conditions not seen in 100 years. In March 2003, the state and federal governments closed a $100 million deal to buy 16,500 acres of ponds from Cargill Salt, based in Newark.

Gold Rush heritage

Cargill, which continues to make salt in other East Bay ponds, sold roughly 20 miles of San Francisco Bay shoreline to the public. It and other companies had used the ponds to evaporate water and harvest salt for road clearing, food and medical uses since the Gold Rush.

The project -- expected to take 30 years and cost hundreds of millions of dollars -- is among the largest wetlands restoration efforts ever attempted in the United States.

As part of the restoration, the least saline ponds are being opened to bay waters first. The ponds have been diluted since the sale so the salt won't harm wildlife.

Problems came to light Friday, when the San Francisco Bay Regional Water Quality Control Board issued letters saying the Fish and Wildlife Service and the California Department of Fish and Game had violated their discharge permits by releasing water with low oxygen levels.

The water board could issue fines of $5,000 a day to the agencies, but will not, said Wil Bruhns, a spokesman for the water board in Oakland.

``We're expecting them to correct the problem,'' Bruhns said. ``This is a good project for the environment. Let's keep it moving. But if people repeat the same mistakes, we will reconsider our enforcement position.''

The culprit was algae, said Morris. In hot months, it builds up in the ponds, and its decay can result in low oxygen levels. The most toxic water, released into Guadalupe Slough near Sunnyvale, had a median oxygen level of .23 parts per million -- 20 times lower than state water quality officials require.

Miscommunication

Morris said part of the problem was that scientists from another agency, the U.S. Geological Survey, were taking weekly readings from tidal gauges, but the Fish and Wildlife Service had not told them what the limits were.

Meanwhile, Bart Laine of Alviso, who harvests bay shrimp to sell as bait to fishermen across Northern California, saw his catch drop nearly to nothing in the weeks after the gates were opened July 17.

``Everything was just gone,'' he said.

Morris has given Laine claim forms to recoup his loss from the government.

Meanwhile, state water officials have required more thorough reporting. The Fish and Wildlife Service has put radio gauges on the gates to obtain immediate water quality results and installed filters in the worst pond to keep algae away from the gates.