The site of some of the fiercest environmental wars over water in recent years is now the subject of a federal investigation into millions of dollars that whistleblowers say were intended to secure water for drought-stricken fish but flowed instead to farmers and ranchers.

The Office of Special Counsel, the small federal office that investigates disclosures by whistleblowers, has found enough of a likelihood that $48 million was spent improperly by the Interior Department in the Klamath Basin that it directed the agency to do a formal investigation.

The basin, which begins in the mountains east of the Cascade Range in southern Oregon and flows to northern California, has long been a flashpoint for conflicts over water use and fish conservation. Farmers and ranchers have fought with environmentalists and Indian tribes over the scarce water supply in this enormous watershed, one of the largest in the western U.S.

In recent years, though, the area has been stricken by drought, which has only sharpened the tensions.

Two biologists for the Interior Department’s Bureau of Reclamation, which supply farmers with irrigation water and farmland in the Klamath Project, became suspicious a little more than a year ago of a contract between the bureau and an organization called the Klamath Water and Power Agency, according to Public Employees for Environmental Responsibility (PEER), a watchdog group that brought the scientists’ claims to the Office of Special Counsel.

PEER says at least some of the $48 million contract was supposed to pay for a feasibility study for fish and wildlife of whether farmers could use groundwater instead of pulling water from the rivers. But instead, the group says, the money was used for office space, equipment, salaries and other expenditures to defray expenses of the company, an association of Klamath Project irrigators.

The biologists discovered that money also was used  to pump large amounts of groundwater to supply farmers during drought years until private wells went dry. All of these expenditures were made without any apparent legal authority to do so, PEER claims.

Below is an excerpt from the June 26 letter the special counsel’s office wrote to Interior Secretary Sally Jewell:

“They’ve never done a feasibility study,” PEER Senior Counsel Paula Dinerstein said in an interview.

“We have a situation where the combination of increasing droughts and endangered species is presenting a real long-term problem, but in the short term, this money became a kind of slush fund for this irrigation agency. It’s not benefiting the fish or the wildlife.”

The Bureau of Reclamation is supposed to work with Klamath Project farmers and ranchers. But the biologists, Todd Pederson, a natural resources specialist, and Keith Schultz, a retired fisheries biologist, say the relationship has gotten much too close, Dinerstein said. The feasibility study was never completed, she said.

A Bureau of Reclamation official said in a statement, “Reclamation takes these complaints seriously, and will cooperate fully with the Department’s investigation.”

The Office of Special Counsel does not decide whether claims like this are valid, only whether there is enough evidence to refer them back to an agency to conduct a full-blown investigation.

An official with the special counsel’s office said the office does not comment on pending investigations.