The Padthaway Formation and Bridgewater Formation aquifers provide a high quality groundwater resource in the Padthaway Proclaimed Wells Area (PWA). The resource supports an irrigated agriculture and horticulture industry. Irrigation is concentrated mainly along the Keith-Naracoorte road to the north and south of Padthaway, and currently comprises an area of 7 059 Ha with a gross annual production estimated to be in excess of $36 million. During the 1994/95 irrigation season, groundwater crop use was estimated to be 23 500 ML, about 67% of the total allocated groundwater volume of 34 952 ML. MESA monitoring data from observation wells in the area indicate that water table levels generally respond to rainfall trends. Longer term rises in water table levels are evident throughout some areas of the plain to the south of Padthaway, particularly in wells located along the eastern edge of the plain, and within the adjacent Naracoorte Range. These rises are due respectively to increased groundwater outflow from the Naracoorte Range, and increased rainfall recharge following native vegetation clearance and the loss of high water use lucerne pastures during the 1970s. Of more concern is the groundwater quality monitoring data which indicates that groundwater salinity is increasing in the eastern parts of the more intensely irrigated areas by up to 45 mg/L annually. This is due predominantly to the recycling of groundwater for irrigation. Analytical modelling indicates groundwater salinities in the intensely irrigated strip north and south of Padthaway will continue to increase over the next 20 years to levels of up to 500 mg/L above current levels. Currently, the sodium content of some Padthaway wines is approaching the allowable limit for consumption in Europe, and the continued rise in groundwater salinity has the potential to severely affect the viability of the export wine industry. The Padthaway PWA has been divided into five subareas for the purpose of allowing the calculation of a water balance. The major inputs and outputs for the aquifer systems include groundwater inflow, rainfall infiltration, crop use, storage and groundwater outflow. Five options are described in this report to manage the groundwater resources and slow or stop the rate of salinity increase. These options include; - pumping from the Naracoorte Range upstream of the irrigation area; - pumping from deeper parts of the aquifer sequence; - artificially recharging the aquifers with surface water from Morambro Creek; - reducing groundwater use and/or increasing irrigation efficiencies; - the construction of a groundwater drainage/interception scheme. The water balance has been used as a guide for assessment of these options. Further groundwater modelling is required to fully determine the impacts and effectiveness of each of the options. Modelling will also be required to test the validity of the predictions for groundwater salinity distributions described in this report.