A fundamental question remains to be answered in the Clare Valley. How much water can be safely extracted without causing depletion of the groundwater resources? This question is being addressed by a major investigation into the groundwater resources of the Clare Valley by Primary Industries and Resources South Australia (PIRSA), CSIRO Land and Water, the Centre for Groundwater Studies and Flinders University. This report details the background hydrogeology, groundwater monitoring and Phase 1 of a drilling program. Groundwater in the Clare Valley is stored in fractured rock aquifers. The fractured rocks are part of a larger geological entity known as the Adelaide Geosyncline. The groundwater occupies fractures which exist randomly within various rock types including shales, slates, dolomites, sandstones and quartzites. Well yields and salinity are extremely variable across the region, as is expected in this type of geological environment. Due to the unpredictable nature of the chemical and physical properties of these fractured rock aquifers, it is often difficult to locate and maintain a reliable groundwater supply. Current groundwater extraction for irrigation purposes is estimated at 1400 ML/a. The potentiometric surface represents a subdued form of the topography, with groundwater travelling in approximately the same direction as the surface water. A groundwater divide occurs near Penwortham; north of Penwortham groundwater travels to the north, whereas south of Penwortham groundwater travels towards the south. Groundwater monitoring has not shown any obvious changes in quality or total stored volume, however, there have been large seasonal variations in both the depth to water table and groundwater salinity. The monitoring period to date is considered to have been too short to determine any long term trends. Twelve groundwater research bores have been drilled at eight sites throughout the district to investigate the sustainability of the groundwater resources. Future work will look at characterising these sites for hydraulic properties, as well as performing groundwater age dating. If groundwater recharge rates can be determined then safe groundwater pumping rates can be calculated.