Sunil, your guess could very well be right, and it probably its. I think it's a slit in the bed of rock(limestone) leading westward to the known spring we intercepted. I don't know how big a pipe can move 400 gallons per minute, but I would suspect a 8" to 10" pipe could, to put things in perspective.
I'm not giving up. The dam is in. It is dead level, and engineered well. It is the expensive part. The cheap part will be patches, hopefully.
Great idea Sunil about an hour or so of leveling off. Why would you think this? It sounds exactly right, but I just don't know why. Maybe hearing a sucking sound?
