KC,
Nice place, very nice.
I'm not personally experienced with shale, but I'd be willing to bet that in your original construction they either dug out the shale to clay or packed clay over the top of it. How deep does the vein run? From the picture it's hard to tell, but it sure appears that no way would it hold water at the base of the dam. Now, up in the area away from the dam where you are expanding maybe its less of a risk, but even there I would think the likelyhood of leaks is high. You probably aren't the only one in your area to have encountered this problem, so you might want to check with other locals.
