E&J Gallo faces a $73,000 fine for illegal diversion of Russian River water into an eight-acre vineyard reservoir near Healdsburg, according to a state water board complaint.

Gallo, the Modesto-based company that is the nation?s largest winery, can pay the fine proposed by the State Water Resources Control Board or dispute it in a hearing, a step that would risk increasing the penalty to more than $500,000.

The water board?s complaint, posted online Wednesday, claims that Gallo lacked the authority to pump river water into the reservoir located off Westside Road.

For at least three years, Gallo used the water for frost protection and irrigation of a 395-acre vineyard, the complaint said.

Gallo?s action reduced the amount of water available to downstream water right holders and may have contributed to reduced habitat for steelhead trout, an endangered species, the complaint said.

Gallo did not have an immediate response to the complaint.

The complaint against Gallo stemmed from an investigation launched in 2005 into illegal water diversions within the Russian River watershed, said William L. Rukeyser, a water board spokesman.

Numerous informal allegations of illegal reservoirs in the watershed have been made over the years, he said.

The agency is still looking into the matter, but Rukeyser said he could not comment on whether any other complaints will be forthcoming.

Gallo saved about $16,000 a year, the complaint said, by tapping the allegedly illegal reservoir instead of buying water or paying annual water right fees. The 45-foot deep reservoir held an estimated 250 acre-feet of water, enough to supply 1,000 people for one year, the complaint said.

Based on three years of unauthorized water use, Gallo could be fined a maximum of $500 a day or $547,500, the complaint said.

Water board staff proposed a fine of $73,000, amounting to less than $67 a day, Rukeyser said.

If Gallo chooses to dispute the penalty, it can request a hearing before the five-member state water board, which could impose the maximum fine, he said.

The complaint named Gallo Glass Co., a Gallo subsidiary that Rukeyser said was listed as owner of the vineyard in question.