BUTTE FALLS — Jim Grieve vividly remembers catching rainbow trout as a kid in the creek-like stream of water flowing through Butte Falls Hatchery and into nearby Big Butte Creek.

BUTTE FALLS — Jim Grieve vividly remembers catching rainbow trout as a kid in the creek-like stream of water flowing through Butte Falls Hatchery and into nearby Big Butte Creek.

Hatchery workers regularly stocked trout in the stream — which really was the hatchery's water-discharge line — for local kids much the same way Grieve, who now is the hatchery's production foreman, stocks a small earthen pond for kids during Free Fishing Day.

"This hatchery is what got me into fisheries," says Grieve, 45. "Now, it's the one I have to close."

The Oregon Department of Fish and Wildlife plans to close the 94-year-old hatchery July 1 and divest itself of the 14-acre facility as part of a plan to pare 30 percent from its general-fund budget for 2009-11.

It is the only hatchery scheduled for shuttering in the current budget proposal that calls for slashing slightly more than $5 million from the agency's $16.1 million slice of the general-fund pie.

Other cuts include reductions to coastal salmon and steelhead monitoring programs, a program that screens water diversions in salmon streams, and some wildlife field staff within the 1,145-employee agency.

Plagued with a backlog of maintenance projects and its production severely cut after a deadly 2006 disease outbreak, the third-oldest state-run hatchery will shut off its bottle-quality water for good less than a decade after the agency invested nearly $1 million to upgrade it.

"We're not talking about mothballing Butte Falls. We're talking about getting rid of it," says Russ Stauff, the ODFW's Rogue watershed manager.

A 4-acre part of the property that includes the house Grieve lives in could be broken off and sold, Stauff says. The agency would then find a new owner for the remaining facility and its aged concrete ponds cloaked by old-growth Douglas firs, he says.

Possibilities include the Oregon State Parks Department or even the city of Butte Falls, though no plans have been vetted, Stauff says.

The facility's production of rainbow trout for regional disbursement likely will be shifted to Cole Rivers Hatchery on the Rogue River. Cole Rivers already has assumed Butte Falls' production of steelhead, coho and chinook salmon for the Coos, Coquille and Umpqua systems.

Cole Rivers Hatchery is federally funded as mitigation for the building of Rogue River Basin dams by the U.S. Army Corps of Engineers.

Half of Butte Falls Hatchery's yearly budget of almost $250,000 is paid by fishing license fees and half comes from the state general fund. Gov. Ted Kulongoski has told all state agencies to pare their budgets by 30 percent for the upcoming biennium.

"We're not enthusiastic about this reality," Stauff says. "But like everybody else in this budget climate, there are some things we have to do."

That means Grieve, whose family has been associated with the hatchery and Rogue River angling for decades, will leave the grounds where he remains around-the-clock for weeks at a time.

"There's a lot of history here," Grieve says. "Not just for me, but the whole Rogue Valley."

The facility began raising spring chinook salmon for the Rogue in 1915, collecting its brood stock in lower Big Butte Creek and raising the fry with fresh, cool creek water.

Later, trout were raised there, placed on railcars at an adjacent rail line and shipped to lakes throughout the region.

In 1931, the federal government added another 4-acre parcel for raising more salmon, and eventually turned that part of the facility over to the former Oregon Fish Commission.

In 1976, the agency considered closing the hatchery after Cole Rivers Hatchery went online, but it survived.

In 2001, the ODFW was set to close the run-down and aged facility, and even brought in Grieve to do it. But townspeople and a collection of southwestern Oregon state legislators convinced the Oregon Legislature to order the ODFW to keep it open and funded a year's operation.

To operate it in the 21st century, the ODFW first had to fix it. The agency poured $875,000 into revamping the ponds, rebuilding the water-intake system and adding alarms to ensure water remains flowing over eggs and fish.

After a seven-month layoff for refurbishing in early 2003, the hatchery went back into production.

In a 2006 evaluation of the nine hatcheries funded solely with state money, Butte Falls rated the best overall, largely because of the improvements, says John Thorpe, the ODFW's fish-propagation program manager.

"They were right on top," Thorpe says. "Then they got the death blow, and everything changed."

The death blow was infectious hematopoietic necrosis, or IHN. It is a naturally occurring, water-borne virus carried by adult fish. It is known to kill eggs and young fish if it enters the hatchery water supply.

IHN likely was carried by an infected steelhead that migrated upstream of the hatchery water intake, infecting the hatchery. It was discovered just after the hatchery's No. 1 rating in 2006, and discovered again among "sentinel" fish there used to test for the disease in 2007.

Since IHN survivors become carriers, the ODFW's policy is not to stock fish grown at IHN facilities into water bodies where IHN hasn't been discovered. That crippled Butte Falls' program, leaving it officially "quarantined" and relegated to growing a small amount of rainbow trout for regional ponds.

"The IHN put that hatchery from the top of the list to the bottom," Thorpe says.

The facility has been IHN-free for two years, raising rainbow trout for release in area ponds and water bodies where IHN already has been found.

ODFW policy states that a facility must be IHN-free for three consecutive years before its old fish-rearing programs can return.

That puts Butte Falls at the top of a more dubious list released Thursday at the Legislature's Joint Ways and Means Committee meeting — the prioritized list of hatcheries that would close based on budget cuts. So far, it's the only one slated for closure.

"When it's the only quarantined facility in the state, it's hard to argue that it should be maintained," Stauff says.

Had the recession hit a year later, when the facility could have been deemed IHN-free, things would have been different, Grieve says.

"Everything just fell wrong for it," he says.

So he plans on packing up and moving to a different hatchery, based on openings and seniority.

He will turn off the lights and the water to the facility, and shutter a family legacy, as well.

"I guess it's better me than someone else," Grieve says. "For me, it's like home."

Reach reporter Mark Freeman at 776-4470, or e-mail mfreeman@mailtribune.com.