The Powder River Basin is one of the largest producers of coal-bed natural gas (CBNG) in the United States. An important environmental concern in the Basin is the fate of the large amounts of groundwater extracted during CBNG production. Most of this produced water is disposed of in unlined surface impoundments. A 6-year study of groundwater flow and water chemistry at one impoundment, Skewed Reservoir, has produced the most detailed data set for any impoundment in the Basin. Data were collected from a network of 21 observation wells and three suction lysimeters. A groundwater mound formed atop bedrock within initially unsaturated, unconsolidated deposits underlying the reservoir. Heterogeneity in physical and chemical properties of sediments resulted in complex groundwater flow paths and highly variable groundwater chemistry. Sulfate, bicarbonate, sodium, and magnesium were the dominant ions in all areas, but substantial variability existed in relative concentrations; pH varied from less than 3 to more than 9, and total dissolved solids concentrations ranged from less than 5000 to greater than 100,000 mg/L. Selenium was a useful tracer of reservoir water; selenium concentrations exceeded 300 μg/L in samples obtained from 18 of the 24 sampling points. Groundwater travel time from the reservoir to a nearby alluvial aquifer (a linear distance of 177 m) was calculated at 474 days on the basis of selenium concentrations. The produced water is not the primary source of solutes in the groundwater. Naturally occurring salts and minerals within the unsaturated zone, dissolved and mobilized by infiltrating impoundment water, account for most of the solute mass in groundwater. Gypsum dissolution, cation-exchange, and pyrite oxidation appear to be important reactions. The complex geochemistry and groundwater flow paths at the study site underscore the difficulty in assessing effects of surface impoundments on water resources within the Powder River Basin.