In January 2009, the lake dried up after years of drought. Water enters the lake from Barongarook Creek, but the lake usually loses more water through evaporation. The lake needs to get water from rain falling directly over it to keep up a high level. Water quality in Lake Colac is low because of nutrients, such as phosphorous and nitrogen entering the lake. This has come from farms and untreated sewerage. There has also been chemicals and rubbish from the town of Colac. These can cause blue-green algae to grow in the lake which makes the water unsafe for humans or animals. There have been efforts made to improve water quality by stopping these nutrients from getting into the lake. 