At Las Vegas's Bellagio hotel, fountains shoot 500ft into the air, dancing to the music of Frank Sinatra. Gondolas ferry people around canals modelled on Venice's, swimming pools stretch for acres, and thousands of sprinklers keep golf courses lush in the desert.

But, as with many things in Sin City, the apparently endless supply of water is an illusion. America's most decadent destination has been engaged in a potentially catastrophic gamble with nature, and now, 14 years into a drought, it is on the verge of losing it all.

"The situation is as bad as you can imagine," says Tim Barnett, a scientist at the Scripps Institution of Oceanography. "Unless we can find a way to get more water, Las Vegas is out of business. Yet they're still building, which is stupid."

The crisis stems from Vegas's reliance on Lake Mead, America's largest reservoir, created by the Hoover Dam in 1936. It supplies 90pc of its water. But in the last decade, as the population has grown, Lake Mead has been drained of four trillion gallons and is under half full. Mr Barnett predicts it may be a "dead pool" by 2036.

The lake looks as if someone has removed a plug from it. Around its edges, bleached rock, known locally as the "bathtub ring", show where the water level used to be. Pyramid-shaped mountains rise from the shallow waters.

Tying his boat at the water's edge, Tom Merrit (51), who has fished the lake for years, points to a hill. "My boat used to be up there," he says. "We kept moving down as the water receded. That rock never used to be there," he adds, gesturing to an island.

Lake Mead's water level is now 1,087ft above sea level. There are two pipes, known as "straws", that take water from it to the city. The first extracts water at 1,050ft and is likely to be sucking air soon. The second is at 1,000ft. But Lake Mead is expected to fall 20ft towards the critical point by the year's end.

Work is under way to complete a lower straw to draw the last of the water. But it is a slow process as a drill the size of two football pitches advances one inch per day. The project costs $817m (€599m) and is expected to be complete by 2015, but it is not seen as a solution. Las Vegas wants to build a $15.5bn (€11.4bn) pipe to pump 27 billion gallons of water a year from an aquifer 260 miles away. But a judge refused permission after environmentalists sued on the basis it would affect 5,500 acres of meadows, 130,000 acres of habitat and more.

Rob Mrowka, of The Centre for Biological Diversity, which brought the case, says: "It's a dumb-headed proposition. It would provide a false sense of security that there's plenty of water and would delay the decisions that have to be taken about conservation and growth. We have to talk about the removal of people (from Las Vegas)."

Mr Mrowka cites Lake Las Vegas, a resort where stars including Celine Dion live, as one of the "most egregious examples" of wasting water. He claims: "It has a 320-acre lake filled with three billion gallons of water from Lake Mead. Each year, they take millions more to keep it from stagnating."

JC Davis, from the Southern Nevada Water Authority, says developments like Lake Las Vegas are "artifacts from an earlier time that wouldn't be allowed today".

Environmentalists acknowledge the hotels have made strides toward using water wisely. The Strip now uses only 7pc of the city's water while accounting for 70pc of its economy. The Bellagio fountain does not use water from Lake Mead, instead being filled with undrinkable water from an underground lake. But Las Vegas still uses 219 gallons of water per person per day, one of the highest figures in the US. Most of that is used on golf courses and parks, so the water authority has declared war on grass, paying homeowners to remove it for $1.50 (€1.10) per sq ft. So far 165 million sq ft has been destroyed.

There is pressure on California to help Las Vegas, but it is dealing with its own drought, possibly its worst in half a millennium. A total of 100pc of California is classified as in "severe drought" and rivers are so low, 27 million salmon are being taken to the ocean in trucks.

Nevada and California are two of seven states that rely on the Colorado River for water. It used to empty into the Gulf of California in Mexico, but now rarely reaches the sea before running dry. In 1922, seven US states – California, Nevada, Arizona, Wyoming, Utah, Colorado and New Mexico – divided up how much water each could use, and the amounts have been bitterly contested ever since, including by Mexico, which also takes water.

One proposal is for Nevada to pay billions to build solar-powered desalination plants off Mexico, taking Mexico's share of Colorado River water in exchange. But Mr Mrowka said:

"The Colorado is dying. Our civilisation in the South West is going to disappear, like the Indians did before us."

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