Several areas with altered, highly acidic sediments are present on the western margin of the San Joaquin Valley near O'Neill and San Luis Reservoirs. Alteration occurred mostly in the upper part of fluvial deposits of the Plio-Pleistocene Tulare Formation. Surrounding deposits, in general, have normal basic pH of 7.5 to 8.5. Altered sediments with pH values ranging from 1.5 to 4.5 contained some native sulfur, gypsum, iron sulfide, and alunite-jarosite. Three samples had pH values of 0.7 and two had values of 0.5. Hydrogen sulfide odor had been noted in many auger holes during exploration for construction materials in the vicinity, and methane-bearing gas with a hydrogen sulfide odor was found in two test holes, 25 and 80 ft deep. The alteration is similar to that resulting from low temperature hydrothermal processes, but the association with methane-bearing natural gases and hydrogen sulfide suggests a different origin. The gases rising from deeper beds were trapped locally under a clayey cap, where reactions between hydrogen sulfide, calcium-iron compounds in the sediments, and oxygen in groundwater and soil atmosphere produced an acidic environment, with iron sulfides, native sulfur, gypsum, alunite, and related minerals.