The effects of surface changes on the heat and water budgets of the Canadian Middle North have been studied for the region of The Pas, Manitoba, using a surface energy balance model and daily synoptic and radiosonde observations for the period July 1967-June 1968. Comparisons have been made with the results of a previous, similar, investigation for the same period for the Boreal region of Moosonee, Ontario. The latter region showed a positive water budget for all surface types, i.e., runoff, while The Pas showed a substantial water deficit for all surface types except that of rock. This deficit was calculated when using similar surface type descriptions to those of Moosonee (bare ground, forest, lake and rock). As the river runoff measurements indicate a moderate annual regional water surplus, it was concluded that there may be conditions at The Pas which reduce evaporation and which are not generally typical for other areas previously examined. Such possibilities have been investigated. The main point of interest proved to be the characteristics of vegetation types like lichen, which has marked water retention properties because it generates strong resistance to evaporation. In order to obtain a realistic water budget for the region it thus becomes essential to ascertain in considerable detail the structure of the vegetation cover and to calculate the evaporation from each of the various surface types. The composite regional water budget for 1967–1968 proved to be approximately balanced. Open water showed high evaporation loss and lakes can only exist in the region by receiving water from surfaces of rock, lichen, moss or thin soil. Maintaining an increased water area, as behind reservoir dams, would require either reduction in forest covered land or the import of water from outside the region. Large-scale destruction of moss and lichen would apparently have far reaching consequences for the regional water budget.