On October 8, 1998, about 1315 Alaska daylight time, a wheel equipped Cessna 207A airplane, N6874M, sustained substantial damage during a forced landing after takeoff from Napaskiak, Alaska. The airplane was being operated as a visual flight rules (VFR) on-demand passenger flight under Title 14, CFR Part 135, when the accident occurred. The airplane was registered to Gussik Ventures, Anchorage, Alaska, and operated by Hageland Aviation Services Inc., Anchorage. The certificated airline transport pilot, and the passenger received minor injuries. Visual meteorological conditions prevailed. VFR company flight following procedures were in effect. The chief pilot for the operator reported the airplane was departing runway 19 at Napaskiak to transport the passenger to Bethel, Alaska, which is located about 5 miles away. The chief pilot said the company has fuel sumping procedures that require all fuel system drains be checked for contaminants. The company's fuel system is equipped with a "GO/NO GO" cartridge type filter element. The chief pilot said the company fuel system was producing clean fuel. In the Pilot/Operator report (NTSB form 6120.1/2) filed by the operator, the pilot supplied a statement about the accident. The pilot said the airplane's fuel system, including the main gascolator, wing sump drains, and the reservoir tank drains were all purged of any contaminants prior to the first flight of the day. The airplane was then flown on four flights, for a total of about 1 hour. The pilot said he filled both wing fuel tanks prior to the flight to Napaskiak, and again drained all fuel system sumps. He did not find any water or other contaminants in the fuel. The pilot indicated that during the first takeoff run from Napaskiak, the engine surged. He aborted the takeoff and returned to the departure point of the runway. He then performed an engine power check. The engine power check was satisfactory, and the pilot continued the second takeoff. About 300 feet msl, the pilot said the engine RPM suddenly dropped to idle. Emergency engine procedures did not restore power. The airplane collided with trees during an off-airport landing. A Federal Aviation Administration (FAA) airworthiness inspector, Anchorage Flight Standards District Office, examined the airplane at the accident scene on the accident date. He reported the airplane came to rest inverted. The wing fuel tanks were breached from impact damage. The engine propeller blades sustained slight aft curling. The airplane was retrieved from the accident site and transported to Bethel by company and insurance personnel. On October 14, 1998, the FAA inspector who previously examined the airplane, found a total of about 1/2 cup rusty-colored water, along with clean fuel, in the airplane's gascolator, reservoir tanks, and both wing fuel tanks. The left wing sump drain was slightly blocked with a dark silty material. A clean fuel source was attached to the airplane and the engine was started. Due to the propeller damage sustained in the crash, the engine was only run at an idle. The FAA inspector reported that on October 28, 1998, he was present when the engine was placed on an engine test stand in Anchorage, Alaska. The engine produced full power. The FAA inspector also said further examination of the engine revealed some metal filings in the engine governor, and the oil pan. The passenger on the accident flight is a certificated commercial pilot, and has extensive experience in the accident airplane make and model. He reported he was seated in the right seat, second row. During the first takeoff run, the engine surged. The pilot told the passenger that the surge was due to the propeller governor control. The pilot aborted the takeoff and taxied back for a second takeoff run. Further draining of the airplane's fuel system was not performed. The passenger did not notice any engine power check before the beginning of the second takeoff run.