On August 20, 1999, about 1350 Alaska daylight time, a float equipped, DeHavilland DHC-3T airplane, N888KA, sustained substantial damage when it collided with terrain at the edge of an unnamed lake about 30 miles west of Port Alsworth, Alaska, at 60 degrees 19 minutes north latitude, 155 degrees 22 minutes west longitude. The accident airplane has been modified by the installation of a Pratt & Whitney PT6-135 turbine engine. The airline transport pilot, and the three passengers on board, were not injured. The airplane was operated under 14 CFR Part 135 by Ketchum Air Service, Inc., of Anchorage, Alaska, as an on demand air taxi flight. The flight was departing the approximately 2,000 feet long lake, transporting hunters and their equipment to larger Tutna Lake, where more passengers were to be loaded for transport to Anchorage. Visual meteorological conditions prevailed at the time of the accident, and a company VFR flight plan was filed. During a telephone interview with the NTSB investigator-in-charge (IIC) on August 22, the pilot stated that he pumped the flaps to the fully extended (takeoff) position and used the 15 knot wind to sail the airplane to the downwind end of the dogleg shaped lake. He said he then placed the hydraulic selector valve in the "up" position, pumped the flaps to the 1/2 position, and commenced the takeoff run into the wind. He described the airplane "getting on step" normally, and the headwind becoming a crosswind at the dogleg in the lake. The pilot indicated he intended to pump the flaps to the takeoff position, but because he had not switched the selector valve to the "down" position, he retracted the flaps inadvertently. The airplane did not get airborne, the pilot retarded the power lever to idle, and the airplane struck the approximately four feet high bank at the end of the lake. The floats separated from the airplane, which remained upright and slid about 100 feet across rough, but level, tundra. Both wings, horizontal stabilizers, and the underside of the fuselage sustained substantial damage. The pilot had operated the same airplane from this lake on other occasions. He indicated the airplane did not get off the water on the accident flight because the flaps were retracted instead of extended. The pilot told the IIC during a second interview on August 25, and wrote in his NTSB Pilot/Operator report, that he thought he had placed the flap selector lever "down." He thought that due to the close proximity of the selector lever, and the pump lever, his shirt sleeve may have hooked the selector and moved it to the "up" position.