On August 11, 2000, at 0625 hours mountain standard time, a Balloon Works Firefly II, N7244X, encountered unusual wind conditions and collided with the ground after the envelope partially collapsed about 4 miles northeast of the Deer Valley Municipal Airport, Phoenix, Arizona. The balloon, operated by Hot Air Expeditions under 14 CFR Part 91, was not damaged. The commercial balloon pilot and 7 passengers were not injured; 1 passenger received serious injuries; and 2 passengers received minor injuries. Visual meteorological conditions prevailed for the local for-hire sightseeing flight that departed from a remote launch site at 0617 and was scheduled for a 1-hour flight with a termination at the launch site. The pilot stated in his written report that a preflight weather briefing contained no flight precautions for the proposed flight area. The launch site is in a flood control basin near a dam and surrounded by hills. Following launch, the pilot contoured a hill, and as the balloon neared the top, it encountered a wind shear the pilot described as a direction change of 70 degrees with a speed of 10 to 12 knots. The pilot said that on the lee side of the hill, he encountered a downdraft followed immediately by an updraft. The pilot said he believed he encountered a wind rotor. The rapid changes in air mass movement distorted the balloon envelope and resulted in spilling some of the heated air. The balloon then entered a rapid descent the pilot was unable to arrest with three burners going and collided with the ground. The METAR for the Deer Valley Airport at the time of the accident was reporting winds from 100 degrees at 8 knots. The pilot did not report using pibals or other wind quantification devices prior to launch.