Event management research increasingly recognizes place embeddedness as critical to success. Less well understood is the significance of the festivals and events sector in places suffering from environmental crises. A major empirical survey of 480 festivals in rural Australia, conducted in 2008 at the height of the Millennium Drought, elucidates the role and significance of festivals under conditions of extreme environmental stress. It centers on a qualitative analysis of responses to open-ended questions on the impacts of that drought. Over 70% of participating festival and event managers indicated that their community had suffered from drought, while 43% cited drought as adversely affecting the organization and management of their event. Impacts varied geographically and by event type (with inland agricultural shows especially hard hit). Nearly half of event managers also explained how their festival played a constructive role in helping their community cope with drought. Festivals stimulated much-needed economic activity and encouraged "creative frugality" in difficult times. Festivals also fulfilled an important civic emotional and psychological role in lifting community spirits and bringing communities together in otherwise adverse circumstances. Biophysical extremity is thus both a constrainer and a catalyst for the festivals and events sector in trying social circumstances.