This bay is a branch of the largest bay of the country, Faxafloi, between the peninsulas Seltjarnarnes and Kjalarnes.  Usually only the northeasternmost part of the Kolla Bay is referred to by this name.  At the end of the bay are the farms Mogilsa and Kollafiord.  The former became one of the centres of the National Forestry Service and the latter has been used for the rearing of salmon and arctic char.  Along the northern side of the smaller version of the Kolla Bay, just south of Mt Esja, Thorsteinn Ingolfsson, the son of the first Norwegian settler, who built his farm in Reykjavik, founded the district parliament at Leidvollur, which mostly disappeared under the road.  The location of this parliament was later moved to Lake Ellidavatn and in 930 the common parliament of the whole nation was founded at Thingvellir (The Parliamentary Plains).

The operation of the Salmon Rearing Station started in 1961 with breeding, research and releasing fries and smolt into rivers, lakes and the sea.  The station also sold rows and fries to other rearing stations.  An increasing number of fries released into the sea was marked for the purpose of estimating returns and following the routes of the salmon in the North Atlantic.  Many were caught off the coasts of Norway, the Faroe Islands and Western Greenland.  Brown trout and arctic char were also reared for other breeding stations and release into lakes and rivers.  An experiment with the sale of angling permits for a pond near the main road was carried out to interest people building up the tourism and farmers in offering travellers a greater variety of recreation.  Arctic char was bred to consumption size in 1974-75 and sold on the market.