This study addresses the shearlayer organization induced by hairpin packets and the corresponding turbulent kinetic energy (TKE) budget in the outer region of highly turbulent, freesurface shear flows over a fully rough bed. The main emphasis is on the parameterization of the TKE budget in the intermediate and nearsurface regions where shear layers dominate production and transport of TKE. We discuss the implications for such processes as gas exchange at the airwater interface, for gas of low solubility. We find that the organization of the outer region proposed by Adrian et al. based on hairpin packets agrees well with our openchannel flow data. Using the same conditional sampling method as Adrian et al., we observe similar zones of uniform streamwise momentum. Intense shear layers are seen to extend over the entire outer flow region. The streamwise scale of the hairpin packets correspond well with the longitudinal dimensions found in Adrian et al. (typically 1-2 times the boundary layer thickness). Combining an unconventional uwquadrant threshold technique to instantaneous momentum flux representations, we demonstrate that the shear stress events below a critical threshold are mainly small scale structures that do not contribute to the vertical TKE flux in the outer region. For quasi instantaneous shearstress events above the critical threshold, extended homogeneous shear layers are found between the wall region and the free SurfaceInfluenced Layer (SIL). We find that the TKE flux results from the residual momentum flux between ejections and sweeps above a critical H max value. These data demonstrate the importance of the vertical velocity skewness in the observed shear layer dynamics, in agreement with previous observations by Raupach (1981). Inertial range estimates of TKE dissipation support the idea that dissipation close to the surface is in local balance with TKE transport. Observations indicate that the fraction of surface water renewing eddies is nearly independent of the Reynolds number. This agrees with measurements of boils in the North Sea by Nimmo Smith et al. (1999) and with laboratory measurements of upwellings by Kumar et al. (1998).