United States Office of Water EPA 816-F-01-039

Environmental Protection (4606)

Agency Washington, DC 20460

Using the Drinking Water State Revolving

Fund for Source Water Protection Loans

P

roviding safe, clean drinking water to 

the more than 250 million people served by

community water systems in the United

States is an important goal of federal, state,

and local officials. The Safe Drinking Water

Act (SDWA) Amendments of 1996 developed

a new tool for the protection of drinking water 

– the Source Water Assessment and

Protection Program. Through this program,

state drinking water agencies assess the threats

to each community’s drinking water and have

an opportunity to establish a comprehensive

contamination prevention program. 

Communities and public water systems can 

work with their states to ensure the

assessments are accurate and to decide how to

best protect drinking water sources. 

Funds are available from the Drinking Water

State Revolving Fund (DWSRF) set-asides to

finance a variety of local land use controls and

other management tools for source water

protection. States can provide loans to water

systems to acquire land or conservation

easements needed to protect drinking water

sources. States can also provide loans for

voluntary, incentive-based source water

protection measures. These loans are offered

by the states at interest rates that are equal to or

below the market rate and can be repaid over

terms as long as twenty years. Repaid funds

are recycled to fund other drinking water

projects.

What is Source Water Protection?

S

ource water is the water from the rivers,

streams, lakes, and ground water that systems

use to supply communities with drinking

water. Source water protection involves taking

positive steps to manage potential sources of

contamination and prevent pollutants from

reaching or contaminating sources of drinking

water. There is a growing recognition that

protecting the source from contaminants is often

more efficient and cost-effective than treating

drinking water later. The types of protection

measures that a community can implement

include local land use controls such as land

acquisition and ordinances and other management

tools such as contingency plans and public

education initiatives. EPA’s source water

protection website includes information on a wide

range of best management practices for

communities to consider (www.epa.gov/

safewater/protect/swpbmp.html). The protection

activities that a community pursues will depend

on the results of the source water assessments and

the community’s prevention plan. 

Acquisition of Land or Conservation

Easements

S

ome communities have found that an effective

way to protect the quality of drinking water

sources is to own or control land in upstream

watershed or ground water recharge areas where

development or other land activities can impair

the quality of the drinking water source. States

can use DWSRF funds to provide loans to water

systems for the following land use controls: 

< Land Acquisition – Purchase of land at or

below the fair market value to control the

types of activities that can take place. 

< Conservation Easement – A legal

agreement with a landowner that permanently

protects the land by limiting the amount and

type of development that can take place, but

continues to leave the land in private
ownership. Donating the easement can

result in reduced income and estate taxes. 

Land acquisition and conservation easements

can protect a water supply by preventing

pollution-generating activities from occurring

in critical areas and can provide community

benefits such as preserving open space,

enhancing recreational opportunities, and

reducing flood damage. 

Source Water Protection Measures

S

ome communities are focusing protection

efforts on undertaking local source water

protection measures. States can use

DWSRF funds to provide loans to water

systems for implementing voluntary, incentivebased source water protection measures. This

approach emphasizes a local stakeholder

process that could produce a plan for

implementing a wide range of local land use

controls and management tools including:

< Fencing – Building

fences that keep

cattle away from

the water’s edge

can reduce

contamination in

drinking water

downstream. 

< Capping Wells –

Sealing abandoned ground water wells and

underground injection wells can keep

contaminants out of ground water, which

serves as a source of drinking water for close

to 80% of community water systems.

< Riparian Buffers – Strips of vegetation

along streams and around reservoirs can

significantly reduce the amount of pollution

entering the water system by serving as

natural filters of contaminants. Tree and

shrub roots hold stream banks in place to

prevent erosion which causes sedimentation

and increased turbidity levels. Buffers have

the additional benefit of providing habitat for

wildlife. 

< Public Outreach Activities – Educating the

public through activities such as workshops

on best management practices and hazardous

waste collection events can help to build

community support for source water

protection. 

Success Story

Protecting Lake Auburn in Maine

The Auburn Water Department received a

loan for $570,000 to acquire 434 acres of land

in the watershed of the “Basin,” a small pond

which drains directly into Lake Auburn. Lake

Auburn serves as a source for two water

systems. The systems collaborated with the

Lewiston-Auburn Watershed Commission and

the Androscoggin Land Trust (ALT) and

negotiated a joint easement. Under this

easement, the Commission will review the

landowner’s forest management plan to

ensure that best management practices for

water quality are used and ALT will share

overall easement monitoring responsibilities.

By protecting land around Lake Auburn, the

water systems will be able to maintain water

quality standards. 

Protecting Land Use in Vermont 

The Town of Bradford received a $140,000

loan to purchase a tract of farmland within

Zone I of the system’s source protection area. 

The purchase was a high priority because the

Town’s source protection plan identified high

risk land use activity on the property. 

Success Story

Implementing Protection Measures in

California

California has reserved more than $8 million in

DWSRF set-aside funds for loans to community

water systems to implement measures to protect

vulnerable drinking water sources from

contamination. The types of projects eligible for

funding include: hazardous waste collection

programs, education on best management

practices, destruction of abandoned wells, and

fencing out cattle from intakes, tributaries, or

reservoir boundaries.
Success Story

Forming Partnerships in New Hampshire 

New Hampshire provides loans to systems to

purchase land or conservation easements to

protect vulnerable drinking water sources from

contamination. 

A contract with the Society for the Protection

of New Hampshire’s Forests provides

technical assistance to water systems in

prioritizing projects for land acquisition and

facilitating purchases. In addition, New

Hampshire identified protection of sources of

drinking water as a priority and budgeted $1.5

million in state grants as a 25% match to help

communities purchase land. 

Partnership Opportunities 

L

oans for land acquisition and conservation

easements and source water protection

measures can only be made to public water

systems. However, there are plenty of

partnership opportunities available for land

trusts, nonprofit organizations, community

groups and others that have expertise in land

protection issues to work closely with water

suppliers. 

The following are some examples of the types

of activities that land trusts and other

organizations can do to facilitate source water 

protection: 

< provide technical assistance to water

suppliers in identifying properties that

qualify for funding; 

< offer expertise in negotiating land

acquisitions or conservation easements

with willing sellers; 

< monitor a conservation easement once it is

acquired by a willing seller; and 

< assist with public outreach efforts to

demonstrate the benefits of protecting

water supplies within a community. 

In addition, an organization can work with

water suppliers to become a co-signatory to the

loan agreement. In this way, the organization

could help those water suppliers that would

like to implement measures to control land use

around their water sources, but do not want to

be responsible for loan repayment. The loan

agreement would describe the specific

responsibilities of the organization and the

water supplier with respect to the assistance

provided by the state. 

Such partnerships

may complement the

ongoing work of

organizations to

preserve parts of a

watershed or ground

water recharge area

for other purposes. 

Contact your state

agency, community

leaders, and/or local

public water

suppliers to find out

about opportunities

for local involvement or to explore partnership

opportunities.

Getting a Project Funded

S

ince the DWSRF program is managed by the

states, project funding varies according to the

priorities, policies, and laws within each state. 

States develop annual Intended Use Plans (IUPs)

that describe how they will use funds in the

program. As part of this process, a state

determines which set-asides it will take, including

whether it will use funds to establish a loan

program for source water protection. Those states

that decide to develop a loan program for source

water protection must fund projects based on a

priority system (see Box 1). 

Given that each state administers its own DWSRF

program differently, the first step in seeking a

loan is to contact your state DWSRF

representative – who can be found on the DWSRF

website. Your state representative will be able to

assist you. 

Sources of Loan Repayment 

E

ach state must approve a source of loan

repayment as part of the application process. 

Although finding a source of repayment can

prove challenging, it is not impossible. The

source of repayment need not come from the

project itself. Loan recipients can be creative in

developing sources of repayment.
Box 1

Establishing a Priority System for Loans

for Source Water Protection

Each state that establishes a loan program for

land acquisition or conservation easements

and source water protection measures must

develop a priority setting process to determine

which projects to fund. 

As part of the priority setting process, a public

water system must demonstrate how the land, 

easement, or measure to be funded will

protect the source of the system from

contamination and ensure compliance with

national drinking water regulations. 

Each state that has established a loan

program has developed a unique priority

system for ranking projects. Many of these

priority systems include the requirement that

the land be within an delineated source water

or wellhead protection area. 

Some potential repayment sources include:

‚ property owner’s ability to pay

(determined during loan application)

‚ fees paid by developers 

‚ dedicated portions of local, county, or

state taxes or fees

‚ drinking water fees

‚ donations or dues made to nonprofit

groups

Challenges Ahead

E

PA encourages states to open their

DWSRFs to the widest variety of drinking

water projects while still addressing their

highest priorities. As source water

assessments for water systems are completed,

systems will be looking for ways to implement

protection measures. Those interested in

source water protection should seek out their

DWSRF program and learn how their state

program works.

Other Funding Sources

T

he Clean Water State Revolving Fund

(CWSRF) program authorized by the Clean

Water Act can also be a powerful tool to help

states finance a variety of protection activities. 

The CWSRF program can provide assistance to

communities, water systems, and other

organizations (including land conservation

associations), for projects that protect source

water and enhance water quality. For more

information on the CWSRF program, visit the

Office of Wastewater Management website at

www.epa.gov/owm/finan.htm. For more

information about other water quality funding

programs, visit the Office of Water website at

www.epa.gov/water/funding.html. 

For More Information

F

or more information about the DWSRF or

source water protection programs, or for a

program representative in your state, contact:

Drinking Water State Revolving Fund Program

Office of Ground Water and Drinking Water 

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, NW 

(Mailcode 4606)

Washington, DC 20460

www.epa.gov/safewater/dwsrf.html

Prevention Branch 

Office of Ground Water and Drinking Water

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, NW

(Mailcode 4606)

Washington, DC 20460

www.epa.gov/safewater/protect.html