United States
                   Environmental Protection
                   Agency
                        Office of Water
                        (4606)
                        Washington, DC 20460
EPA816-F-01-039
 r/EPA
Using the Drinking  Water State Revolving
Fund  for Source Water Protection  Loans
   Providing 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?

                          Source 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

                          Some 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

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      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.
              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.
  Source Water Protection Measures

     Some 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, incentive-
  based 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

    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.

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Partnership Opportunities

    Loans 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.
for local involvement or to explore partnership
opportunities.
                        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
                 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.
Getting a Project Funded

   Since 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 (lUPs)
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

    Each 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.

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  Some potential repayment sources include:
Other Funding Sources
        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
                  Box 7

 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.
  Ch allenges Ahead

     EPA 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.
    The 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/fman.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

    For 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
I                                                                              Water
                                                                              Protection
              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

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