The OSL water system does not have adequate source of treatment capacity. In addition, the distribution system is unable to adequately distribute treated water and meet summer water demands. To prevent water outages, Hillview utilizes two sources that do not meet the primary drinking water standard for uranium. One of the two wells is treated; however, the existing treatment system cannot effectively remove the uranium to meet the drinking water standard. The distribution system does not have enough hydraulic capacity to efficiently distribute the treated water. Hillview has implemented mandatory water conservation measures.

On September 8, 1997, DHS issued Hillview a Compliance Order No. 03-11-970-002 for failure to comply with the Uranium MCL and failure to insure that customers are provided with a reliable and adequate source of pure, wholesome, healthful and potable water.

On November 30, 1999, DHS completed a review of the water system and directed Hillview to develop additional source capacity. The problem has been adequately documented in DHS' files.

Hillview submitted a long-term construction loan application for the SDWSRF on May 10, 2000 for its OSL System. DHS approved the funding for the project on or about August 17, 2000. Pursuant to DHS' Technical Project Report approved on August 17, 2000, there is a lack of adequate production, treatment, and distribution capacity within Hillview's Oakhurst-Sierra Lakes water system.