STILLWATER, Okla. — Seven nearby communities are closer to having a reliable drinking water supply.

The Lone Chimney Water Association will receive a $3.355 million loan from the Oklahoma Water Resources Board to build a pipeline from Stillwater’s water treatment plant to Lone Chimney’s water distribution system.

The state agency approved the loan earlier this week, Executive Director J.D. Strong said.

The pipeline will connect the Stillwater water treatment plant to Lone Chimney’s 87-mile network of pipes. Two booster pump stations will be installed between Stillwater and the association’s distribution system, located 2 1/2 miles north of Glencoe and 7 miles south of Pawnee.

The association must advertise for construction bids. Officials hope construction will start by the end of 2012 and be completed within six to eight months.

In June, the Stillwater Utility Authority and Lone Chimney Water Association signed a 30-year contract that allows the association to purchase at least 2 million gallons a month. Lone Chimney will pay at least $85,000 annually to Stillwater for water.

The association needed the contract before it could apply for a loan from the state agency.

The Lone Chimney pipeline to Stillwater will be “just a backup, emergency line,” association manager Paul Kinder said. The association will be obligated to take or pay for 2 million gallons of treated water per month.

The Lone Chimney tie-in won’t affect Stillwater’s distribution system, Stillwater Utility Authority Director Dan Blankenship said. Lone Chimney will be drawing water directly from Stillwater’s water treatment facility.

The association draws water from Lone Chimney Lake, south of Pawnee. The reservoir normally covers 514 acres. It hasn’t been full since July 2010 because of the drought. It also was in danger of drying up in 2006.

The lake was 8 feet, 3 inches below normal on Sept. 13, Kinder said — “the second lowest level it’s been since 2006,” when it shrunk to just over 10 feet below normal.

The Lone Chimney Water Association supplies drinking water for approximately 16,500 people in four counties, according to a state Department of Environmental Quality estimate. It is the sole or primary water source for Pawnee, Glencoe, Morrison, Cleveland and Yale. It is a supplemental water source for Cleveland and Pawnee.

It also provides water to seven rural water districts, five school districts and approximately 125 residential customers near its water treatment plant.

Stillwater gets its raw water from Kaw Lake, an impoundment on the Arkansas River which covers 27 square miles in Kay County and, according to the U.S. Army Corps of Engineers, held approximately 114 billion gallons of water on Sept. 12.

The Tri-County Development Association was created in 1971 to provide a water system for area residents. The name was changed to the Lone Chimney Water Association 12 years ago, in 1990.

Joe Freeman, chief of the Water Board’s Financial Assistance Division, said the Drinking Water State Revolving Fund loan will be secured with a lien on the association’s water receipts, and will be retired over a maximum 30-year period.

Lone Chimney Water Association customers will realize an estimated $1,006,500 in interest savings over the life of the latest loan, compared to traditional financing, Freeman said.