In a potential setback for efforts by the Santa Clara Valley Water District and the city of San Jose to expand the use of recycled water in Silicon Valley, tests found that trace amounts of a chemical suspected to cause cancer appear to have spread from recycled water used in an irrigation project into shallow groundwater.

The study, funded by the water district, began in September 2008 at Integrated Device Technology, a semiconductor company in South San Jose, and continued for 18 months. Researchers irrigated grass on the company’s property with recycled water and found that small amounts of NDMA, a chemical that is created as a byproduct of disinfecting water with chlorine, seeped into shallow groundwater

The researchers tested the groundwater beforehand and did not find the chemical.

Roughly 5 percent of the water that the water district currently provides to San Jose and other communities comes from filtering, cleaning and treating sewage to high levels so it can be used again as irrigation water. The district and the city of San Jose are building a $50 million advanced treatment plant with the goal of doubling the use of recycled water and, more controversially, blending it with existing groundwater sources now used for drinking.

Don Gage, chairman of the water district board, said Tuesday that he is closely following the study, and the final five-volume version is due out in July. But he said the preliminary findings aren’t a death knell for the recycled water expansion efforts.

“I’m always concerned about any contaminants that are in the water,” said Gage. “My understanding, though, is that it doesn’t exceed the state standard.”

The EPA has not set a maximum level for the chemical in drinking water, although California has a “public health goal” of 3 parts per trillion. The study found levels of 3 to 4 parts per trillion down to 30 feet in the groundwater at the site at 6024 Silver Creek Valley Road, but did not test deeper aquifers to see if it had migrated lower.

Gage also noted that NDMA can be removed through various techniques at the treatment plant, including reverse osmosis — a process where water is forced through tiny filters and membranes — as well as treatment with ultraviolet radiation.

The detection of the chemical in the shallow groundwater showed that soils in that part of San Jose don’t filter the chemical, the study concluded. Although Silicon Valley gets roughly half of its drinking water from underground wells, those are deep underground. Nobody drinks the shallow groundwater, which often contains other contaminants, including fertilizer, and oil that can wash off roads.

“I don’t know that it came from the water,” Gage added. “They could have put fertilizer on the ground or anything. We know there’s a problem, but we need to learn more. If it is in the recycled water, we have to find a way of removing it or else people won’t accept it. They aren’t going to use water or drink water that has a carcinogen in it.”

NDMA is classified as a suspected human carcinogen by the U.S. Environmental Protection Agency. A water-soluble, yellowish liquid, it was once used in rocket fuel, but is no longer manufactured. Instead, it turns up occasionally as a byproduct of water disinfection using chlorine. It is also found in small amounts in cured meat, fish, beer and tobacco smoke.

Tests have shown that the chemical causes liver tumors in lab rats.

Joan Maher, deputy operating officer for water supply for the district, said that the district has not tested for NDMA in other locations where recycled water has been used for irrigation in the past decade. A 2007 study by the U.S. Geological Survey of seven local groundwater wells did not detect it.

Environmentalists said the issue is of concern, but ultimately solvable.

“NDMA is a pretty potent chemical at very low levels. It is not uncommon to detect it in wastewater,” said Jennifer Clary, policy analyst with Clean Water Action, an environmental group in San Francisco.

“I’m thrilled they are finding it at an early stage so they can reverse course and fix it. They are going to have to do additional treatment, which is good because you are going to get cleaner water. But that comes at a cost.”

Contact Paul Rogers at 408-920-5045.