We did turn off the water last night and the power to the water pump and found that over a couple hours time we lost all the water in our reserve tank. Does this sound like a leak to you?
Maybe. Was the reservoir tank cut off (like with a valve) from draining back down the well? If there is a check valve, is it in good working order? If not, it is hard to say whether the reservoir fed a leak or just emptied back into the well.
To more definitively indicate if well water is causing the observed ground water, turn off the pump, close all the water valves (to prevent water flowing out of the pump house) and wait. Observe the ground water level every hour or two—maybe put in a stake or stick in the hole to better track it. Does the water go down? If so, a leak seems likely.
Leak detection
Doing a standard pipe pressure test would indicate quickly and conclusively identify whether there is a leak anywhere. It requires containing the pipe under test by closing valves or disconnecting and capping pipe, adding a gauge or other measuring device, and pressurizing the pipe, perhaps with a bicycle tire pump—a gas pipe pressure testing gauge has an air valve for this purpose; I haven't seen anything directly comparable for water pipes. Then just wait and watch. The pressure should remain, dropping no more than 5% per hour. (In my experience, temporary caps and a gauge for leak testing are the source of most pressure testing leaks. Generously apply plumbers tape.)
Finding a leak
If a leak is detected, then there are several choices to fix it find it and fix it. Which you choose depends on the specific situation, your budget, and your patience:
- dig up all the pipe to inspect for leaks
- abandon the existing pipe and install new
- Sherlock Holmes
The first two are self-explanatory. The third involves looking for clues. Can you isolate part of the system—the hot water portion is an easy and obvious example—and see if leak continues? Maybe there is another portion: outdoor faucets, sprinkler system, barn, etc. which can be individually cut off from the main system.
A leak is most likely to develop at a pipe joint and the location of joints are reasonably predictable. If the pipe is PVC for example, it usually comes in 10 foot lengths (at least in the U.S.—but if it is freezing where you are, probably you are south of the equator so some other length—3 m?—applies), so you only need dig a hole every pipe joint to check—at least with good luck.
Also consider any recent changes if it got worse: Has a fence post been installed or did a tree fall? Dig around there for to look for pipe.
If you have metal pipes, and the high utility bill would seem to indicate that your well-house filled due to pumping itself full, digging down to fix it would appear to be a logical approach - though I don't know that I'd be "looking for leaks" as much as "having dug the expensive hole, replacing all the pipes while the hole is open." As mentioned in my comment, I'd use polyethylene water pipe rather than any sort of metal in ground contact. The higher pressure grades are thicker wall, which makes them more durable in general, even if your water pressure is not nearly so high.
This part does not really have anything to do with fixing your leak: Having just replaced it, you won't want to change this part, but I'd also take a long look at not having any "electrical control box" in an underground wellhouse that's prone to flooding. That, however, typically requires changing the pump as well (depending on exactly what it is - if it's a "3-wire pump" and the control box has a capacitor/starter for it, you have to change to a "2-wire pump" - if it's just a pressure switch, you may already have a two-wire pump, and relocating the pressure switch might be all that's needed), and 2 .vs. 3 wire pumps seem to be a philosophical divide among well people. It's also more money on top of an expensive hole, and you may be fine if the expensive hole and pipe replacement means the thing does not fill with water again.
Best Answer
If this is a submersible pump in a fairly shallow well and it is running continuously and only putting out 20psi, you have several possible problems:
The impeller assembly is coming apart and there is excessive internal leakage in the pump.
There is a leak in the pipe leading from the pump to the well-head, either the pipe has split, or the barb fitting nipple in the top of the pump has a hole corroded in it. The pump basically is recirculating the water back into the well.
Submersible pumps with iron pipe to the wellhead that use a below frostline casing fitting have an o-ring in the slider coupling assembly that can rot and cause a leak back into the well.
Not sure where the main water shutoff valves are. Are they in the pump house or at the residences? Any unexplained water bubbling out of the ground with quicksand like mud?
Note: A leaking foot valve will have one of two effects. On an above ground pump, you will lose prime, on a submersible, if there's air leakage, you get a slug of air into the system every time the pump starts (chugging faucets, etc).