Oregon is set to lose about $4 million per year in federal grant money used for stream restoration and other local watershed projects because its coastal nonpoint pollution control program has continually fallen short of federal requirements.
The National Atmospheric and Oceanic Administration and the Environmental Protection Agency have opened a 90-day public comment period.
So-called "nonpoint" sources of water pollution come from logging, agriculture and urban areas, instead of factory pipes.
They are not regulated under the federal Clean Water Act, so the federal government offers incentive money to 34 coastal and Great Lakes states and territories that comply with certain criteria for addressing polluted runoff along their coasts.
All of those states began with "conditional" approval while they worked to get their programs approved.
Oregon, along with 10 other states, was allowed to continue under that conditional approval indefinitely, even though the federal statute requires funding cuts to states that do not receive final approval.
In 2009, Portland-based Northwest Environmental Advocates sued NOAA and the EPA, saying they were letting Oregon avoid compliance.
"This isn't something that's blindsided the state," said Nina Bell, executive director of Northwest Environmental Advocates.
"The federal agencies have been saying the same thing since 1998."
Federal agencies said Oregon's program falls short in three key areas.
They include controlling impacts from timber harvesting, including measures for protecting small and medium sized streams; measures to protect landslide prone areas; and measures to address runoff from forest roads built before modern construction and drainage requirements.