This paper analyses the costs and benefits of controlling groundwater pollution from nitrogen fertilizer. The Village of Hensall, where nitrate concentrations have been observed above 10 mg/1 in recent years, was selected as the study site. The CREAMS simulation model was used to estimate the effect of reducing nitrogen fertilizer on nitrate leaching and consequently on nitrate groundwater pollution. Estimates of the value of groundwater were obtained from the literature and used to calculate the off-farm cost of groundwater contamination. This procedure resulted in a wide range of values for the benefits of reducing nitrate pollutionJEstimated annual benefits of improved groundwater quality ranged from less than $1000.00 to more than $30,000.00 for the village. The off­farm benefits of nitrate groundwater pollution abatement outweigh the cost of using bottled water and in this case the on-farm cost of reducing nitrogen fertilizer. Placing a tax on nitrogen fertilizer would reduce the level of nitrogen applications, but the farm cost of compliance to a nitrogen tax policy is substantially higher than the compliance cost under a regulatory policy.