Michael Colvin, 65, MP for Romsey, Hampshire, and farm foreman Ian Hewish, 54, deny causing farm effluent to enter the water supply, which supplies 32 properties, on Home Farm at Tangley, near Andover.
The offence carries a maximum fine of pounds 20,000 or three months imprisonment.
Magistrates at Alton, Hampshire, were told that 200,000 gallons of waste water were discharged, polluting ground water at a bore hole on the 855- acre farm.
Hugh Davies, prosecuting for the Environment Agency, said: "There was a concentrated discharge of waste water over a period of 36 hours in a site around the bore hole, which led down at some speed to the bore hole and polluted the ground water."
Mr Davies told the court the incident occurred over December 5 and 6 1996 and as a result standpipes had to be used.
On New Year's Day some of the standpipes froze and it was necessary to divert the Southern Water emergency supply to the bore hole. Residents were given a Recommendation to Boil notice from January 1 to February 17.
Environment Agency officers who visited the 180-cattle farm, owned by the MP since 1967, found evidence of slurry having been spread from a pipe about 200 metres from the bore hole.
When interviewed, Mr Colvin said he thought it was safe to deposit dirty water on adjoining fields. He believed the present system was adequate and he had not been prepared to carry the cost of irrigation or spreading machinery.
Ground Water Protection Officer Robert Barnes told the court he had found a fissure within chalk through which the water could have passed quickly into the ground water.
The hearing was adjourned until tomorrow.