On October 28, 1994, at 1415 Pacific daylight time, a Hiller UH- E4, N80NW, experienced a loss of engine power shortly after take off from Morton, Washington, and collided with the terrain. Visual meteorological conditions prevailed at the time and no flight plan was filed. The helicopter was substantially damaged and the commercial pilot was not injured. The flight was being conducted under 14 CFR 133 for the local flight. It was reported that the helicopter with a bucket on a 20 foot line had just taken off and approximately one minute later, the pilot reported a loss of engine power. An emergency landing was made to an open area, where during the landing, the helicopter collided with the terrain and rolled over. After the helicopter was removed from the accident location and secured in a hangar, an engine examination revealed water in the main fuel line from the fire shield check valve to the fuel nozzle in the engine. Approximately one-third cup of water was found in the engine-driven fuel pump filter and approximately one quart of water was found in the airframe main fuel filter. The main fuel tank sump was drained and approximately two and-a-half gallons of water were removed before fuel began to drain. The helicopter had been parked outside during a heavy rain storm the day before. The fuel filler cap was removed and disassembled. It was found that an O-ring in the stem of the fuel cap was in very poor condition and allowed liquid to leak into the fuel system. The helicopter was not on level ground during the preflight inspection and the pilot reported that he did not detect any water in the system.