On June 11, 2001, approximately 1200 Pacific daylight time, a Hughes 369D, N69PE, registered to and operated by E 3 Helicopters, as a 14 CFR Part 91 maintenance test flight, experienced a partial loss of engine power followed by a hard landing near Canby, Oregon. Visual meteorological conditions prevailed at the time and no flight plan was filed. The helicopter was substantially damaged and the commercial pilot and mechanic on board were not injured. The flight originated from Aurora, Oregon, about 30 minutes prior to the accident. The pilot reported to a Federal Aviation Administration Inspector from the Hillsboro, Oregon, Flight Standards District Office that while performing blade tracking procedures at about 450 feet above ground level, a rotor droop was noticed followed by engine rpm decay. The pilot tried to increase engine power, however, the engine did not respond. During the autorotation, the helicopter landed hard. The main rotors subsequently contacted and severed the tail boom. Prior to the accident flight, the pilot reported that the helicopter experienced rotor droop and engine rpm decay that recovered on it's own. Maintenance personnel checked the engine fuel lines and found a loose "B" nut at the fuel control unit PR/PG lines. After the nut was tightened, the flight that resulted in the accident began. During the post-accident inspection of the helicopter and systems, the engine control rigging was found to be proper. The wet side of the fuel system was vacuum tested. The test determined that vacuum would not hold per test requirements. Further investigation narrowed the vacuum leak to the fuel pump. When the fuel filter bowl was removed, a significant volume of water (about 15 percent by volume) was present in the fuel that was drained from the filter bowl. The pump was reassembled and re-tested. The vacuum initially held, but after moving the drive shaft, the vacuum decayed. It was determined that the leak was from the shaft seal. The fuel system's air side was pressure tested and "B" nuts were torque checked with no discrepancies noted. The fuel nozzle was removed and disassembled. The nozzle was found to be completely covered with a dark green/brown colored substance and collapsed. The fuel control inlet strainer was clean. The main fuel filter displayed similar contaminants as found inside the filter element. A test of the by-pass switch was conducted and it was found serviceable. The fuel boost pump was inspected prior to power application. Power was then applied and the pump was found to operate. The main fuel control was removed and inspected for damage or contamination. No external damage was noted. During the disassembly inspection, no evidence of contaminants were noted. The engine fuel pump was inspected for external damage prior to disassembly. The main drive shaft rotated smoothly at a normal torque of 5 in-lbs. The filter cover was inspected for contaminants. Slight contamination was noted. The five pump cover screw breakaway torques were measured between 115 and 175 in-lbs. The rubber seals were undamaged, and the fixed bearings and pressurized bearings did not have any unusual material removal. The gears were visually inspected which revealed severe rust on both the drive and driven gear teeth. The gear housing had a slight score mark in the bore. Maintenance records indicated that the main engine fuel filter was replaced and the fuel nozzle screen was reportedly inspected at the 300 hour inspection accomplished in January 2001, about 185 hours prior to the accident. The pilot reported that he had been utilizing this aircraft for about 100 hours prior to the accident. Jet A fuel was supplied from an approved aircraft fuel supplier that pumped fuel into a 1,000 gallon supply tank at the Corvallis, Oregon, Airport. From the supply tank, the fuel was pumped into a portable tank in a pick-up truck. Both the supply tank and the portable tank have Velcon filters to one micron and water block. The pilot reported that he was not using fuel additives. There was no airframe mounted fuel filter installed on this helicopter. Fuel samples were sent to Dixie Services Incorp. Gelena, TX, for analysis. The results of the testing "strongly indicated water contamination and possible fungal or bacteria growth in the fuel supply." To this date, the pilot has not returned the NTSB Pilot/Operator Aircraft Accident Report Form 6120.1/2.