The provision of an adequate supply of water for Wigtownshire had been a problem for the County Council for a considerable number of years. As far back as 1936 Mr John Hogg (Consulting Civil Engineer from Glasgow), was instructed to report upon a water supply for the whole county. His report which was submitted to the County Council in 1937 recommended a scheme of supply from Loch Valley in Kirkcudbrightshire, the required storage to be provided by raising the level of Loch Neldricken situated a short distance above Loch Valley. The estimated cost of this scheme at the time was approximately £650,000, covering about 300 miles of distribution piping. However, the Minute of the Public Health Sub Committee noted “It was agreed that this scheme was a desirable one, but that the cost put it beyond the reach of this County Council. It was resolved that no action be taken unless a very substantial Exchequer grant becomes available.”
Nothing further was done until 1944 when the Rural Water Supplies and Sewerage Act was passed. This Act made provision for grants to local authorities providing water supplies for rural areas.
In 1945, there was received from the Department of Health for Scotland an “Outline of the Proposals for a Water Supply Scheme to serve the County of Wigtown (including the Small Burghs therein)”. This indicated that there were two possible sources for a comprehensive scheme, namely Loch Valley and the Penwhirn Burn lying between Cairnryan and New Luce. Penwhirn Burn was chosen for the following reasons:-
1. Central position
2. Short length of unproductive main
3. Excellent site for reservoir
4. Large reserve of water beyond present estimated requirements
5. Reservoir site capable of economic development to the full available supply from the area.
The dam was constructed 1952-1953 across the Penwhirn Burn (a tributary of the Main Water of Luce), consisting of a clay core embankment 240 metres long. Works were completed in 1955 with the opening of the Penwhirn water treatment plant, located a short distance downstream from the dam.
Concern over stocks at Penwhirn prompted plans for a drought order in 2010, but the proposals were shelved in 2010.
Plans were drawn up in 2011 however to increase the size of the reservoir supplying most of Wigtownshire. The £8m project was completed in 2015, raising the height of the dam at Penwhirn by 1.5m (about 5ft) and increasing its capacity by about 40%. Scottish Water hoped that it would provide an ”increasingly secure supply of drinking water” for communities in the area.