Wel, I suppose i know more than your average joe about house related stuff. I have been paid upwards of $30/hr to stand around and supervise well conversions and such. Things like converting from a two pipe jet pump to a submerged pump and such.
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There is nothing wrong (well, there is a ton wrong with that picture, but nothing that you were asking about), and I cant believe I'm the first one to say it on here. Thought ya'll knew how to work on stuff, and water is pretty basic stuff. Anyways - what is happening is you have a well that acts like an artesian well. It means that the well is under pressure from water coming from up a hill (not necessarily really close to you, either). Your well, some springs along the creek, and a few other places are where it's coming out. The only thing I would concern myself with is where this water is flowing to - as long as it doesn't run in a little stream right into your basement you're good to go. Look at it this way - you have too much well water!! As a matter of fact, a friend of mine has a camp where the well is always flowing, so we ran some hose to a spot in the ground, and bury our beer in the gravel there. Stays cold all the time, and they're right outside where we can ge to 'em without going inside!!
What is the conduit for, and what about the extension cord? That setup is ghetto as hell man. Carpet? Pieces of concrete? That conduit is not listed for underground installations, neither is extension cord. Something about the pump being under a barrel? That's also not code.