It has traditionally been considered that the Paleogene clastic rocks in the Luzhong Mountain Area have no water supply significance. Taking the Xinzhuang water source in Laiwu, Jinan as an example, this study explored the water-rich mechanism of the water-bearing rock formation of the gray conglomerate in the Zhujiagou Formation of the Paleogene in the water source through hydrogeological surveys, drilling, group well interference pumping tests, dynamic monitoring and other work. The compensatory dewatering method was used to constrain the exploitable resource quantity of the water-bearing rock formation, and further, a Dupuit confined steady well flow analytical model was established based on MATLAB software. Through parameter optimization and other measures, the dynamic response characteristics of the total water level drawdown of the test well group under different exploitation schemes during the dry season were revealed, and the allowable exploitable resource quantity of each well was determined. The results show that: under the combined action of fault water conduction and the water resistance of mud and conglomerate at the western boundary of the water source, groundwater accumulates in the exploitation area and forms a fault water-conducting and blocking-type fractured karst water storage structure of gray conglomerate; the maximum exploitation drawdown in the exploitation area during the dry season is determined to be 7 m, the leakage recharge quantity of the fault zone at the initial stage of exploitation is 4009.6 m3/d, the leakage recharge quantity of the fault zone at the end stage of exploitation is 6288.46 m3/d, and the allowable exploitation quantity of the exploitation area in the water source is 4304.43 m3/d; in order to optimize the allocation of the exploitable quantity of groundwater resources in each well of the exploitation area and ensure the continuous, efficient and stable development and utilization of the water source, a Dupuit confined steady well flow analytical model was established based on MATLAB software. The optimal exploitation quantities of each well were determined as Q2 = 1100 m3/d, Q5 = 1500 m3/d, Q6 = 1705 m3/d, and the corresponding total drawdowns during the dry season were S2 = 5.69 m, S5 = 7.85 m, S6 = 7.61 m respectively.