I'm not a teacher, but "grade" means "ground level", so "grade water" is typically rain water and the like that is (normally) uncontaminated by sewerage or other pollutants.
Normally you would have:
a "Clean Water Sewer" (CWS) for "grade water"
a "dirty" or "foul" water sewer
and, on industrial sites, an "oily water sewer" that goes into a pit, where the oil and water are separated. The water can then be treated, reasonably free of oil, and the oil either disposed of separately or recycled to some stage in the process, where it can be recovered.
Hope this helps