A fuel system comprising a liquid fuel tank, an engine, and a coalescing filter adapted to separate water from fuel, the filter having an inlet fluidically connected to the fuel tank, a first outlet fluidically connected to a fuel feed system for the engine, and a second outlet fluidically connected to the fuel tank, wherein the coalescing filter is adapted to discharge fuel filtrate from the second outlet and filtrand from the first outlet. Also, a method of removing water or ice from a fuel tank, the method comprising directing a flow of fuel from a fuel tank to a coalescing filter adapted to separate water from fuel, discharging filtrand from a first outlet of the coalescing filter to a fuel feed system for consumption by an engine, and discharging fuel filtrate from a second outlet of the coalescing filter and returning the fuel filtrate to the fuel tank.