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It started investigating after the spill, near Portsmouth Dr, about three weeks ago.
Compliance manager Tami Sargeant said it could not confirm the source until the investigation and possible enforcement were resolved.
"We believe we have identified the likely source of the diesel spill.
"Our investigation is continuing and we cannot comment further,"she said.
Council was continuing to inspect the boom daily — which was in place in the Andersons Bay inlet to soak up the diesel and help stop it from spreading further into the harbour — and were replacing it as needed.
The amount of diesel discharging into the harbour had reduced, but was continuing, she said.