The problem is outlined in a report to be presented to a Queenstown Lakes District Council meeting today.
Council strategic project manager Martin O'Malley says in his report the sewage pond system will reach capacity in 2012.
"There is a potential for the existing system to become less effective in the removal of pathogens and some nutrients past 2012 and this is a risk to QLDC in terms of consent compliance and potential adverse health effects," he said.
Project Shotover is the proposed upgrade of the wastewater treatment facility at the Shotover delta.
It is required because of the expiry of the present pond system's consent and the Otago Regional Council's more stringent discharge criteria.
Consent for the upgrade was granted by the regional council in March but is under appeal in the Environment Court.
Mr O'Malley said the council had planned to commission the plant in 2012.
"This corresponded with the estimated effective life expectancy of the current pond system to continue to treat wastewater without further enhancement," he said.
After the appeals were lodged, the project's funding was earmarked for the 2013-14 year in the council's ten-year plan.
The pond's consent had limits on the quality of the discharge and its downstream effects.
"These limits are not low . . . [and] are difficult for a pond-treatment system to comply with. Nutrient levels and coliform concentrations in the receiving water are often elevated and consent conditions are regularly exceeded," Mr O'Malley said.
The discharge was deemed non-compliant in a 2002 monitoring report.
The current disposal method of direct discharge into the Shotover River was also considered culturally unacceptable to local iwi and the area was unsuitable for contact recreation.
The pond system's discharge consent was due to expire on November 1, 2008, but remains in place until a new one has been granted, he said.
He expected the new consent would be granted before the end of this year and expire at the end of 2013.
The council needed to investigate alternative land-based disposal options as the current system would not be able to meet demand projected for the Lakes district by 2012 unless more aerators were added.
Councillors will discuss the report at their meeting today.
They will also attend a workshop in early February to finalise the preferred procurement option for Project Shotover.
