The contamination was discovered during routine testing of stormwater discharge from the former Balclutha sawmill site in January, but it came to public attention only this week after a concerned member of the public contacted the Otago Daily Times.
However, council chief executive Steve Hill said the council had fulfilled its obligations at the time by immediately notifying all those affected, including resident Rosebank business owners.
He said an alert was triggered when a contaminant test showed ``minimally'' elevated levels of arsenic in water discharged from the site earlier this year.
A second test had shown continued non-compliant levels of arsenic, a poison, likely to be present due to the tanalising of timber when there was a sawmill on the site.
Further tests had revealed the presence of arsenic in a stock pond on a neighbouring farm property, leading to notification of the owners, and steps to decontaminate the pond, Mr Hill said.
``The owner wanted to bring stock on to the property, so we worked with him to fence off the pond in question. I understand it's now to be dug out and further testing done.''
Landowner Brian Povey declined to comment on the situation, describing it as ``delicate''.
Remedial work was likely to cost the council as much as $40,000, Mr Hill said.
``Although we're gradually selling off the sites, the council remains the Rosebank landowner. We won't be walking away from our responsibilities.''
He said there had been no attempt to keep the contamination ``secret'', and there was no risk to those using Rosebank.
``When we purchased the land it was with discharge consents for contaminants attached, and copies of those consents were passed on to buyers during the sales process.
``We'll continue to monitor the situation until all the land is sold.''
