The payout is part of a $6.6m initiative by the government to clean up four historical New Zealand landfill sites vulnerable to extreme weather and coastal erosion.
Minister for the Environment Penny Simmonds announced on Saturday grants from the Contaminated Sites Remediation Fund would go towards fixing former landfills and dump sites in Tairawhiti, Southland, Canterbury and Nelson.
Historical landfills could become a threat to communities due to the effects of climate change and the government would support local government by directing funds each year to sites considered regional priorities, she said.
"This funding will address the risk of the sites being breached by a natural event, exposing waste material and contaminating the surrounding land and waterways."
The Bluecliffs area, in Southland, is home to a hamlet of about 17 houses.
It also houses a landfill that was a former fly-tipping site.
Earlier this month, Southland District Mayor Rob Scott declared a state of emergency for the area after heavy rain and sea swells accelerated coastal erosion that threatened to wash away homes.
While he was "very grateful" for the funding and was confident it would address the issues posed by the landfill, the erosion problem remained, Mr Scott said.
The erosion had unearthed the landfill and had highlighted potential explosives contained within, he said.
As well as contaminating the surrounding environment, the landfill’s unknown contents posed a risk to the community.
"We don’t know what’s actually in the ground there ... We’ve got to work towards the worst-case scenario there."
There was a risk to people, property and the environment, he said.
Environment Southland chairman Nicoll Horrell said he was "absolutely and completely delighted" by the funding.
However, he did not think it would reduce the overall vulnerability for Bluecliffs residents.
Mr Horrell said contracting could be expected to happen relatively soon.
While the risk from explosives was "very low", health and safety precautions would still be taken.
