Uralla Shire Council has warned its residents not to drink the water following the discovery of elevated arsenic levels in the council's potable water supply.
With 20 kilolitres of bottled water was delivered on Wednesday morning, Mayor Michael Pearce said council was looking to receive about 40 kilolitres of bottled water per day, which would be distributed through a number of locations in Uralla.
Cr Pearce said Kentucky Dam was down to about 38 per cent, the lowest he had ever seen.
"We're taking more measurements and trying to find out through the soil samples if it's actual leaching or silt at the bottom of the dam," he said.
He said the latest test of Uralla's water was done a week ago and the one prior to that was in August. Council has since ordered in water testing equipment to operate on a daily basis.
Acting general manager David Aber said he expected the treatment works to be online in about five days and it was important for the water to be monitored throughout the town.
"When we know it is all clear of arsenic we will remove the alert," he said.
"I will add, this is an elevated level of arsenic and it's not at a critical health risk.
"This is probably more related to the dam level dropping below 40 per cent, which has happened in the last three or four weeks."
Member for Northern Tablelands Adam Marshall said people should cease drinking the water, but all other purposes are absolutely safe.
"Those who have been consuming town water are not at risk of any adverse effects whatsoever and that is the latest advice we've received from the NSW chief medical officer," he said.
"A person would have to have been drinking arsenic in the water at this level for years to have any adverse effects.
"The best case scenario is that residents will be on bottled water for days, the worst case scenario, weeks, but this is not going to be something that is long-term, it is something that is going to be resolved in the short to medium-term."
Mr Marshall said he thought it would be prudent on the back of this situation to have Health and Water NSW work closely with with all councils in Regional NSW to get a snapshot of the overall state of our water quality.
He ruled out any deliberate contamination of the water supply.
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