The City of Iqaluit says testing shows a high concentration of fuel in a tank that supplies water to the Nunavut capital.
It says the fuel could be diesel or kerosene, but that long-term health effects are not a concern.
Residents of the community of 8,000 people were told on Tuesday not to drink tap water after it was discovered it may be contaminated by fuel.
Some residents reported smelling fuel in their water last week, but city officials said regular testing came back clear.
Staff then discovered a holding tank that had a strong fuel smell and the city put out a notice to not drink the tap water.
The Nunavut government has been flying in shipments of potable water, while many residents have collected freshwater from a nearby river.
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