Dave Mazey from Ruapehu Alpine Lifts said the spill had come from a diesel tank, which stored fuel for skifield equipment.
"A pipe attached to the tank became disconnected. We don't know how or where or when."
Mr Mazey said he was "dismayed" by the contamination.
"We take very seriously the fact that we operate within a pristine environment. We thought we had good equipment and good processes in place to deal with this type of situation, but, obviously, we don't always get it right."
The contaminated water supply was not shut off until last Wednesday when the problem was identified, leaving unsuspecting residents drinking the contaminated water for six days.
A Ruapehu District Council spokesman said some farmers had become sick as a result of drinking the water.
It will probably take 10 days before the town's residents could take a shower in their own homes, but it is still uncertain when the drinking water supply will be restored, he said.
Dr Peet said digging the soil out and moving it to a containment facility reduced the likelihood of further contamination,
Controlled flushing was also underway to try to flush residue out of the stream, he said.
Two absorbent booms were in place and a third was set to be installed later today.
Dr Peet said diesel in the stream was widely distributed in thin layers, and initial sampling found undetectable levels of hydrocarbons.
"The thing that will make the biggest difference now is rainfall. This is forecast for Tuesday, although possibly not in large enough amounts.
"We probably need a fall of over 80mm to really remove residual diesel. Diesel will also evaporate so the recent sunny weather has helped.
"We will be carrying out further sampling following this rain and hope to be able to advise farmers around the availability of stock water later in the week."
Surveying carried out by the Department of Conservation on Saturday found no evidence of any major environmental effects.
Horizons has initiated a formal investigation of the incident.
Eight "drive-up" showers had been set up at for residents, and had been used by more than 200 people so far.
An additional 28 showers were being set up today.
- additional reporting Lin Ferguson of the Wanganui Chronicle