The South Taranaki District Council is investigating how to get rotting buttermilk out of the Eltham wastewater treatment plant.
Locals say they're being made sick by the odour and chemicals coming from the plant.
Last year during the spring flush, or milk flow peak, Fonterra dumped three million litres of the byproduct buttermilk, and also milk contaminated with oil waste, at the Eltham plant - with the permission of the South Taranaki District Council, which mistakenly thought its plant could handle the waste.
Council chief executive Craig Stevenson said a mistake by an employee had snowballed into a much bigger problem.
He was gutted at the impact it had had on residents, and the council was looking at how to get rid of it.
"Obviously it will create a bit of odour to get it out. People will probably be quite happy to put up with that to get rid of it, so we're actually examining that at the moment," Mr Stevenson said.
What would then be done with it was another matter, he said.
"What we would say to Fonterra is we need to find another source to dispose of it, and we'll work with them on it.
"It was an error that one of our staff made. We have to front up to that. I do, in particular, as chief executive, and we're not trying to duck that. It's a problem we've created and we need to solve it."
Mr Stevenson ruled out taking buttermilk again but said Fonterra had been excellent throughout, donating its expertise, advice and equipment to try to get on top of the problems.
Fonterra referred Radio New Zealand to the council for comment.
