Sid Bruninsma, enforcement officer for Environment Canada, said the leak was found by an Iqaluit citizen, who then reported it to Environment Canada.
Bruninsma said the city was soon notified so proper steps could be taken to clean up the spill.
As soon as the contamination was located the city hired Nunatta Environmental to contain and clean up the fuel.
Council recently agreed to provide up to $40,000 from the emergency fund to cover the cost of cleanup.
Alain Carriere, director of operations for Nunatta Environmental, said because of the quick action from council they were able to contain the fuel before it spread into the water system.
"At this point it's really well contained and people shouldn't be worried," he said. "There is no fuel going into the river."
So far Nunatta Environmental has absorbed close to 1,500 litres of fuel.
Carriere explained the first step in the project is to contain the leak. The next step will be to locate the point of origin.
He added the problem is, they don't really know where the fuel is coming from.
"In the last 50 to 40 years the area has been a dumping ground," he said. "It will take some in-depth investigation to find the source."
Jim Grittner, director of public works, said they are waiting until spring before they start digging to find out where the fuel is coming from.
Environment Canada hasn't laid any charges yet in relation to the leak. Bruninsma said they need to gather more information about the ownership.
"It would be premature to point fingers at this point," he said. "What we are most concerned with is that it's being cleaned up."
So far the city has spent most of the $40,000. Grittner couldn't say how much the cleanup would cost the city.
"Regardless of cost this is something the city has to do."