New South Wales water authorities are demanding that the Defence Department remediate the Tomago Sandbeds after a contamination crisis stemming from the Williamtown Air Force base.

Hunter Water says it has lost access to 1.5 billion litres of water as the contamination from old fire-fighting chemicals spreads.

Hunter Water has been forced to stop using three pump stations inside the NSW Environment Protection Authority’s investigation zone at the sandbeds, and must now wait for New South Wales Health to deem it safe.

But reports say water has been sampled at points across the sandbeds, and chemicals from the old air base have not been detected.

Still, Hunter Water interim CEO Jeremy Bath is not overly confident that Defence will clean up the sandbeds, and says the company may end up seeking compensation.

“I think it's fair to say that Hunter Water is not confident that the Department of Defence is going to be able to remediate the Tomago Sandbeds,” he told the ABC.

The Defence Department says it has a plan.

Officials were asked about the situation at a Federal Government hearing for an air traffic control infrastructure project on the weekend.

They said they are developing a clean-up plan that would involve soil with low concentrations of contaminants being removed from the site as solid waste.

After that, toxic soils will be stockpiled and contained.

Defence says some dewatering will be required in areas where groundwater contains the toxic fire-fighting foam chemicals at levels that exceed appropriate standards.

It also says it is trying out chemical filtration methods for use on the infrastructure project.

NSW Premier Mike Baird says he will speak to the PM about the issue.