Taranaki Regional Council says it is disposing of 150,000 litres of milk which was contaminated by mud and gravel.
Council resource management director Fred McLay says the affected milk was taken to the Eltham Waste Water Plant by Fonterra on Saturday.
He says it has been added to the butter milk Fonterra has had to dump because it can not store it. The council is treating the waste milk products by adding bacteria to them to break them down.
Mr McLay says the milk waste is then drip fed to a treatment plant before being discharged out to sea.
He says the council does not anticipate any adverse environmental impacts.
Fonterra general manager for the lower North Island Scott Walls says the company is investigating how 14 of its tankers became contaminated with mud and gravel, including the claims it was actually mining waste.
Fonterra collects milk from Taranaki farms that spread mining waste from fracking on their land.