Testing across Sydney's drinking water catchment released on Wednesday showed new highs for Medlow Dam in the Blue Mountains.
Two groups of PFAS chemicals were found in the dam's untreated water at one-and-a-half times the safe level of Australian drinking water guidelines.
However, all tests of treated drinking water supplies across Greater Sydney in September fell well inside the guidelines.
NSW Water Minister Rose Jackson has backed an inquiry into PFAS contamination. (Bianca De Marchi/AAP PHOTOS)
Testing began to find the source of the dam's toxins after it was disconnected from the network in late August.
More than 100 samples from 30 sites, including water at various depths in dams, were taken.
Results found a small creek - Adams Creek west of Katoomba - in the upper reaches of the Medlow catchment, required further investigation.
Historical land use including potential activities where PFAS has been used, such as firefighting activities, was also being investigated.
A dam lake downstream of Medlow - Greaves Creek - fell just inside the safe drinking guidelines.
Global concern is on the rise about the health and environmental effects of the family of PFAS chemicals, which don't break down and can accumulate in plants, animals and people.
They have been linked to deadly cancers, impacts on the liver, heart and immune system, and developmental damage in children.Â
While backed by local health authorities, Australia's PFAS guidelines have been attacked by critics after the US created harsher limits that effectively banned any detectable level of the chemicals.
Sampling of water in NSW has increased in recent months. (Dan Himbrechts/AAP PHOTOS)
The issue will receive greater scrutiny after NSW Water Minister Rose Jackson indicated support for a parliamentary inquiry into PFAS contamination.
Increasing concern about the chemicals also triggered a federal inquiry.
"We accept that drinking water has a special status as the source of life and community resilience - it warrants special consideration," Ms Jackson told parliament.
A coalition bid for a deeper inquiry with royal commission-like powers to compel evidence from witnesses was knocked down by Labor and the crossbench.
"We are disappointed because this issue warrants the highest level of scrutiny possible," Nationals MP Sarah Mitchell said.
Environment authorities have been sampling water across the upper Belubula River since July after a farmer discovered PFAS in a stream that makes up part of the Murray-Darling basin.
Test results from filtered water bound for sinks and showers in Blue Mountains homes are all within safe levels and have shown slight reductions in PFAS levels since July.
WaterNSW is preparing to increase the flow of water from an alpine dam, which has recorded near-zero levels of PFAS.
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