Prince Albert city council has declared a local state of emergency over an oil spill that threatens its water supply.

The declaration was one of the first orders of business at a special meeting of council Monday in the city of 35,000, Saskatchewan's third largest.

A local state of emergency allows the city to evacuate neighbourhoods and take other measures to deal with the threat and helps pave the way for disaster assistance applications.

Council also passed measures putting residents and businesses under strict water restrictions, imposing $1,000 fines for residents and businesses caught watering lawns.

On Sunday, city crews began rolling out an emergency waterline that will connect the South Saskatchewan River near the Muskoday First Nation to the city's water treatment plant. City officials said they've been told by experts to expect lingering hydrocarbons and contaminants in the North Saskatchewan River for about two months.

"The South Saskatchewan River is a clean, viable solution for our residents. We are anticipating this will allow us to continue to offer safe, potable drinking water," said Jim Toye, city manager for Prince Albert.

The City of Prince Albert is rolling out a 30-kilometre waterline connecting its water treatment plant to the South Saskatchewan River. (Trevor Bothorel/CBC)

Prince Albert Mayor Greg Dionne updated reporters on Monday, saying the 30-kilometre waterline was about half complete. Dionne expects the line to start feeding water into the plant as early as tonight or Tuesday afternoon.

"Once we get the [waterline] up and running we'll be in a different situation," Dionne said. "There's enough water delivered on that line to get our plant fully up to capacity and that's key, because we'll be able to put everyone back in business."

The mayor added because of the complexity of the waterline, which will need 18 pumps along the way to keep water flowing to Prince Albert, the chances of running into problems are high. Therefore the city is exploring secondary water supply ponds from private land owners and using the city's retention ponds.

But if all goes well and the waterline is able to continuously supply the water plant with treatable water, then the city can go back to offering a full supply of drinkable water.

Dionne said he doesn't know how long the city will be relying on secondary sources of water.

"We could have it up as long as two months. It all depends on the river, how much oil has sunk in the river, where is it pooled, because at the end of the day, we can't start a water plant up if there's still pools of oil out there that can damage our plant."

After Thursday's Husky Energy oil leak in the North Saskatchewan River near Maidstone , Sask., booms were set up in various locations along the river. However, those booms have been failing and a plume of oil continues to flow closer to Prince Albert via the North Saskatchewan. An oil slick on the North Saskatchewan River has prompted the city to shut off the intake to the water treatment plant. (Matthew Garand/CBC) Maidstone

As of 6:15 a.m. CST Monday, the City of Prince Albert has shut off its water intake from the river to its water treatment plant, as the oil plume can now be seen approaching the city.

The city is using its reserve water supply, which is expected to last for the week. But that all hinges on the people and businesses of Prince Albert conserving water in the meantime.

Heavy users of water such as car washes and laundromats have been closed and so has the Kinsmen Water Park, until further notice.

Beyond the residents of Prince Albert dependent on the city's supply of clean potable water, Toye said, there are about 1,200 rural properties outside the city that currently have no water because of the shutdown.

Jeff Da Silva, manager of public works with the city, said consultants have been hired to test the water in the river and the water coming out of the water treatment plant to see if any hydrocarbons are present.

The Prince Albert Parkland Health Region sent out its own update on Monday, saying it's doing what it can to make sure operations at all health facilities continue uninterrupted.

Prince Albert Mayor Greg Dionne expects the temporary waterline to be operational by Monday night or Tuesday afternoon at the latest. (Jen Quesnel/CBC) The region said it plans to make large water bladders available to provide potable water to Victoria Hospital, the Herb Basset Home, Pineview Terrace and the Mont St. Joseph Home in case of a water-supply disruption.

Who pays for oil spill?

Following a conference call Sunday night, Dionne said a line of communication has been opened between himself and Husky, and that Husky will have a representative on site in Prince Albert this week.

Dionne said he's been assured by the CEO of Husky the company will cover all costs incurred by the city because of the spill.

"This waterline alone is costing over $1 million," Dionne said. "Husky have given us assurances that they're going to make us whole and that they're going to fix whatever has to be fixed, and I take them for their word."

On a provincial media call, Al Pate with Husky Energy told reporters the company is going to do its best for affected communities.

"We're deeply sorry this has happened," Pate said. "We accept full responsibility for the event and the cleanup and we will make things right."

Minister of Government Relations Jim Reiter said he expects the company will follow through.

"​The costs we're certainly going to have to deal with," Reiter said. "I understand that Husky has spoken to that, saying that they're going to step up and do the right thing. Certainly we expect that that would be the case."

Pate added that Husky still doesn't know exactly why the oil leaked from the pipeline.

"It's too early to tell. Investigations of this nature take weeks, even months, to fully understand all the causes," Pate said.