Saltburn'S Red River, which was inspected recently by council and agency officials, may cost hundreds of thousands of pounds to clean up.
The stream, which flows through Saltburn Gill Nature Reserve, in east Cleveland, to Saltburn beach, is known locally as Red River because of iron ore leaking into it from a disused mine.
Saltburn Parish Councillor Jim Wingham, who visited the stream with other officials, says the problem is getting worse.
"It will cost a lot of money, but I think we've started on a journey that has a finish," he said. "We're hopeful that we will be able to involve the Environment Agency financially and a senior officer at the Lottery is keen to get involved as well as Teesside University.
"We will soon be having a public meeting.
Simon Walker, environmental maintenance manager at Redcar and Cleveland Borough Council, said a multi-agency approach was being used to tackle the problem. He said the scale of the work needed to be assessed before work could be carried out.
"We can make no promises, but we are working together to try to reduce the effect of the ironstone workings on the beck," he said.
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