Dawson City, Yukon, has been under a court order to build a new sewage treatment system since 2003. (CBC)

The Yukon's environmental screening agency says a much-needed new sewage treatment system in Dawson City should be approved, but with conditions to protect the town's drinking water.

In its 56-page report, the Yukon Environmental and Socio-Economic Assessment Board (YESAB) recommends the Yukon government approved the proposed system, but with a number of environmental conditions.

Dawson City has been under a court order to build a new sewage treatment facility since 2003, when the town was fined for dumping toxic sewage into the Yukon River.

Under the system being proposed, Dawson City's sewage would be treated in two deep shafts drilled into the ground near Minto Park. The two shafts would be located about 200 metres from three groundwater wells that provide the town's drinking water supply.

In its decision, YESAB said the shafts must be tightly sealed to prevent any sewage from seeping into the water wells. The board also calls for groundwater to be monitored in the area.

Shafts won't leak: manager

But Catherine Harwood, the Yukon government's project manager on the Dawson City sewage treatment plan, insisted that the sewage shafts will not leak.

"I'm not convinced that there's any chance of a leak from these shafts," Harwood told CBC News on Thursday.

"I've no reason to believe that they would leak, but we're considering carefully the recommendations from YESAB."

Harwood said the shafts are made of thick steel and would be pressure-tested before they are used.

"Then there's a grout curtain all the way around them for the … full depth, down to 300 metres," she added. "That grout curtain or sleeve is about five inches thick."

Other recommendations from YESAB deal with preventing any pollution during the drilling and construction of the sewage treatment shafts.

As well, the board wants safeguards at the town's landfill in the Klondike River valley, where sludge and solids that's screened from the effluent would be deposited.

Harwood said the effluent that would enter the Yukon River will meet current pollution standards, as well as new regulations that are expected to become law.

With the conditional approval from YESAB, it is now up to the territorial government to make a final decision on whether the project should proceed.