The City of Whitehorse is being forced to spend millions to upgrade water treatment even though health officials say there is nothing wrong with drinking water. A draft environmental screening report released last week says bugs like giardia are not getting filtered out before drinking water streams out of residents' taps.

"If there are live giardia cysts or cryptosporidium at the intake then there should be a multi-barrier system in place," says the Yukon's federal water resources spokesperson Dave Sherstone.

But city engineers say that kind of upgrade costs millions of dollars.

The Yukon's medical health officer, Dr. Bryce Larke, says there's never been a problem with city water. Health officials say giardi has always been present in Yukon tap water and has never caused a health concern.

"I'm very comfortable drinking the water. My family drinks the water. I can't reassure people enough that this is a false alarm in terms of safety," Larke says.

He suggests faulty tests by federal authorities raised the alarm. He'll meet this week with city and federal officials to discuss implications of the draft report.