The Ministry of Environment is investigating two B.C. mushroom farms, following reports from neighbours that local waterways may be polluted.

The province launched its investigation into two Fraser Valley farms after residents of Abbotsford noticed an odour coming from a waterway next to a compost facility.

"It smells like raw sewage," resident Shelburne Rempel told CTV News on Thursday.

The waterway, which flows into a nearby creek, also had an oily black sheen and a green slime on it, Rempel said.

"You can't see through this black water. You can't even see the bottom."

Neighbours were worried that the substance, which appeared to be a pollutant, would reach the creeks in the area.

"Kids play in those creeks. Kids swim in those creeks. The salmon spawn and the coho spawn in Nathan Creek," Rempel said.

Another neighbour said the water looked like a sewer outfall, a stream of waste leading to a body of water.

"Whether or not that immediately kills fish, it can't be good for them," Mike Inniss said.

The City of Abbotsford fined the owner of Delfresh Mushroom Farms and HQ Mushroom $1,500 earlier this month, for three separate infractions on their properties on 58th Avenue. The infractions include waste materials leaching into a ditch that led to Bradner Creek, and an uncovered storage area with runoff water leading to Beaver Creek.

Following the fines, the city confirmed that the ministry was conducting its own investigation.

The ministry told CTV that "preliminary fecal coliform results show that the discharge is above B.C. water quality guidelines," but that staff are waiting for full results of water testing.

The owner of the farms said that there were problems at Delfresh during construction, and said that the issues have been fixed. He said he was working with the ministry to address any other issues.

HQ Mushrooms has run into trouble before, and faced a $10,000 fine in 2008 for federal fisheries offences.

The ministry's investigation is ongoing, but neighbours say they still have concerns about the water, which is still full of a black substance.

With a report from CTV Vancouver's Michele Brunoro