An investigation is underway to discover how around 10,000 litres of heating oil leaked from underground tanks at the County Hotel in Kendal.
The Environment Agency has been cleaning up the spill and testing of the nearby River Kent has been carried out by United Utilities, the Westmorland Gazette has reported.
A spokesman for the company however said that no oil had entered the watercourse.
Paul Bennett, the managing director of UK Holiday Group which owns the hotel, said everything was being done to clean up the oil leak and moved to reassure people there is no danger to public health.
An Environment Agency spokeswoman said: 'Our role is to protect the environment, including the River Kent, by ensuring the investigation into the spill and subsequent clean-up is carried out to a high standard. The extent of the spill is still to be determined. To date we have not seen any negative impacts on the environment, ground water or to the River Kent.'
'We are continuing to monitor the environment for any signs of the leaked heating oil and are working closely with the appointed clean-up contractor, South Lakeland District Council, the owners of the hotel and other interested parties to ensure all necessary actions are taken for a thorough and timely clean-up of this spill.'
When the incident happened, The North West Evening Mail reported that Polly Rourke, a spokeswoman for United Utilities, said: 'We would like to reassure people that there has been no effect on water supplies. We do not abstract drinking water from the River Kent and we do not have water mains in the immediately affected area. Purely as a precautionary measure, we carried out some sampling which has proved there has been no effect on water supplies.'