Environment Minister Peter Kent said the new regulations, which he said are the first of their kind, are designed to ensure effluent is properly treated before it is released into the environment.
He said the government estimates roughly 75 per cent of municipalities are already in compliance with the new rules, but the rest must upgrade to at least secondary wastewater treatment.
"The bad news is 25 per cent of communities — and that amounts to about 850 individual communities or treatment areas — are deficient," said Kent, who made the announcement in Delta, B.C., near Vancouver.
"These regulations will apply almost immediately to the high-risk polluting communities."
Municipalities that are considered high risk have until 2020 to comply, while medium-risk municipalities have until 2030 and low-risk jurisdictions have until 2040.
Kent's office did not release a detailed breakdown of which municipalities fit into each group.
Kent acknowledged the total costs to municipalities will run into the billions. He said the federal government already provides municipalities with infrastructure funding and they are free to use that money to pay for wastewater upgrades.
"Since 2006, the federal government has provided more than $3 billion in wastewater infrastructure funding," he said.
"And since we made permanent the annual $2-billion gas tax refund, that's infrastructure funding which could, if a community so chose, reallocate and apply completely to their wastewater treatment improvements under the new regulations."
Kent said the regulations took three years of talks with provinces and municipalities to finalize.
The federal government estimates upgrades associated with the regulations will cost municipalities about $5 billion across the country.
The Federation of Canadian Municipalities puts the number much higher at somewhere between $20 billion and $40 billion. The federation said it welcomes the new regulations, but the group called on Ottawa to create a national funding program to pay for the wastewater upgrades.
President Karen Leibovici, who is also a city councillor in Edmonton, said municipalities won't be able to shoulder the costs of upgrading their systems on their own.
"The regulations were developed in partnership with the (federation) and we support the principles behind them ," she said in an interview.
"Those (the potential upgrade costs) are quite huge numbers."
For example, Leibovici said the Cape Breton Regional Municipality in Nova Scotia estimated it would cost $423 million.
"The main source of revenue for municipalities are property tax, and $423 million is beyond the capability of a municipality like Cape Breton to finance," she said.
The federation pointed to figures that were prepared when an earlier version of the regulations were released and published in the Canada Gazette.
Of 949 municipalities included in the data, 147 were considered low risk, 403 medium risk and 399 high risk.
The federation did not say which municipalities were in each group.
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