I would pursue it so that at least you know what it is and whether you should be concerned. Your first step is to have it tested so that you know what you're dealing with. Once you know what is causing the orange color (it might be something harmless), then you can try to find the source and determine whether remediation is necessary. I think those steps need to happen before wondering if a neighbor is responsible.

Yes, a previous owner/neighbor can be held liable for certain contaminations. Some interesting reading (It is well written but state specific, I did not see your state mentioned in your post but each state has similar sorts of publications):

Here is a link that might be useful: hazardous waste

This post was edited by lucille on Wed, Mar 5, 14 at 14:10

I am sure that creeks get contaminates from all sorts of underground sources. As long as the creek is not completely on your property, the creek is not techically yours (for lack of a better way to describe it). The injustice is not being done against you in that case. The Core of Engineers is generally responsible for activity (in my state anyway) for any activity inside the creekbed. You are generally responsible for clearing debris in your section of the creek. If you wish to put a bridge across, you would need approval.
I would not see why a barn (mostly wood) would be the source of that tent of rust. Is there a high iron content in ground water in your area? That seems like a more probable cause. Wither way, rust (iron water) should not pose a problem to animals and fish in the area. So there may be no reasoning behind fixing this.
Maybe you could take a sample of the water seeping out into a water testing place and see if it indeed high in iron?

Thanks for the replies.

I wish we had found this issue when the soil scientist was going over the property for perk testing.

nostalgic The creek flows through our property but I doubt the Corp would be responsible since this is a very small creek. Also, putting a small walking bridge over it would not require approval. When the surveyor said it might be an old barn that was buried and rusted, he was talking about the metal roof that would create rust.

I think we are going to have the soil scientist look at the creek area when we apply for the septic permit. He should be able to tell us if it is harmless or what direction to go in.

Cricket-

Follow this link:

http://www.fairfaxcounty.gov/dpwes/stormwater/stuffinstream.htm

You will see many different illustrations of odd things occurring near/in creeks. I've seen what you describe many times here where I live. Often It is where someone used an old car or some type of equipment to shore up a creek bank or keep a ditch from eroding. As the metal rusts away, the iron oozes up in the mud. I don't think it is particularly harmful, but it is ugly. I'm sure your DNR folks could help you out... Tread lightly here. Since you are the landowner it will be your responsibility to clean it up if it proves to be harmful to the environment. The laws don't care if you were/weren't the responsible party. The cleanup will involve you and everyone else they can bring into it. I'm hoping it is just what your surveyor suggests. Make sure to look at the picture under the orange ooze. This is petroleum based and could mean someone may have disposed of some sort of industrial waste in an inappropriate manner.

Good luck with your endeavor.

Saftgeek-

Saftgeek-

Thanks for the information.

The orange slime in the article looks nothing like the orange area in the creek. The soil looks orange I am hoping it is iron since it is prevalent in the area where the property is located.

I am aware of treading carefully since we work in a business where EPA laws are scrutinized and enforced.

I think we will wait until the soil scientist looks at it to determine what direction we take.