Officials say 336,000 gallons of diesel fuel spilled in Arthur Kill after a storage tank was lifted and ruptured from the surge from Sandy.
All the spilled oil is believed to be contained by booms put in the water, the Coast Guard says.
The diesel fuel leaked at the Motiva oil tank facility in Woodbridge, N.J., according to authorities.
Coast Guard spokesman Les Tippets says a secondary tank caught most of the oil and that the liquid that escaped moved into the Arthur Kill, the water waterway separating New Jersey from New York's Staten Island.
Two hundred responders were on scene to contain the spill.
New Jersey Department of Environmental Protection spokesman Larry Ragonese says the company reported the spill and hired contractors to clean it up.
Air samples collected by the Coast Guard at Arthur Kill showed levels within acceptable thresholds Wednesday.