This is the specific excerpt from the episode transcript:
Lancelot: It’s poisoned.
Prince Charming: Can we find an antidote?
Snow White: Or the fairies. They can help us.
Lancelot: No. I’m afraid this is gonna take something stronger than fairy dust.
Prince Charming: Lake Nostos… I’ve been there before. Its waters have powerful magical properties. I’ve seen them turn a man from solid gold back into flesh. It isn’t far. A day’s journey at most.
Source: http://onceuponatime.wikia.com/wiki/Lady_of_the_Lake/Transcript
They talk about fairies in general, not Blue Fairy specifically.
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