The Environmental Protection Authority has lifted the abatement notice it served on the owners of a private dump near Greymouth, saying it now meets national standards for a landfill.
But Grey District Mayor Tania Gibson says the Taylorville Resource Park - sited directly above the intake for Greymouth's water supply - is still a disaster waiting to happen and should be closed.
"If there's a major slip or an earthquake - it doesn't bear thinking about what would happen. The enormity of this keeps being played down," she said.
EPA investigators issued an abatement notice on the dump's owners after they found it was leaching contaminated water from an unlined sediment pond.
The authority was asked by the West Coast Regional Council to step in as an independent investigator after the Grey District Council challenged the WCRC's handling of resource consents for hazardous waste at the site.
The EPA's investigations manager Jackie Adams says the extensive work needed to bring the landfill up to national standards has now been done.
"[Taylorville Resource Park] had to empty the existing pond and build a new, lined storage facility.
"This has now been completed and recent water samples taken from the area show that contaminated water is no longer being discharged from the site."
The EPA's investigation was now concluded and its intervention was at an end, Adams said.
"Ongoing regulation and monitoring of the site remain the responsibility of the regional council."
But Gibson says her council is a long way from being convinced the Taylorville site is safe.
Although the Grey District council had issued the original subdivision consents for the landfill, it had not been informed when the Regional
Council had consented it for hazardous waste, the mayor said.
"We were not considered an affected party - unbelievable. We've got tonnes of toxic material - building materials, coal tar, paint, sitting directly above our public water intake that supplies 10,500 people, schools, hospitals.
The Grey District Council would continue paying for additional independent tests of its water which came from a bore at the Taylorville site above the Grey River, Gibson said.
So far tests had not found unsafe levels of any potentially harmful substances in the town's water.
"But we will keep paying for tests - if anything happens we want to be able to say as a council that we did everything we could to prevent it."
Taylorville Resource Park has been approached for comment.
LDR is local body journalism co-funded by RNZ and NZ On Air.