Studies by the Health and Safety Executive say not enough research has been carried out into the airborne toxins that compost produces.
At the moment the Environment Agency considers a 250m distance from the site to be safe from these toxins, known as bio-aerosols.
But according to a former Agency board member, this distance is not enough.
The Normanton landfill site run by Waste Recyling Group has been the focus of much controversy because of the health risks associated with the bio-aerosols.
Problems can include breathing difficulties, infections and allergic reactions.
Alan Dalton, former North Eastern Environment Agency board member, says the new report reveals composting to be more dangerous than originally thought. He claims bacteria may spread up to 540m away.
The health and safety report says that "atmospheric conditions" may be responsible for the bio-aerosols spreading, but at the moment there should be no change made to the 250m limit, pending further research.
Environmental pressure group Residents Against Toxic Scheme (Rats) is calling for the composting facility to be enclosed, and says this report reveals Welbeck as a major health hazard.
The group has said the lack of data about the health risks and what is considered "safe" shows not enough research has been carried out and no one really knows how much harm Welbeck is causing. Further complaints from residents have also been made about the ongoing stench coming from the site.
The Environment Agency has issued a further enforcement notice on the composting facility, giving 21 days to remedy the problem of smells, and if the work is not completed it has threatened action against the site.
Waste Recycling Group said that in a bid to tackle the smell problems, it would not be accepting any more green waste until a solution was reached.
Environment management team leader Darren Starkey said: "We consider this to be the best option to ensure that this problem is solved once and for all."
The agency also has begun discussions with Wakefield Council about moving the composting facility to a different location on the site or enclosing it in a building.