According to official estimates, methane escaping from the Welbeck landfill site, north of Wakefield, has probably done more environmental damage than a thousand million miles of motoring over the past year.

Although methane gas is not known to cause direct harm to human health, it might when it comes off decomposing rubbish because of trace elements it carries.

Welbeck Waste Management's struggle to meet Environment Agency standards for methane control may explain its last minute postponement of a plan to turn the gas into electricity.

Shelving the power plant project is a disappointment to the agency, because using tip gas is a government target. And a December 2007 deadline for getting some value out of Welbeck's had been notified to everyone up to Environment Secretary and Leeds Central MP, Hilary Benn.

But the priority at Welbeck now is to capture most of the gas so it can at least be flared off, rather than allowed to leak into the atmosphere.

Opponents of the tip are pleased at the crackdown, which they think is a result of their campaigning. But they are concerned about the health implications of the emissions – especially as the Government has made it hard to get hold of localised information on possible effects, such as birth defects.

The Environment Agency concerns came to light when Paul Dainton, from Altofts, a former union official who runs the campaign group Residents Against Toxic Scheme (RATS), waded through 20lbs of papers associated with an application for amendments to the tip licence.

While doing that, he got a report from a RATS delegate to the Welbeck Liaison Forum – made up of local people, councillors, the Environment Agency and the tip company – that there were hints the gas utilisation project had been shelved.

An Environment Agency official confirmed it to Mr Dainton last month and said the decision was "a surprise".

The tip company now says it hopes to build the power plant next year, but denies it ever made a firm promise.

But everyone else – including Mr Benn, writing to local MP Ed Balls in October – was expecting start-up by this Christmas.

Welbeck Waste Management takes rubbish from all over West Yorkshire and from Barnsley to build what it says will eventually be a green hill on derelict mining land, bordered by the communities of Eastmoor, Heath Common, Kirkthorpe, Normanton, Altofts and Stanley.

Mr Dainton said: "The tip is wasting more energy than some wind farms will ever generate, it smells awful and it spills rubbish all over the place. But almost everyone round here has had a slice of the landfill tax and if you complain, the default position is that nobody moves until you rub their noses in the proof."

The company is part of the Waste Recycling Group, which has confirmed it is "working with the Environment Agency to address its concerns around the provision of landfill gas control measures".

A spokeswoman said: "Installation of the electricity generation plant at the site is predicted to take place in 2008. Some details have taken longer than anticipated."

The Environment Agency confirmed that the site had been "scored twice for category 2 breaches relating to gas management issues" and added: "An investigation into the breaches is on-going. We are unable to comment further as it may prejudice any further action we wish to take."