Natural Resources Wales has said it is consulting further with Public Health Wales over an application to site a waste plant at Nine Mile Point Industrial Estate.
Residents from Cwmfelinfach and Wattsville and Ynysddu want NRW to refuse an operating licence over environmental health fears.
The plant, being developed by Hazrem Environmental Ltd, will process up to 100,000 tonnes of waste annually and campaigners have cited an increase in traffic and a weather phenomenon called temperature inversion as reasons for objection.
After an initial public consultation, which saw hundreds of residents lodge their views, the environmental body has said it will consult further with Public Health Wales.
John Hogg, Head of Operations for Natural Resources Wales in South East Wales said: “One of our main roles is to protect communities from poor environmental quality that is detrimental to people’s health and the environment.
“As part of our assessment we review the draft decision in light of additional information we receive as a result of public consultation.
“We continue to review application and work closely with Public Health Wales to ensure that we have all the information necessary on any potential impact on the health of people living in the area.
“This is due to a predicted short term increase in Nitrogen Dioxide emissions during certain weather conditions, such as thermal inversions.
“We will only grant a permit if we are satisfied that the company’s detailed plans demonstrate that it will comply with environmental laws, and can operate without harming people and the environment.”
Islwyn MP Chris Evans and his Labour colleague Rhianon Passmore, the AM for Islwyn, have both welcomed the development.
Mr Evans said: “The health of local residents is of paramount importance and must be protected.
“I am pleased to hear the responses gathered from the public consultation are being taken seriously and that local residents are being listened to.”
Ms Passmore said the strength of feeling in the community on the issue is very strong.
She said: “Residents of Cwmfelinfach, Wattsville and Ynysddu handed in around 700 formal letters of complaint to Natural Resources Wales during the consultation with many highlighting their real concerns at the reliability of the scientific data being relied on.”
The proposed facility would accept up to 100,000 tonnes of non-hazardous waste per year which will be sorted and segregated for recycling and the production of fuel.
The waste used to produce fuel will be shredded. It will then be wrapped five times with film and stored before being taken offsite for incineration.
Emissions from burning of natural gas used in the drier will be released through an 18 metre-high stack which will also eliminate odour emissions.
Ms Passmore added: “The data used as a basis to calculate the estimated density of particulate pollution, predicted to be caused by the 18 metre-high chimney is fundamentally flawed.
“The stack itself, although 18 metres high, will stop at pedestrian level adjacent to the main road.
“I have raised this matter in the Senedd chamber and with the Minister and I will continue to stand shoulder to shoulder with the communities of Cwmfellinfach, Wattsville and Ynysddu in saying ‘no’ to this unwanted plant.
“I continue to call on Natural Resources Wales to deny this permit for the wellbeing of the health of the local communities.”
A spokesperson for Hazrem Environmental Ltd was unavailable for comment at time of publication.