More than 500 complaints have been made to the Environment Agency about the site in Cormongers Lane, Redhill.
It said it was monitoring gas emissions and would consider formal action against operator Biffa if it was found to be breaching its permit.
Biffa said if did not believe levels of hydrogen sulphide detected posed a threat to human health.
Residents have been complaining about the smell from the site, described as like rotten eggs or sewage, for several weeks.
Green Party councillor Sarah Finch said it reached its worst levels earlier in the week.
"It smells like normal household gas, sometimes with a tinge of sewage smell," she added.
"It is a very unpleasant smell which catches in your throat and can make you gag."
Paul Bennett, from the Environment Agency, said officers were at the site at least once a day to collect data.
The information will be sent to Public Health England to assess whether it poses a risk.
"If Biffa don't keep the gas within the site and we find that they are breaching their environmental permit, then we are going to consider formal action against the company," he said.
Biffa said it had installed a flarestack as a temporary measure, which would burn off the excess gas.
It said a blue or yellow flame may be visible at night.
"This action is being taken with the knowledge of the Environment Agency and is a tried and tested method to increase gas extraction capacity," it said.
"Biffa has undertaken monitoring of the odours and provided the results to the Environment Agency.
"Biffa's interpretation of these results is that the levels of hydrogen sulphide detected do not pose a threat to human health."
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