Emergency services have spent the night at the Sewage Treatment Works in Dunster's Station Road.
A chemical reaction yesterday, in the main plant area, caused a large plume of smoke.
Wessex Water said the incident, which has now been resolved, was caused by a third party firm delivering a chemical to the site.
Fire crews from Taunton, Porlock, Lynton, Wiveliscombe and Street were among those called to the scene.
A nearby railway line was closed and a warning was given to those staying in a nearby holiday park and on the beach.
Residents were urged to keep their windows shut because the incident resulted in a small amount of Chlorine gas being released.
It can cause a burning sensation to the eyes and throat or breating issues.
A spokesperson for Devon & Somerset Fire and Rescue last night gave an update, saying: "The chemical incident is producing a small amount of chlorine gas that is being controlled and diluted with jets of water.
"The gas is not affecting residential areas as the wind and water are dispersing the gas towards the sea, however if you are concerned please close your doors and windows.
"Please do not cross the cordons that are in place for public safety. We expect to be at the scene throughout the night.
"Chlorine gas has a pungent bleach odour. Minor exposures may result in a burning sensation of the eyes and throat. More substantial exposure may cause coughing or breathing difficulties.
"Those with a chest condition such as asthma or emphysema may be more sensitive to the effects of chlorine.
"Most people who have developed symptoms following an exposure to chlorine will not suffer any long-term effects.
"If you are concerned about your health, call NHS 111, contact your General Practitioner (GP) or in the case of an emergency, call 999."
This morning the spokesperson added: "Block lifted on West Somerset Railway, cordons removed, low levels of chlorine detected confined to area around storage tank, no off-site risk from chlorine."
The confirmed the site has been handed back to operators.
A Wessex Water spokesman said: "While there was no impact on water and sewerage services, and Minehead water recycling centre was able to continue to operate as normal, we realise this incident caused concern locally.
"We will be thoroughly investigating what happened and speaking to the third party company involved.
"We’d like to thank Devon and Somerset Fire and Rescue service for their assistance in helping to make the chemicals safe and ensuring there was no health risk to local people."