Oil has been found on Motiti Island which has 30 residents and is close to the reef where a stricken container ship is grounded.
The Rena struck Astrolabe Reef on 5 October, spewing hundreds of tonnes of heavy fuel into the sea.
Resident Lynda Wikeepa says spray from the polluted surf is giving off fumes and people are worried about the effect that will have on the drinking water they collect in tanks on their roofs.
Ms Wikeepa says shellfish on rocks have been destroyed by a huge oil slick that arrived overnight on Tuesday and she fears the island's environment may never recover.
She says it is very distressing to watch containers from the Rena sinking in the waters near the island.
Ms Wikeepa says a meeting was held on Wednesday with Maritime New Zealand workers about clean-up efforts, but they must now wait for the weather to clear up and the smell of oil on the island is horrible.