Final warning notices have been served following a serious flaring incident at the Mossmorran chemical plant in Fife.
Bright flames and black smoke were seen coming from the main chimney during the seven-day incident last June.
Residents also complained of extreme noise and vibrations at homes near the plant.
The Scottish Environment Protection Agency (Sepa) said environmental licences were breached and increased monitoring will now take place.
Flaring involves burning gas which cannot be processed at the petrochemical site, usually because a problem has developed.
Last summer’s unplanned incident prompted 74 complaints to Sepa.
Operators ExxonMobil and Shell have said they accept the findings and are co-operating with Sepa.
Principal operator ExxonMobil apologised to the local community for the flaring incident.
Although flaring is permitted, environmental conditions have to be met to ensure disturbances from noises, vibrations and air pollution are kept to a minimum.
Two further incidents, in October 2017 and March this year are still under investigation.
Sepa chief executive Terry A’Hearn said: “The impact of unplanned flaring from Mossmorran last year was both preventable and unacceptable.
“We’re disappointed that both ExxonMobil Chemical and Shell UK caused an environmental impact on local communities which is why we’ve issued formal final warning letters, have announced a full review of environmental permits to operate and an enhanced programme of air quality monitoring.
“It’s clear that further actions are required by ExxonMobil Chemical and Shell UK to ensure the frequency and impact of flaring is reduced, but we’re encouraged by how both companies have responded, committing to respond positively to a strengthening of environmental controls.
“We’ll be working with the Health and Safety Executive, public health partners and communities to together both strengthen environmental controls and deliver powerful transparency over site operations.”
Sepa’s five-month investigation found that maintenance failures led to elevated levels of unplanned flaring during the incident.
It followed the breakdown of a condensate pump.
Environmental controls were breached between 12 June and 18 June and there was “considerable disturbance” to residents throughout the period.
A delay in restarting the facility meant the flaring continued for four days.
Then in March a “process upset” led to flaring for a further three days.
Campaign groups say the flaring has increased in frequency and intensity and some have called for the site to be shut down.
A spokesman for the Mossmorran Action Group said: “The operators plainly put profit before safety and before the well-being of neighbouring communities.
“Sepa’s report shows communities were right to be fearful and angry about the irresponsible behaviour of the operators.”
A spokesman for ExxonMobil said: ” We apologise to the local community for the flaring in June last year which we recognise caused particular concern and inconvenience.
“We completed our own detailed investigation into the flaring and its impact on the community, and have already made a series of improvements to our maintenance processes, and to our flaring-related communications with the local community.
“We are also committed to work with Sepa on an enhanced programme of air quality monitoring.”
ExxonMobil said flaring was safe and used widely in petrochemical plants and refineries worldwide.
The spokesman said the company would continue to work with Sepa, other relevant agencies and the local community to monitor and minimise the impact of flaring.
A Shell spokeswoman said: “We recognise that the unusual flaring events at the Mossmorran complex in June 2017 raised community concern around flaring and air quality.
“We take very compliance very seriously.
“In response we have been cooperating with Sepa, and working closely with our neighbours at the ExxonMobil-operated Fife Ethylene Plant on technical and operational measures that will help avoid the circumstances which led to that flaring event from happening again.
“We stepped up our engagement in the community last July to understand people’s concerns. This work is ongoing with community groups and other parties to address concerns raised.”