The Canadian-owned company has stated that the water discovered leaking from a manhole into Mid Yell Voe was not untreated "blood water", but had gone through two filter processes and ozonation.
The BBC reported that it used a Freedom of Information request to learn that SEPA was contacted by a member of the public in August 2017, who reported "weekly offensive smell complaints from locals, the school and tourists" on Yell.
It led to SEPA visiting Cooke's site which, according to the inspector's report, uncovered "small quantities" of untreated overflow from blood water tanks discharging into Mid Yell Voe.
'Two filter processes and ozonation'
However, a spokesperson for Cooke Aquaculture told the BBC: "Cooke Aquaculture Scotland has never discharged untreated wastewater from its Mid Yell packing facility and the company has requested that the Scottish Environment Protection Agency correct errors in their report noting otherwise.
"The SEPA report was issued in connection with an odour issue at the packing facility in August which prompted inspection by the SEPA on August 14, 2017. The odour came from treated water foam in a manhole at the facility. The wastewater had been treated through two filter processes and ozonation.
"The wastewater had an odour but it was not untreated as the SEPA report states.
"The company corrected the odour issue immediately in August. Among those measures, the manhole was heightened to ensure no future leakage of any materials. Cooke also implemented a regular filter cleaning schedule and added lids to their holding tanks, which aid in containing odours."
'Compliance is not optional'
SEPA chief officer Anne Anderson told the BBC: "SEPA works every day to protect Scotland's environment and investigates reports of suspected pollution when we receive them. We are clear that compliance is not optional.
"Following a complaint about odour and effluent discharge from Cooke Aquaculture Scotland's site at Mid Yell in August 2017, a SEPA officer attended the site to carry out an inspection. The inspection identified problems with odour and a discharge of effluent.
"SEPA's report was based on the information supplied by the operator at the time of the inspection in August. The company has since advised that the discharge from the manhole was treated, and is in the process of providing information to support this. The fact remains the discharge should not have happened."
Agreed actions completed
Anderson said measures had been agreed to address the problem.
"The operator, who responded swiftly, has confirmed that all agreed actions have been completed and has supplied evidence to prove this. We are satisfied that our requirements have been met and an inspection will be carried out in due course," she told the BBC.
"SEPA is continuing to work with Cooke Aquaculture Scotland to ensure the site is compliant with all regulations and licences."