The fire began in an illegal stack of about 300 tonnes of old tyres on Territory day last year and even when covered with earth, kept burning until mid-December.

The tyre piles formed a makeshift fence behind the showgrounds.

The subsequent EPA investigation found Katherine Town Council was not licensed to store or dispose of waste tyres at the site and had potentially committed a number of offences under the Waste Management and Pollution Control Act 1998.

Katherine Town Council has now entered into a performance agreement with the NT EPA.

NT EPA chair Dr Paul Vogel said the implementation of the performance agreement rather than pursuing a prosecution would provide long term benefits for Katherine's residents.

"Katherine Town Council engaged with us openly and immediately about this matter," Dr Vogel said.

"Katherine Town Council has already spent considerable sums of money and will need to spend more to continue the clean-up from the waste tyre fire.

"Pursuing a prosecution through the courts would have diverted resources away from the Katherine area where they are needed and potentially unfairly penalise ratepayers through considerable fines and legal fees.

"A prosecution would not have achieved what this agreement does which is a very positive and long term outcome for the Katherine community.

"Katherine Town Council's commitments under the agreement will put Katherine at the forefront in waste planning and management in the NT.

"The tyre fire incident and NT EPA's response reinforces the need for all councils to ensure that waste is effectively managed.

"The air quality monitoring station will for the first time provide Katherine residents with real time data about the quality of the Katherine air environment during the fire season, as well as an increased understanding of any potential impacts to Katherine residents.

"This outcome commits Katherine Town Council to making significant and ongoing improvements to its environmental performance as well as delivering environmental and health benefits for the community."

Council chief executive office Ian Bodill this afternoon said as per the performance agreement with the NT EPA, council is required to develop a Waste Management Strategy for the Katherine region under control of the council that will outline clear actions, timelines and budget to address a range of waste management matters and challenges.

One of these challenges is the matter of recycling, Mr Bodill said.

"Through the Waste Management Strategy, council will explore options relating to waste reduction, avoidance and reuse along with resource recovery and recycling," he said.

"The form in which these challenges are overcome are still to be determined and our requirement to provide kerbside recycling could potentially be misleading.

"With limited/no access to recycling streams, the way in which council achieves these outcomes is most definitely a challenge that will be further explored through the process.

"Despite the circumstance surrounding the Territory Day tyre fire, Katherine Town Council is thankful to work alongside the NT EPA to develop a long-term, positive outcome in relation to waste for the Katherine community."

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