Explosions were heard at a residential address in Katikati, Bay of Plenty, today as armed police executed a drugs warrant.
Neighbours were told to stay indoors while police approached a shed on Park Rd about midday.
One neighbour told the Bay of Plenty Times she heard a loud bang, then the building caught alight.
The woman, who did not want to be named said big plumes of thick, black smoke erupted from the shed.
Witnesses told One News about hearing the explosions, followed by a chemical smell in the air.
Jo-Anne Russell said the explosions might have been caused by combustible fuels in the building.
"I don't think it's rifle shots, even though the Armed Offenders are carrying weapons at the moment.
"The Armed Offenders came over with their rifles, all geared up ... and gas masks, and told us that there was a lot of toxic fumes in the air and to please move away."
A woman, who did not want to be named, said she was told by a member of the Armed Offenders Squad to stay indoors as the shed contained volatile chemicals.
A reporter at the scene said more than a dozen firefighters were called to the property and used breathing apparatus when they were putting out the fire.
The shed was gutted.
Police said there was a large fire and a significant amount of smoke at an industrial style building at the property, requiring a number of fire appliances.
As a result, police temporarily evacuated a small number of people from nearby buildings as a precaution. No one was injured.
Julian Dickon said he thought the first blast was a blown out tyre "and the next explosion I came out and the smoke was absolutely billowing out".
Another resident, Chris Marment, said she assumed the people who owned the building had blown it up.
Detective Senior Sergeant Lindsay Pilbrow said there was a family on the property, and they would be relocated for the night for their own safety and to help police carry out a scene examination.
Police were unable to confirm media reports that a methamphetamine lab was at the scene, as it would not be possible to begin an examination until the area has cooled down.
Two men and a woman are helping police with their enquiries.
- additional reporting APNZ
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