Waterway is source of chemical smell (5)
I believe the answer is:
creek
'waterway' is the definition.
(thesaurus)
'source of chemical smell' is the wordplay.
'source of' says to take the initial letters.
'smell' becomes 'reek' (reek is a kind of smell).
The initial letter of 'chemical' is 'c'.
'c'+'reek'='CREEK'
'is' acts as a link.
(Other definitions for creek that I've seen before include "Up the .....; in difficulties, and wet?" , "Natural stream" , "Small inlet, river" , "Stream, brook" , "sound" .)