If it is found in the water it's likely the flushing chemicals as JR suggested. But the portaloo itself can be built out of formaldehyde emitting materials as was the case with the Katrina disaster...it's not healthy at all to inhale or drink: Formaldehyde is also found in a variety of construction materials, furnishings, and consumer products. The three products that emit the highest concentrations are medium density fiberboard, hardwood plywood, and particle board. Environmental factors effect, such as temperature and relative humidity can elevate levels because formaldehyde has a high vapor pressure. Formaldehyde levels from building materials are the highest when a building first opens because materials would have less time to off-gas. Formaldehyde levels decrease overtime as the sources suppress.
Formaldehyde inhalation changes the sensitivity of immune system, which influences oxidative stress.
In the U.S. the Federal Emergency Management Agency (FEMA) provided travel trailers and mobile homes starting in 2006 for habitation by residents of the U.S. gulf coast displaced by Hurricane Katrina and Hurricane Rita. Some of the people who moved into the trailers complained of breathing difficulties, nosebleeds, and persistent headaches. Formaldehyde-catalyzed resins were used in the production of these homes.