UNC Resources of Falls Church is testing the strength of radiation regulation in the nation's leading uranium-producing state in a legal battle now under way with the New Mexico Environmental Improvement Division.

Four years after the most massive radioactive spill in U.S. history, UNC is suing the state agency, challenging two NMEID orders to clean up the spill site at a UNC facility at Church Rock, N.M.

UNC sued its insurance company Allendale Mutual over the incident and has been awarded $54.4 million by a U.S. District Court in Santa Fe from the company to cover cleanup costs associated with the spill, loss of profits from the ensuing four-month shutdown and punitive damages for refusing to pay UNC initially. Allendale is appealing the decision.

On July 16, 1979, a UNC dam collapsed, allowing more than 1,100 tons of solid uranium waste tailings and 95 million gallons of radioactive and toxic metal-contaminated water to flow into the Rio Puerco river. Since the spill, high levels of radiation have been traced more than 100 miles downstream and radioactivity has been found in wells used by Navajo Indians, elementary school children and tourists at the Petrified Forest National Park.

The lawsuit was filed last summer after the state ordered UNC to clean up a uranium tailings pile and to stop all seepage of water containing radioactive thorium-230 from ponds near the pile.

UNC spokesman Juan Valesquez said the company intends to stop leakage of the thorium but does not now plan to clean up the 160-acre tailings pile or to begin stabilization activities as ordered by the state. "That would be premature," he said.

UNC, one of two suppliers of nuclear fuel for the Navy, closed down its mining operations at Church Rock in May 1982 after the price of uranium fell to uneconomical levels. But UNC still owns the mine.

Environmental groups in New Mexico fear UNC may abandon the site, leaving the state with radioactive residue. "They are trying to get out of the uranium business as fast as they can," said Paul Robinson, executive director of the Southwest Research and Information Center, a nonprofit organization based in Albuquerque.

The company denies the reports and in its suit says it has completed only five of the 15 years of expected operation at Church Rock. But UNC's 1982 annual report states, "UNC has elected to direct its mineral development diversification efforts toward precious metals."

Robinson points out that UNC is "a cash-rich company" that has undertaken a series of rapid acquisitions and diversification efforts in a move to restructure the business away from uranium mining.

In 1982, UNC purchased in quick succession Swift Group Inc., a producer of aluminum and steel marine vessels, for $14.7 million; Champion Shipyards Inc., a builder of marine vessels for the offshore oil industry, for $5 million; Falcon Pump and Supply, a distributor of industrial pumps principally for the oil and gas industries, for $4.7 million, and Carlton Machine Tool Co., a producer of radial and horizontal drilling machines, for $1.6 million.

Uranium tailings are the byproducts of uranium mining. In most concentrations, only four pounds of uranium can be extracted from each ton of ore mined, leaving 1,996 pounds of fine grey sand called tailings.

There are five million tons of tailings at the UNC site and more than 140 million tons at other uranium mining and milling sites throughout the country. Tailings piles account for 97 percent of the total volume of nuclear waste.

"Tailings piles are the most serious problem of all the radioactive waste issues," said John Sutherland, executive director of the Sierra Club Legal Defense Fund. Sutherland said tailings do not have the high level of radioactivity found in some other nuclear wastes, but the problem lies "in the huge amount of tailings that are generated from uranium mining." New Mexico officials say the problem is not only the tailings, but the leakage of water containing radioactive thorium from the piles of UNC waste.

"The continued presence of tailings liquids at the existing site can only aggravate the spread of contamination," said former NMEID director Russell F. Rhoades in a letter to UNC mining and milling president Thomas F. Bailey ordering the company to begin cleanup operations.

Sutherland said that historically, mining operations leave the waste they generate unless they are forced to clean up the affected area. "The classic American way of dealing with tailings is to just walk away," he said, echoing Robinson's concern that UNC plans to withdraw from uranium mining activities in New Mexico.

The Uranium Mining and Milling Act of 1978 set standards for cleanup of tailings piles. Led by the Department of Energy and some EPA officials, the Reagan administration is considering relaxing the regulations, an SRIC report states.

The latest encounter between UNC and NMEID is the culmination of a series of actions against the company following the dam collapse and resulting contamination of the Rio Puerco.

Valesquez said UNC is satisfied with its cleanup of the Puerco. "The situation with the spill is that it has all been cleaned up," he said.

But the UNC cleanup has been criticized by environmental groups and Navajo Indians who use the Puerco as a water source. The cleanup concentrated on only the upper three inches of the riverbed, they complain, citing a Nuclear Regulatory Commission-sponsored report indicating the radioactive material seeped deeper into the river bed.

"Radioactivity still present below the surface of the stream may continue to be released to groundwater causing a long-term water pollution problem," a report by Southwest Research stated.

Surface water quality in New Mexico and Arizona was also adversely affected by the spill, environmentalists say. The polluted water was left untreated for weeks in an area where Navajos use the water for household purposes and cattle.

The combination of rainfall washing radioactive material into the river and the removal of water that leaks into underground mine shafts have washed radioactive agents at least as far as Holbrook, Ariz., more than 115 miles downstream from the dam site, SRIC stated.

The Arizona Department of Health Services also found excessive radiation in the Little Colorado River downstream from Holbrook. "These levels of contamination can be considered dangerous to human health," stated an April 1 report from Timothy D. Love of Arizona's Ambient Water Quality Unit. The report says the radiation levels found in the river "are suspected to be impacted by New Mexico mining operations."

UNC spokesman Valesquez said it is "simply erroneous to assume" that upstream mining activities are the cause of elevated levels of radiation in the Puerco and Little Colorado River. He said that the Four Corners region, where New Mexico, Utah, Arizona and Colorado all meet at one point, is full of natural "uranium outcroppings."

The Arizona Atomic Energy Commission in 1976 studied base radiation levels in Arizona water systems and concluded, "There are no apparent geographical trends and no abnormally high radioactivity concentrations" in the state's water.

Arizona officials say they have measured radiation in rivers below the UNC uranium mine that range from 10 to 100 times the levels permitted by the state.

The UNC dam failure has revealed other environmental problems. The investigation into the cause of the collapse contended UNC knew of cracks in the dam structure. The company also allegedly failed to insure that the highly acidic wastes were insulated from the dam walls to prevent erosion.

Further investigation into the UNC site revealed thorium-230 was leaking into offsite wells. Thorium has a half-life of 80,000 years and when ingested is deposited in the liver, spleen, bone marrow and abdominal lymph nodes, sometimes resulting in bone and liver tumors and leukemia.

UNC does not deny that thorium leakage is occurring but claims the land into which the thorium is seeping is not public land and is not accessible to the public so therefore is not subject to NMEID regulations for public land. Part of the land in question is leased to Kerr McGee Corp. by the state and another sector of the land is Indian reservation.

Because of the seepage problem, the UNC facility was selected as one of the EPA Superfund sites for hazardous waste areas in January. No action has yet been taken on cleanup, said Robinson.

Robinson, along with a small staff located across the street from the University of New Mexico here, have been closely following the uranimim mining in New Mexico since 1971. Robinson criticizes the state for dragging its feet in enforcing environmental regulations. Robinson described the New Mexico congressional delegation as "wimpy" in efforts to force major uranium producers to abide by state and federal regulations.

Robinson criticized NMEID for presenting its weakest case possible against UNC by citing only two wells in violation of thorium standards and not charging UNC with any violations of toxic metal content. He said more than 100 wells surrounding the site are contaminated with radiation and also contain high levels of toxic metals in violation of state standards.

Robinson said UNC has not yet responded to a state order to submit cleanup proposals for the tailings site. Valesquez said UNC intends to wait until its lawsuit is settled before acting.