Hopes for an early settlement of the longstanding regional sewage crisis were set back yesterday when the Council of Governments was told that the Environmental Protection Agency (EPA) had rejected its formula for expanded use of the Blue Plains treatment plant.

Although Montgomery County administrator Robert W. Wilson told regional representatives that "we're back to base zero," an EPA official later told the closed meeting that the EPA rejection was "not a flat no."

William W. Colony, an EPA area program officer, said that the agency's regional administrator, Joel Schramm is anxious to work out a compromise to the plan, proposed by local elected officials earlier this month.

The proposal would allocate an additional 5 percent sewage capacity to Montgomery County and the District by giving them credit for rain and ground water that seeps into leaky pipes on the way to the Blue Plains plant in Southeast Washington. One survey found that 30 percent of the flow into the plant resulted from water that had penetrated leaky pipes.

Colony said the EPA wants assurance that if the Extra allocations cause Blue Plains to exceed its daily treatment capacity, there would be a plan for the two jurisdictions to "pay back" the plant by reductions in use on other days.

The increased allocations would relieve sewage crises in the District and Montgomery County, while giving planners time to come up with a longterm solution, EPA was told.

Colony said that Schramm is planning to meet with local government officials on March 28 to attempt to work out a compromise to head off legal battles among the jurisdictions.

Suburban Maryland sued the District after the city announced it planned to take a bigger share of the capacity of Blue Plains. Since the suit was brought in U.S. District Court last December, both sides have been meeting regularly in an effort to reach an out-of-court settlement acceptable to the local governments and to environmentalists, who contend that greater use of the plant will further pollute the Potomac River.