When broad-shouldered Avis Pence, who runs the P & E Snack Bar on First Avenue, was asked for a glass of water, he brought it with a warning: "It stinks!"

It did indeed. The water smelled like a musty basement. The taste was worse than the smell.

It was so bad that Hank Frazier, who owns the Hank Apartments, says he has to put twice as much whiskey in his bourbon and water to get the drink down.

Up and down the hilly streets of this Page County town of 2,000 nestled between the Blue Ridge and Massanutten Mountain, about 100 miles southwest of Washington, people complain about their drinking water, drawn from the south fork of the Shenandoah River. They say it has turned smelly off and on for the last 10 years.

They worry, too, about whether the water is safe, and are depending on state health officials to solve the mystery.

"We're more puzzled than alarmed," says the state's district engineer, H.T. (Tom) Eberly, who says there is no sign that drinking water is hazardous.

Health officials suspect the problem is a chemical that may have been discharged accidentally from one of several industries upstream on the river. But there will have to be more tests before the state can say for sure, they say.

Meanwhile, the water, described by other townsfolk as smelling or tasting like wet, rotting leaves or Clorox, continues to flow to the town's homes and businesses.

Vernon L. Hughes, who used to work at Merck & Co. one of the upstream industries suspected in the mysterious contamination, before he retired, isn't taking any chances.

Early one recent afternoon, he was on his knees filling eight plastic milk jugs at the free-flowing Bear Lithia Springs just south of Shenandoah in Rockingham County.

"You can't drink that stuff," Hughes said, referring to the town's public water. "It's the nastiestds stuff I ever tasted in my life. It's bad all the time, but now, it's read bad."

Hughes and many other townspeople trust Bear Lithia because the springs' waters are sparkling clean -- so much so that Coors, the Golden, Colo., brewery that is so finickly about its water, is considering building its first East Coast plant at the site. Coors had an option to buy 2,300 acres of land along the Shenandoah River.

Because of the possibility of accidental chemical discharges, the Health Department has recommended that the town replace its antiquated plant with one that could deal with such emergencies or find an alternative supply, such as from wells.

The town wants to go to wells, but Mayor Barrett R. Bryant, who fills prescriptions at his Shenandoah Pharmacy, says the Farmers Home Administration has dragged its feet on a $650,000 loan application by the town.

"It's a bureaucratic mess," Bryant complains. "No one seems to want to straighten the dumb thing out."

At the sprawling Merck plant farther down Rte. 340, just south of Elkton, manager Arthur H. Joecks says "I'm sure we are not the cause of the problem." He says the only recent accidental spill, which involved a caustic, occurred last fall, and while it did temporarily make the river more acidic, "it did not affect the quality."

Because of mercyry discharges from Waynesboro, the South Fork of the the DuPont plant farther upstream at Shenandoah has been close to fishing for the last two years.

With low-flyig rain clouds expected to give the Shanandoah Valley a drenching today, town residents were hoping that the river would get a good flushing and that their water would start to smell and taste better.