A decade ago this month, Virginia health authorities closed a small chemical plant in the town of Hopewell, an action that led to the discovery of what officials were to call the worst environmental disaster in the state's history.

The plant, actually a converted gasoline station, produced a grayish white, powdery pesticide called Kepone, and soon after the tiny Life Science Products Co. plant was shut, state officials discovered that massive amounts of the toxic chemical had been secretly and illegally dumped into the James River.

Alarmed state officals closed almost 100 miles of the river to fishing, and Life Science and the giant Allied Chemical Corp. were fined heavily because of the discharges of the pesticide. Life Science had a contract with Allied to produce only one product -- Kepone.

Today, although the $5.25 million settlement paid by Allied in 1977 has been exhausted, Kepone remains embedded on the bottom of the James River, and rockfish and croaker in the river still contain excessive levels of the pesticide, according to Virginia officials.

Removing the Kepone, a known cancer-causing agent in laboratory animals, would cost at least $2 billion, according to Virginia Secretary of Commerce and Resources Betty J. Diener. Furthermore, the cleanup techniques are crude and possibly more dangerous to aquatic life than letting the pesticide settle under the accumulating sediment.

State officials acknowledge that their current do-nothing policy is fraught with danger. Like a sleeping monster, the Kepone on the river bottom could be stirred up by a natural disaster such as 1972's tropical storm Agnes. Sloppy dredging could tear up the sediments and send the Kepone swirling through the river, causing more serious contamination.

"We will see the indication of Kepone on aquatic life for decades, possibly centuries," said David S. Bailey, director of the Virginia office of the Environmental Defense Fund.

Kepone remains banned in the United States, and the furor over the illegal dumping in the James River has died down. But scientists and environmentalists say it will be decades before the James River is healthy again.

It could cost Virginia taxpayers at least $225,000 a year for river monitoring and for periodic medical examinations of former Kepone production workers, many of whom developed symptoms of pesticide poisoning that became known as the "Kepone shakes."

The tests were funded from the $5.25 million settlement with Allied, but that money was exhausted in 1983. Diener says the state may go back to court to try to get Allied to continue to pay for the monitoring and health tests.

Keith J. Buttleman, administrator of the Virginia Council on the Environment, said he is gathering data that will be evaluated by the state attorney general's office to determine how strong a case the state can make. Diener said she expects a decision on a possible court suit against Allied Corp., as the giant chemical firm is now known, by the end of the year.

Allied spokesman Michael Ascolese declined to talk about whether Allied has discussed further Kepone payments or a possible court suit. "We have not been asked by the state of Virginia, and we will not speculate," Ascolese said.

Kepone is a powder that was used largely overseas against potato and banana pests, and in ant-and-roach traps. It was developed at a time when chemical companies wanted to produce potent, long-lasting pesticides, and thus it is extremely toxic and degrades very slowly. No one is certain how long it takes Kepone to degrade in water.

Allied produced Kepone at its Hopewell plant from 1966 until 1973, when it contracted with Life Science, a small company formed by two Allied employes, to produce the pesticide. While Allied made the chemical, it secretly discharged massive amounts of Kepone wastes directly into the James. Life Science dumped its wastes directly into the Hopewell sewage system, knocking the town's treatment plant out of commission.

On July 24, 1975, the Life Science plant was closed down after state health officials were told of workers who appeared to have cases of Kepone poisoning. Symptoms include nervousness, tremors, weight loss, erratic eye movement, chest and joint pain and a reduction in sperm counts.

In December 1975, then-Gov. Mills E. Godwin ordered a ban on all fishing in the James River. Since then, the ban has been partially lifted, but it still exists for rockfish and croaker. The levels of Kepone found in those fish are still above the allowable limits set by the Environmental Protection Agency, according to Robert B. Stroube, assistant state commissioner of health.

Stroube said that it is hard to predict when the Kepone in the rockfish and croaker will be at safe levels, because the Kepone levels in those two fish have fluctuated wildly during the last decade. At one point, the level of Kepone in rockfish dropped briefly into the safe range, but it rose quickly again. He said scientists have no idea what is causing the fluctuations.

"It's hard to predict whether it the levels of Kepone in the fish will go up or down, and when we do try to predict, we're almost uniformly wrong," Stroube said.

In addition to the year-round ban on catching croaker and rockfish, fishing for bluefish and trout is banned from July 1 to Dec. 31, and the American eels must be kept in clean water for 50 days before they can be sold.

There is no restriction on recreational fishing or crabbing, although a warning is issued with fishing licenses that, in essence, says that there is Kepone in the waters and it may be hazardous to human health.

The James did not have a large percentage of Virginia's fishing industry, but the river's closing and Kepone publicity hurt the sales of Virginia fish, a slump from which watermen say the industry is just beginning to recover.

U.S. District Judge Robert R. Merhige originally fined Allied $13.2 million for violation of federal pollution laws, saying he wanted to "send a warning" to the nation's corporate board rooms. He later reduced the fine to $5.25 million after Allied started a private environmental trust fund with a donation of $8 million.

The $5.2 million fine from Allied went to a scattering of more than four dozen programs that for years were coordinated by one man -- Roy N. Puckett. Puckett's record-keeping style was informal, and he kept much of the information in his head.

So when he died, shortly after Gov. Charles S. Robb took office in 1981, the new Democratic administration was in the dark over where the money was going, according to Diener. She said it took the department about nine months to track down where all the money was being spent.

Diener said that some of the largest chunks of money went to the city of Hopewell ($650,000) for a new sewage treatment plant and sewer lines, and to a promotion campaign ($516,120) to help the hard-hit seafood industry.

In addition, money was used to develop a plan for burning Kepone at sea ($129,800), for numerous studies on the health effects of Kepone exposure ($130,435), and for the monitoring of the James River ($75,000). In all, Virginia has spent $5.68 million on Kepone-related projects, of which $429,360 was state money.

The 1977 settlement limited further state actions against Allied, but it did make an exception, allowing the state to try to recover any cost incurred in removing and disposing of the Kepone from the James.

State officials are skeptical about undertaking such a project. "The technology does not appear to be available" to do the job safely, Diener said. "We looked at every option."

She said the Army Corps of Engineers once considered, then rejected, diverting the James River. Another time, state officials became excited over the discovery of bugs that eat Kepone, Diener said, until they learned that the bugs could not live underwater.

The only method currently available is dredging or digging the Kepone out of the river bottom. Diener says that approach would cost at least $2 billion and could create more problems than it solves, because it might resuspend the Kepone that had settled to the bottom. In addition, the state would have to find a place in which to dispose of the contaminated sludge.

Environmentalist Bailey agreed with Diener's assessment. "From all I have heard to date, there is no technique to remove Kepone from the river, except by dredging . . . and a massive dredging project would be as destructive to the natural resources as the Kepone has been," he said.

"Right now it seems that the best solution is to leave it alone," Bailey added. But he also stressed the danger that the sediment -- and thus the Kepone -- would be disrupted by a hurricane or the regular dredging that is done to make the James River navigable.

"No one can say for sure what will happen," Bailey said