Front Royal has never been anyone's idea of a seafaring town. For one thing, it's landlocked, nestled high among the horse farms of Virginia's Shenandoah Valley, clear across the state from the blue water.

But when the state agency that runs Virginia's harbors began planning for new a cargo terminal recently, it picked a site just north of Front Royal in Warren County. They won't be dropping any anchors nearby, but they will be demonstrating one of the newest and least likely maxims of the shipping business: You don't need water to be a port.

The Virginia Port Authority and senior aides to Gov. Gerald L. Baliles have taken preliminary steps toward creating what they call an "inland port" in Warren, about 65 miles west of Washington.

The facility would be no more nautical than a gas station. Trailer-sized freight containers would be delivered by truck to the "port," where they would be lifted onto railroad cars and hauled overland about 180 miles to ships at Norfolk, Portsmouth and Newport News.

As commonplace as this arrangement may sound, Port Authority officials estimate that it could do to their business what a stiff breeze does to a sail. Virginia is battling to take away cargo from other East Coast ports, particularly Baltimore, and the "inland port" is being touted as a powerful new weapon in the state's arsenal.

State officials are keeping mum about details of the project, largely because Baliles has not officially announced whether the terminal will be built. A spokesman for the governor, Chris Bridge, said Baliles could make a formal announcement as early as next week. On Friday, the governor is scheduled to address a luncheon in Front Royal.

Calling the inland port "an exciting concept," Bridge said, "It would provide an easier route, and in some cases a cheaper route, for shippers to get their cargo to the port. Some shippers truck their freight to Baltimore and then it's shipped by barge down the {Chesapeake} bay to Hampton Roads. We think we can do better than that, and that's why the idea is promising."

Officials of the Maryland Port Administration, which operates the port of Baltimore, have been watching the Virginia proposal closely and are skeptical of its prospects. "It isn't clear to us what market they're after or just what they're up to," said Miles Maguire, a Port Administration spokesman.

"Looking at the face of it, the economics don't seem to make sense. If they're trying to get people to ship by rail rather than down the bay, they're going to find that barge traffic is still much cheaper. But we'll just have to wait and see what they do. If the plan works -- if they've built a better mousetrap -- we'll react to that."

Virginia officials know firsthand how such ports can work because two such facilities are in operation in North Carolina. They were built specifically to lure business from competing harbors, including Hampton Roads, according to North Carolina Port Authority spokesman William T. Stover.

North Carolina located its inland facilities -- called intermodal terminals -- in Charlotte and Greensboro, booming cities a few hundred miles from its on-the-water ports at Wilmington and Morehead City. Stover said the inland terminals provide shippers with practical and financial incentives to send their cargo through state ports.

First, the state makes shipping through its ports convenient. Every steamship line that calls in North Carolina maintains empty freight containers at the inland terminals. Anyone with cargo to move can call the terminal and request that a container be delivered and loaded, at state expense. Once freight has been placed in a container it remains there until it reaches its overseas destination, dramatically cutting handling expenses.

Second, the state delivers the containers from the inland terminals to the ports at low cost, made possible by a volume discount negotiated with the railroad that serves the ports.

And terminal officials work to ensure that container trucks never travel empty either to or from the port, enabling truckers to cut costs. Those savings are passed on to customers.

"The usual trucking cost for moving a container from Charlotte to Wilmington would be $400," Stover said. "Because we match the loads coming and going, we can do it for $186. And we take care of everything. The idea is, 'When it arrives at Charlotte, it arrives at the port.' "

Stover said the inland terminals have outperformed the state's most optimistic projections. The Charlotte terminal opened in 1984 and last year moved 4,000 containers; the Greensboro facility opened in 1986 and moved 1,600 containers in its first year. Port officials are planning a third terminal, for eastern North Carolina.

Virginia Port Authority officials predict, in an internal study, that an inland port in the Shenandoah Valley could take away as much as 8 percent of the container traffic now going to Baltimore.

To that end, they have purchased an option to buy about 150 acres of industrial land just outside Front Royal, near I-66 and Rte. 522. The site is bordered by Norfolk Southern railway tracks, which would provide a direct connection to the Port of Hampton Roads.

Bridge, Baliles' spokesman, declined to discuss financial details of the port proposal, including whether the state was negotiating a special rate with Norfolk Southern. "Anything else will have to come after the governor's decision," he said.

Baliles' announcement is not likely to pass unnoticed. He has dubbed 1987 "the year of trade" in Virginia and has embarked on a public relations campaign, including several overseas trips, to emphasize his support for international business. He has also helped the Port Authority win substantial budget increases.

Hampton Roads has been locked in tough competition with Baltimore since the 1970s, when deregulation of the trucking industry dramatically changed the shipping business, and in recent years appears to have been winning. The amount of cargo passing through Baltimore has dropped since 1984, while tonnage at Hampton Roads has increased 50 percent in the last two years.

The inland-port proposal is the most visible assault launched by either Hampton Roads or Baltimore, but there have been others. Maguire said the Maryland Port Administration is building a $250 million container terminal in Baltimore that will open in 1989. Maryland also has plans for a $25 million rail yard where containers will be loaded onto trains adjacent to Baltimore's Seagirt Terminal.

The Virginia Port Authority recently ordered three container cranes that were designed and patented by its own employes. A Port Authority spokesman said that most cranes can load about 27 containers an hour, but that the new ones will handle up to 60 an hour.

Both ports are also improving facilities for inbound automobiles. Virginia is building a $4 million terminal addition to lure European cars to Portsmouth. Baltimore is building a terminal for Toyota that could handle 100,000 cars a year.