When the Portsmouth, Va., city Council voted two years ago to permit construction of the largest oil refinery on the East Coast, city officials, dreamed of the job's would create and the energy-hungry East Coast anxiously awaited the oil it would produce.

The refinery was to be the cleanest that modern technology could produce - so clean that biologists from the Virginia Institute of Marine Science predicted the refinery and its loading operations would have "minimal effect" on the fragile marine life nearby.

But today, serious and complex environmental questions are being raise about the refinery, its projected cost has risen from $350 million to $550 million, and its construction is still more than a year off.

Clouding the project's future is an Environmental Protection Agency objection that could block construction of the refinery on grounds that it would contribute to the already polluted air of Hampton Roads.

The debate over the Portsmouth refinery is a prime example of a major conflict between the demanding requirements of the Clean Air Art of 1970 and the professed federal goal of the U.S. becoming energy self-sufficient.

For nearly a decade, since the awakening environmental consciousness of the late 1960s, the battle ofor cleaner air and water has been fought on two basic questions.

How clean should the government require the discharge of specific industries to be?

How clean should the government require the environment itself to be?

Answering the first question has been largely a technological and political battle. By the EPA's own estimates the Portsmouth refinery would contribute fewer pollution-causing hydrocarbons to the air in the Tidewater area than the trees in the Dismal Swamp 12 miles away.

But answering the second question on how clean the environment should be is proving to be a social and economic battle as well, for ultimately it become the battle over industrial growth itself.

The refinery proposal by the Hampton Roads Energy Co. would create a 175,000 barrel-a-day refinery on a 628-acre site in Portsmouth, a dingy, industrial city of 106,000 people on the south shore of Hampton Roads.

City officials estimate the project will increase tax revenues by 40 to 50 per cent, provide 3,000 temporary construction jobs and 500 permanent jobs.

Not everyone is thrilled with the prospect of the refinery of course. Environmental groups in other Tidewater localities have filled suit to block the project, raising the prospect of oil spills devastating the seed oyster beds in the lower James River. The biologists at the marine institute, confident that the refinery itself by the possibility that refinery-bound barges and tankers might spill their cargo and blacken the surrounding waters.

But virtually none of the opposition has surfaced in Portsmouth itself, and the refinery supporters believe their only real problem lies in Washington.

All but one of the environmental permits necessary for the refinery have been granted, including one from the Virginia State Air Pollution Control Board. It was issud on the basis of the refinery's projected compliance with the state's air quality standards - standards previously approved by EPA.

But late April, Dr. Peter Finkelstein of the EPA's Philadelphia regional office voiced a surprise, 11th floor objection to the refinery.

His forum was a hearing on the refinery's request for a river-dredging permit - a request routinely circulated by the U.S. Army Corps of Engineers to other federal environmental agencies for comment.

In a terse, 500-word statement, Finkelstein said the air quality issue was the one aspect of the refinery "of greatest concern to EPA." Noting that the air in Hampton Roads is already overloaded with smog-breeding photo-chemical oxidants, Finkelstein said it "is not reasonable to allow new sources into an area where staandards are being violated by 200 to 300 per cent . . . The Environmental Protection Agency finds the proposed refinery to be environmentally unacceptable."

The Findelstein statement stunned the refinery supporters because of its implications. It said, essentially, that the best pollution control techniques are no longer necessarily enough for industry to provide, even when those techniques keep that industry's e missions far cleaner than state and federal agencies require, as the Portsmouth refinery would do. It charted, in brief, the limits of industrial growth.

The crunch had been coming. Environmentalists have been coming. Environmentalists have been saying for years and the bottom line of the environmental movement is a halt in the nation's growth. Lawyers have been saying privately for at least three years that the Clean Air Act was a time bomb, containing all the legal machinery needed to block almost any new project, including shopping centers, housing developments and factories.

"This law that (Sen. Edmund S. Muskie passed is nuts!" fumed John Roads Energy Co. "Every time they K. Evans, president of the Hampton paint a destroyer down there (at the Norfolk Naval Shipyard in Postsmouth) they put more hydrocarbons into the air than we would in a year."

Officials of Hampton Roads Energy - whose principal financial backer is the Atlanta-based Cox newspaper chain - make two major complaints.

They did said some of the EPA's overall air quality standards are unattainable because they make no allowance for "background" pollutants from natural sources.

And they said the agency's "tradeoff policy," unveiled last December, puts the burden on new industries to clean up the environmental degradation produced by existing industries.

"That's not only unfair," Evans said, "it's unconstitutional."

The clean air standards causing the most trouble for the refinery - and for other industries around the country - are those for hydrocarbons and their photochemical byproducts.

Hydrocarbons are a class of organic compounds, made up of atoms of hydrogen and carbon, produced in hundreds of gaseous varieties by everything from automobile engines to decaying trees.

In the presence of sunlight they combine with oxides of nitrogen to produce photochemical oxidants - hundreds of molecules suspended in a haze that can be either natural (the "smoke" over the Great Smoky Mountains) or unnatural (urban smog).

One of the principal photochemical oxidants is ozone, a pungent, unstable, pale blue gas about which even the relative handful of ozone experts in the world know relatively little.

As a gaseous layer in the stratosphere, ozone absorbs harmful ultraviolet radiation from the sun, and that's good. But in the urban atmosphere of industrial gas and auto exhausts, it helps form smog.

When the Clean Air Act of 1970 was written, the nation's target ozone standard was set on the basis of ozone levels monitored in smog-covered Los Angeles and set at .08 part per million - a level not to be exceeded more than one hour a year. After all, it was thought, ozone is present in nature only in very small amounts.

But when new and improved monitoring techniques were used elsewhere in the country, beginning in 1971, ozone began turning up everywhere.

In 1975, researchers with the New York state government, after monitoring both rural and urban sites, found ozone peaks about the same in the country as in the city.

At remote, unpopulated Whiteface Mountain, practically on the Canadian border, they found the ozone level nearly twice that in Houston and nearly as high as in Los Angeles.

The implication of these and other studies was plain: government and industry might be successful in reducing the ozone level in every smoke-stack and exhaust pipe, but they would never, apparently, bring the overall ozone level of many states down to the target levels of the standards.

The Portsmouth refinery, for better or for worse, may be blocked because of an ozone level in the air over Hampton Roads, which the refinery backers can little to correct.

What they could do was outlined in the trade-off policy, through which the EPA has sought to temper the no-growth implications of the Clear Air Act. The policy permits industry to locate in the already polluted area only by eliminating existing pollution sources elsewhere in the area.

This has led Evans and his backers to discuss - and reject - such proposals as buying up and junking all the old polluting cars in Hampton Roads, buying and closing old dry cleaning plants (an existing hydrocarbon source) or financing a pollution clean-up program for some other industry.

Last week they trooped to Capitol Hill to plead for a five-year suspension of the ozone standard until scientists know more about the gas and what it does.

Karl Braithwaite, a staff member on Muskie's environmental pollution subcommittee, said the committee is aware of the complexities of hudrocarbons, oxidants and ozone.

"If you get into this subject very deeply and you don't come out confused," he said, "then somebody told you a lie."

But he said many members of Congress are reluctant to make any move that might appear to be relaxing the pressures to clean up the environment.