The federal government set out to test the limits of corporate buck-passing in environmental law today as it opened its long-awaited mercury pollution case against the Olin Corp. and three former Olin employes.

In his opening statements in U.S. District Court here, Assistant U.S. Attorney Eugene Welch said he would prove that "Olin, by the acts of its employes doing their job so as to benefit the corporation," falsified seven years' reports to the Environmental Protection Agency.

Where the reports said half a pound or less of mercury was discharged daily from Olin's Falls chemical plant into the Niagara River, Welch said, the actual discharges often rose above 30 pounds.

In one case, he said, 330 pounds were poured into the river although the daily report said it was one-tenth of a pound.

Olin has conceded that at least five tons of mercury were dumped into the river between 1970 and 1977, the period of the indictment, but the actual amount and the dumping itself are not at issue here. Olin attorney Herald P. Fahringer argued that the giant corporation had always done all it could to recover mercury and prevent its dumping, and was "stunned" to learn that records had been falsified.

The case, Fahringer said in an interview, "could set a terribly dangerous precedent" if it establishes that corporate management is responsible for polluting acts by its employes. And that, of course, is precisely what the government is trying to do.

This is the first case accusing a major corporation of lying under the 1973 Federal Water Pollution Control Act amendments that made polluters responsible for policing themselves. Environmentalists have aruged that although it is unrealistic to expect self-policing to work every time, it is preferable to the vast bureacucracy that would be needed to monitor and record all discharged nationwide.

The Olin trial is expected to set some guidelines on where responsibility for observing the laws may be fixed within a company.

Attorneys for two of the three employes on trial with Olin maintained today that they were not responsible either.

The flase reports were signed by codefendant Wilburt L. Kleiber, 66, of Youngstown, N.Y., who managed the Niagara Falls plant until his retirement in 1976. "Kleiber did this so that the EPA would take no action. . .so that the company does not have to spend a lot of money" cleaning up, Welch charged.

Attorney Joseph Bermingham argued that Kleiber signed only some of the reports, not all of them, and that he never prepared any or performed any of the measurements that went into them. "All that was done substantially down in the plant structure. . . . You have to have some confidence in the people who do that work for you," Bermingham said.

Kleiber, he said, was "absolutely crushed" to be indicted after 22 years with Olin.

The government charged that information in the false reports was prepared by defendants Thomas Board, 49, of Grand Island, N.Y., who was the plant's head chemist, and by Calvin H. Schmiege, 53, of Lewiston, N.Y., the former plant fired in 1977 when, according to Olin, the company first became aware of the falsified documents.

Attorney Joseph Sedita argued that Broad did the tests but had no responsibility for making out the reports. "He could test for quality but he could control nothing," said Sedita. In fact, he continued, Broad gave his records to an environmental examiner from Olin in 1977, feeling "alone, hesitant, to be sure, and afraid," and thus "started the train of events that led to this courtroom."

Counsel for Schmiege declined to present an opening statement until after the close of testimony, expected in about one month.

Mercury causes a variety of nerve disorders and damages unborn infants when ingested by fish that are eaten by humans. However, mercury in the Niagara River is not believed to pose an immediate health hazard since the river is not used for drinking water and downstream commercial fisheries were closed previously for other polution reasons.

The liquid metal is still used as a catalyst in the making of chlorine and caustic chemicals at Olin's Niagara Falls facility. William Oppold, corporate vice president for manufacturing, testified today that prior to 1970, mercury-laced water and brine would routinely slop onto the floor of the plant to be drained by trenches designed for the purpose into the Niagara Falls municipal sewer system.

In 1969, he said, he was sent to clean up the mercury spills which at that point were three to eight pounds per day. In the settlement of a 1970 Justice Department lawsuit, Olin agreed to limit its mercury discharge to one-half pound per day and the level was reduced in 1975 to two-tenths of a pound daily.

A key element in the case is whether reports on emissions should have included all the mercury discharged or only that sent directly into the Niagara River, as the company alleges, and not that sent to the Niagara Falls municipal sewer system.

The complex 28-count indictment, returned by a Buffalo grand jury in March 1978, charges Olin, Kleiber and Schmeige with conspiracy to falsify the EPA documents, including Broad only after 1975.