Over the synthetic fuels industry hovers the specter of a deformed baby cricket with two sets of eyes. Doused when it was an egg with liquids made from coal, the cricket developed like some monster-movie creature to remind the engineers that what they are doing to coal and oil shale is something relatively new on the face of the earth.

The engineers were not surprised. Synfuels -- primarily oil from shale and liquefied coal and gas from gasified coal -- will have as much impact on the environment as the oil, coal and utility industries combined, and then some.

Devising controls for everything is an enormous task, because most of the environmental problems are unprecedented and some are nightmarish.

They include toxic chemicals that cause cancer and genetic mutations, which could be a major health hazard to people living near coal gasification and liquefaction plants and might be subjected to fallout because of possible leakage from pipes and valves.

Another problem, particularly in the West, is that each synfuel project will use millions of gallons of scarce water and threatens to pollute much more of it underground.

The smoke and dust from synfuel plants could endanger air quality. The thousands of people who are moving west to dig and process and sell synfuels will transform the region, not necessarily for the better.

Environmental groups, wielding a decade of legislation and wary of the Reagan administration's antiregulatory stance, are not about to yield on anything they don't have to.

The result is that for the first time in the industrial age, a new industry is going to have to consider environmental problems and costs from the day it gets going, rather than later. And, while environmental protection laws are already on the books, many problems lie ahead.

"There are dozens of substances coming out of coal conversion and there are regulatory standards for only two or three of them," says Jonathan Lash of the Natural Resources Defense Council. "There's enormous political pressure now to move quickly, and a political trend toward looser enforcement of the laws."

The deformed crickets, hatched at Oak Ridge National Laboratory, could have been caused by a chemical known as acridine, which is found in coal liquids, or from the liquids themselves. The product of coal transformation are what scientists call "biologically active," which means they include powerful cancer-causing agents and substances that injure eggs and sperm. Although these are new products, the same problems surround many ordinary crude oil products, which have been the subject of continuing tests.

Synfuels supporters try to be reassuring.

"We know some of these things are nasty," said Robert Hall of the American Petroleum Institute, but the industry needs "nothing new in terms of control technologies that isn't used in [oil] refineries."

The current proliferation of design and treatment is evidence that the companies want "complete control over everything that goes in and everything that comes out," says Joseph Yancik, head of research and technical services at the National Coal Association.

Industry critics are not so sure, but some are willing to wait and see.

Oil refineries still have unsolved problems, Lash points out, and he wants the Synthetic Fuels Corporation to require a more imaginative approach to synfuels' environmental problems as a condition of subsidizing new plants.

The Environmental Protection Agency has ruled that synthetic fuels are new chemicals that must go through testing and documentation required under the Toxic Substances Control Act.

More familiar problems include the industry's need for vast amounts of water in the arid West, its need for mountains of coal and shale that must be dug out of the ground, and its call for thousands of workers to come to the nation's last wide open spaces. The debate over water is especially intense.

A report to the U.S. Water Resources Council estimated that the existing water supply in the Wyoming, Utah and Colorado basins where the coal and oil shale lie could support an industry that produces 1.5 million barrels of oil a day, three times the goal Congress set for 1987. That translates into 26 oil shale plants and eight coal conversion plants, each drinking 50,000 to 2 million barrels of water a day, depending on the process. It also assumes that all water not now under contract is captured and that new reservoirs, pipes and pumps are built.

"That doesn't deal with practicalities," says Lash. Instead of building new systems, "industrial users will just buy up existing water rights and displace agricultural users as they have in the past," he says.

He is also skeptical of EPA's tentative opinion that an industry producing 400,000 barrels a day can be built without damage to the region's air quality.

Coming from the other direction, Blaine Miller, chairman of the Oil Shale Advisory Council of the American Mining Congress, thinks an industry that size will bump up against the Clean Air Act. He wants the standards changed.

"We found Mother Nature violating three air regulations [for dust, ozone and some hydrocarbons] before we ever stuck a shovel in the ground," Miller says. He is also director of the Occidental Oil-Tenneco project, named Rio Blanco, at Rangeley, Colo.

Nobody is waiting for the Clean Air Act debate to end before going ahead, however.

At the EPA a special synthetic fuels task force is monitoring both the cricket tests and EPA's own operations.

EPA is trying to make an unprecedented attack on inconsistent, stop-and-go regulating practices that infuriate industry and environmentalists alike. Set up 18 months ago to represent every EPA agency and regional office, the task force is preparing "pollution control guidance documents" that will spell out EPA's requirements all at once, rather than one at a time.

"Everyone's sure they'll really become pseudo-regulations," says Yancik. "The regulatory people will have nothing else to use to judge these new processes."

Task force chief David Tunderman agrees. "We're trying to break with history," he says. "It's a substantially new way of doing business."

It's appropriate for a multibillion-dollar leap into products, wastes and machinery with major new twists, he said. He estimated that controls on each plant could cost 15 to 20 percent of the total investment, or nearly $1 billion on the largest plants.

"I don't see how the industry could not do it," says Yancik. "It's just plain business sense. Who would enter a $3 billion project and take chances on environmental surprises? They might be subject to controls later that would reduce production or even make the investment inoperable. It would kill 'em."

The physically enormity of the process is one reason for the large costs.

To produce shale oil, industry must find a way to heat large amounts of the gray rock to 900 degrees Fahrenheit, collect the gases that evaporate from the kerogen within and condense them into oil. To convert coal to gas and oil, pulverized coal must react with steam and other chemicals, often under tremendous pressures. Afterward there are mountains of wastes to get rid of.

Here are some of the processes and their problems.

Surface retorting. Shale fragments up to three inches across are heated in a chimney-like building, releasing gas to collecting pipes where it is condensed into oil. Two tons of western shale, the volume of an office desk, yield a barrel of oil. Shale from deposits in the Indiana-Illinois-Ohio region yields 25 percent less.

But distributing the heat evenly is difficult The oils are too thick to flow far and must be upgraded at the site. Also, the hot shale waste must be cooled with water, up to three barrels for each barrel of oil, and the waste water is then full of toxic salts and chemicals, including arsenic.

Secretary of the Interior James G. Watt told editors and reporters at The Washington Post that synfuel production in the West might not be feasible until the industry develops technology that requires less water.

The spent shale is fine as talcum powder, dangerous to breathe and abrasive to moving machinery. It is sterile. "There's no precedent for handling it, but obviously you can't pile it on the surface and let it sit there," said Miller, the Rio Blanco project manager.

There is also more of it than before it was processed, due to the "popcorn effect" in which treated shale expands to 25 percent more than its original volume. The bulk of it can be packed back into the mine it came from, wetted, surfaced with the original topsoil and reseeded under the Surface Mining Act of 1977. But there is debate over the feasibility of disposing of what's left by filling canyons or making new hillsides.

"In situ" (below surface) retorting. To avoid the problems of surface work, dynamite blasts can be set off in mines underground, turning the shale to rubble where it lies. Air is injected and a fire lit that burns slowly downward, driving gases ahead of the fire to condense further down and be collected by pumps already installed at the bottom of the blasted area.

But "it is very difficult to get the proper heat into the formation or the products out," the Electric Power Research Institute reported recently. "If not sufficiently fractured, [the shale] will refuse to give up its oil and gas." Test burns have stopped on reaching groundwater and the chemicals leached out of the shattered shale have been hard to track.

Modified in situ (both surface and below surface) retorting. To make the burn easier, Occidental is planning to dig huge surface pits into the shale, remove 20 percent of it and then blast surrounding shale to fill up the pit. Large sites could be as much as 30 stories deep and a football field across. The burn would proceed as for underground retorting.

Coal gasification. Coal is crushed, pretreated to remove sulfur products, pulverized and fed into a pressurized vessel to react with steam and air or pure oxygen. The resulting gases have a low heat value, so they must either be used locally or upgraded into something more like natural gas.

"You get very clean fuel from this, with most of the environmental problems in the wastes," said Lash. "It may be that gasifying is a good argument environmentally."

Coal liquefaction. Since coal differs from oil primarily because it has fewer hydrogen atoms, one ton of coal can produce up to three barrels of oil if the atoms are added. But all such processes involve high-pressure vessels, exotic and dangerous chemicals and miles of pipes.

Sheer plumbing control will be a monumental task: the Solvent Refined Coal (SRC) plant in Newman, Ky., will have about 60,000 valves in its first-stage capacity of 6,000 tons of coal a day, and perhaps 250,000 when at full capacity.

"Just inspecting each one every six months is a huge job. Some will leak for months and this is nasty stuff," said Lash.

Perhaps the biggest problem, one common to all the technologies, is the influx of people the industry will bring to the West. Rio Blanco paid for a master plan for the area around Rangeley, Colo., which now has 6,000 people and expects 6,000 more in the next five years. The Colony project has budgeted $100 million to build an entire community near its project outside Rifle, Colo., while dozens of towns are worrying about the new schools, roads, hospitals and jails the population surge will require.

But at least everyone seems to see the problems coming. "We have as much interest in a good quality of life as the people who live here now," said Miller. "If we didn't, out turnover would be so great we couldn't function."

Environmentalists grant that point. "The main problem is that so much is uncertain," said Lash, "and under the present administration the burden of uncertainty seems to rest on the public rather than on the industry."