Right at the top of history's wish list, along with converting lead into gold, water into wine, and sows' ears into silk purses, has been the dream of turning sewage sludge into, well, anything useful, just so it's harmless and doesn't smell. How about something called "croal"?

Richard Edwards of Raleigh, N.C., has been turning the sewage sludge of 80,000 New Jersey residents into usable water and clean, burnable fuel that his partner calls croal -- much to Edwards' disgust-- for the last five months. Croal is a tortured acronym for Compressed Residual Oxy-ozo-synthetic Accumulated Litter, and although the processs is nearly unpronounceable, it is patented. It's cheap. It's fast. And it's very, very simple.

"Either it's the greatest con game in the world, or it's a miracle," said Mayor Anthony M. Difino of West New York, N.J., where Edwards' plant began running last March 2. The mayor thinks it may be the latter.

District of Columbia officials are impressed and are considering the process for use at the massive Blue Plains plant.

The implications of Edwards' process are staggering. The nation's 22,000 sewage treatment plants now treat 9.4 trillion gallons of sewage a year, or 107 gallons every day for every person in the country. After 10 days to a month or more of sewage settling, aeration, digestion, evaporation and so on, the plants wind up with more than 6 million tons a year of dry sludge that nobody wants.

Much of it is laced with dangerous heavy metals like cadmium, mercury and lead and with hard-to-kill toxic pollutants like PCBs (polychlorinated biphenyls), so it has to be treated carefully. Currently, a quarter of it gets buried in landfills, 35 percent is incinerated, 15 percent is dumped into the ocean and the rest fills old mines or mulches nonfarm land.

Robert Zabady, president of International Waste Water Reclamation Technologies Inc., Edwards' Raleigh firm, said the process of hyperbaric oxy-ozo-synthesis cuts the treatment time from weeks to 90 minutes. The water comes out sterile, and so does the sludge. There is only 4 percent as much sludge left over as from conventional treatment, and it looks, feels and smells like wet cardboard.

This is the croal, but the term makes Edwards wince. "Please don't use that word," he pleaded. "It's just sludge." But Zabady says it is different enough from the smelly brown muck the world calls sludge that the Environmental Protection Agency is scheduled to reclassify it formally this month as suitable for landfill use without further treatment.

Dried, the croal burns with the heat of soft coal or green firewood. The ashes do not leach and are safe for a landfill.

"The process has the potential of eradicating waterborne diseases worldwide," said Zabady, "and it's small and cheap enough to go anywhere."

Sewer experts are cautious. Test burns of the croal from West New York find the metals and other pollutants that go into the air are within the legal limits, Zabady said.

But some of the metals are not regulated yet and the results of burning the more metallic sludge of other cities are not yet known.

Paul Freese of the District of Columbia's Department of Environmental Services, who plans to visit the New Jersey plant next week, said his chief reservations are mechanical ones: maintenance, handling the ozone, and energy costs.

Edwards says those are no problem and is eager to see Freese. "Blue Plains is the ultimate place to get to," he said, with 300 million gallons of sewage a day needing treatment and more coming.

Zabady said the firm is offering to build a plant at Blue Plains to treat all of D.C.'s sludge on a per-ton contract basis. "We could build it in a year and it would cost less than any conventional system," he said.

"I was absolutely skeptical. They had to prove it to me," said Mayor Difino of West New York. In 1979, he was under orders from the EPA to stop dumping the town sludge into the ocean -- or else.

Contractors offered to cart it to a landfill for him for $542,000, which the town didn't have. Along came Zabady and Edwards, looking for a place to demonstrate their technology on a large scale. They offered to build a sludge treatment plant for West New York, run it for a year and then give it to the town, a bedroom community for New York City, for free.

Difino made them post a $150,000 performance bond first, and then he agreed. Later he made them pay a $10,000 EPA fine for missing the first deadline. "There are still some unknowns, but I can say I'm very happy so far," he said.

Richard Dewling of EPA's regional office in New York said, "If it works permanently as it seems to be working now, they've got a bonanza."

The process involves the raw sludge that settles to the bottom of huge tanks that face midtown Manhattan just across the Hudson River. In a building of only 600 square feet, the sludge is pumped 3,000 gallons at a time from the tanks through a grinder, fed a little sulfuric acid and then sprayed into a highly pressurized (hyperbaric) chamber with oxygen and ozone.

The ozone and oxygen cook the sludge chemically as it is recirculated through the chamber. The bacteria die and the fibers that make regular sludge a jello-like goo are broken down. The acid provides hydrogen ions, which react with the sludge to form water and carbon dioxide, and 90 minutes later the tank is emptied.

What comes out looks like clear water with pulpy white particles flowing through it, according to Sludge, the sewer trade newsletter. The system can handle 16,500 gallons of sludge a day.

The pulpy particles are strained out and pressed in rollers to a cake that is 67 percent solids, or croal. The water goes back to the sewage plant's entrance and West New York trucks the croal off for landfill burial.

The process, Zabady said, uses a 34-horsepower motor for the pumps and sprays and, counting materials and energy, costs $1.54 for 1,000 gallons of raw sludge. That's about half the price of conventional sludge treatment.

Edwards, besieged by eager investors, manufacturers, franchisers and others, has reached retirement age just as people are beginning to believe him. But he's not about to retire. "We're having less problems than I expected," he said. "I'm just getting started."