A national policy statement on ground water contamination has been blocked by the Cabinet Council on the Environment because of Interior Secretary James G. Watt's insistence that the problem is a state concern, not a federal one, according to administration officials.
Officials said that the Office of Management and Budget also raised questions about the proposed policy in a Cabinet council meeting last week, calling it a "raid on the Treasury."
The proposed policy has been in the works at the Environmental Protection Agency for more than two years in answer to congressional calls for a national strategy to address the increasing problem of ground water contamination from industrial wastes and pesticides.
The question has been given additional emphasis recently because of an escalating controversy over whether the EPA is failing to use its authority to safeguard the public from the hazards of toxic waste dumps, many of which have leaked chemical residues into ground water supplies.
The policy was to have been released by the EPA Nov. 30. But on Nov. 29, EPA Administrator Anne M. Gorsuch abruptly canceled a news conference on the policy, saying it involved "broader questions" of national interest and should be reviewed by the Cabinet council headed by Watt.
EPA sources described the policy as "mild," but said it was strongly opposed by Rita M. Lavelle, ousted last week as chief of the EPA's hazardous waste division. The policy proposal also upsets OMB officials, in part because of its emphasis on the need for extensive, and expensive, programs to monitor water quality.
Since 1981, funding for water quality programs at the EPA has been cut by more than 40 percent, and the administration requested further cutbacks in its fiscal 1984 budget. That budget request proposes to cut water pollution grants to the states by $30 million, or 55 percent.
The policy draft, along with background papers prepared by the EPA for the canceled news conference, states the size of the problem in strong terms. Half of the nation's population drinks water from underground sources, according to the documents, and every state has had to close drinking wells because of chemical contamination.
In a recent random survey of public water supplies, it said, about one-fifth of the water systems tested showed some contamination.
In an analysis of 929 hazardous waste sites, the agency said it had confirmed ground water contamination at a third of the sites and "strongly suspected" contamination at another third. It was able to rule out contamination at only 35 sites.
A draft of the policy calls for for states to "take the lead" in protecting ground water supplies, and promises federal help "within statutory and economic constraints."
Administration sources said Gorsuch argued for adoption of the policy at a Cabinet council meeting Feb. 9, but was unable to persuade Watt, who "wanted to study it and not come out with a policy until 1997 or something," according to one official.
An Interior Department spokesman said the department had not developed a policy on water quality, but one was "evolving" around the general theory that ground water "is properly governed by state laws, except where Congress has legislated otherwise."
The draft policy, however, would "recognize" that the EPA and state and local goverments "have extensive power under existing statutory authority to protect ground water."
The EPA is responsible for administering eight major laws with sections aimed at protecting water supplies, including the Clean Water Act, the Safe Drinking Water Act, the 1980 "Superfund" law to clean up hazardous waste sites and laws regulating the use and disposal of toxic substances and pesticides.
But the question of ground water quality is an important one at Interior as well, particularly in light of Watt's campaign to open more federal lands to coal and oil development.
While the subject reportedly did not come up at the Cabinet council meeting, environmentalists contend that Watt is concerned that a strong national policy on ground water contamination could hurt his efforts to increase coal and oil production on federal holdings.