President Reagan's top aides sought urgently yesterday to find a new administrator for the Environmental Protection Agency who could replace acting Administrator John W. Hernandez Jr. within a matter of days.
Although Hernandez has been campaigning actively to be named the permanent successor to Anne M. Burford, who resigned under fire last week, White House officials have become concerned about revelations of his record at the EPA.
Referring to reports that Hernandez allowed Dow Chemical Co. to dictate changes in a 1981 draft EPA report blaming Dow for dioxin contamination of two rivers in Michigan, one official referred to him as "damaged goods."
Another official said Hernandez may be "as much of a liability as Burford."
"We're making progress and we've got a short list of names," a senior official said. "It's important that we fill this job as rapidly as we can. We need someone who is acceptable to Capitol Hill, respects the environmental laws and has unquestioned character and integrity."
William D. Ruckelshaus, a senior vice president of the Weyerhaeuser Co. who launched the EPA as its first administrator during the Nixon administration, is now the most prominent name on the short list of candidates, according to the officials.
Other names mentioned yesterday at the White House were Christopher DeMuth, responsible for information and regulatory affairs in the Office of Management and Budget, and Henry L. Diamond, a Washington attorney who was an aide to the late New York governor Nelson A. Rockefeller.
As congressional subcommittees investigating the EPA increased pressure on Hernandez yesterday, he testified before one of them that he made the decision nearly two years ago to veto an EPA-supervised cleanup of lead contamination in a low-income Dallas neighborhood, even though the responsible companies were willing to go forward.
Instead, residents were given blood tests and instructions by the EPA to "plant grass" to control the lead dust and to "keep their homes clean."
Rep. James J. Florio (D-N.J.), who heads another subcommittee investigating the EPA, plans to question Hernandez on EPA decisions to avoid regulating dioxin, formaldehyde and other highly toxic substances by adopting extremely restrictive definitions of their risk, according to an aide to Florio.
Florio plans to release documents outlining Hernandez' role in revising the estimated risk posed by tetrachloroethylene, a proven human carcinogen, at a New Jersey landfill, even though the chemical threatens the area's drinking water.
Ruckelshaus, who served as EPA administrator from 1970 to 1973, resigned as deputy attorney general in the Nixon administration in 1974 to protest the firing of Watergate special prosecutor Archibald Cox. He joined Weyerhaeuser, a lumber firm based in Tacoma, Wash., in 1976.
"I have not heard anything," Ruckelshaus said last night. "If I do, I'll have to decide. But it would be premature of me to say anything."
White House officials said yesterday that Hernandez was never intended to replace Burford permanently.
But administration officials said last week that they thought he could preside effectively over the agency while the search for a new administrator proceeded.
They changed their minds when, one official said, they feared there was "more fire behind the smoke" in new revelations about Hernandez.
The search for a new administrator was complicated by the conflicting goals of finding a highly qualified candidate able to withstand congressional scrutiny very quickly while sharing the president's philosophical approach to environmental law.
EPA officials said Hernandez has tried to signal the White House that he can improve the agency's tarnished image with the public and Congress.
He instructed subordinates to prepare supplemental budgets seeking extra money from Congress for environmental protection, a sharp contrast from the deep budget cuts Burford had supported during the past two years.
In one of his first official moves, Hernandez demoted EPA official Louis J. Cordia, who kept "hit lists" detailing the political and philosophical leanings of EPA officials.
Cordia, the No. 2 official in the agency's Office of Federal Activities, resigned Tuesday as he was being investigated for alleged tampering with agency records.
EPA officials posted a guard outside Cordia's office yesterday, and later sealed it with a deadbolt lock to ensure that none of his documents was removed, according to an agency spokesman.
An aide to Sen. Pete V. Domenici (R-N.M.), who has supported Hernandez for the top EPA job, said he disappointed to hear that the White House has eliminated Hernandez from the running.
"He's the highest-ranking Hispanic in the administration, and it would have shown that the Reagan administration had the courage to put someone from a minority group into such a visible position."
In response to questioning yesterday by Rep. Elliott H. Levitas (D-Ga.) on the lead contamination case in Dallas, Hernandez said he did not consider it an "emergency," even though studies found concentrations of lead as much as 60 times the level considered the danger threshold.
Black residents of the area eventually staged demonstrations and marched on City Hall to protest what they called racial discrimination by the federal government.
Instead of a cleanup paid for by the responsible companies under EPA supervision, Hernandez decided "what we needed was a blood-sampling program."
Those tests indicated patterns of heavy lead contamination that appeared to have come from three lead-smelting plants in the area, but there has been no cleanup of the contamination.
"There are a number of locations in the U.S. with high lead levels in the soil," Hernandez said. "If we went out and started running bulldozers around, we'd end up with even greater hysteria . . . we'd have been out there tearing houses down, plowing up front yards."
Hernandez said he knew about negotiations with the responsible firms by EPA officials in Dallas, but "I never really knew they had agreed to do any specific thing. There was some talk of this or that."
Levitas, who chairs an oversight subcommittee investigating EPA activities, cited studies, which Hernandez did not refute, indicating that school playgrounds in the area were found to have lead concentrations of as much as 10 times the danger threshold.
He said 70 percent of the residents in adjacent neighborhoods have high lead levels, and more than a dozen children have been diagnosed as having "life-threatening" levels of lead in their blood.
At the same hearing, Hernandez said he "agreed" with Rep. Don Sundquist (R-Tenn.), who said Hernandez' handling of the dioxin report involving Dow Chemical "was inappropriate."
But Hernandez denied that he had ordered anyone to make the changes Dow wanted in the report.
"I asked them to consider Dow's remarks or comments, but no more than that . . . . Dow Chemical made some input to our staff. I have no idea how, what form . . . . I did not tell anyone to take their word for it."
He added that he did not know who at the EPA deleted statements linking dioxin to cancer and birth defects or the report's conclusion that "Dow's discharge represented the major source, if not the only source of dioxin contamination."
He said a Dow employe asked him for the report when the two met by chance in a hallway at the EPA.
Hernandez said he decided to provide a copy because he believed Dow could have obtained it under the Freedom of Information Act.
"At the time I made my decision to send it to Dow, I didn't have a large body of experience" at the agency, he said.
Meanwhile, an EPA inspector general's report has found that Hernandez used a government car and chauffeur to drive him to a tournament where he played tennis with water industry officials.
The tournament was run by the National Association of Water Companies, which also hosted Hernandez at several receptions and dinners during a weekend in San Francisco in November, 1981.
The inspector general's report reached no conclusion about alleged misuse of the car.
An EPA spokesman said Hernandez could not have made all his scheduled events without an EPA driver and that the tennis match was "a good opportunity" to meet with water industry executives.
Hernandez spoke to the water association, the National Association of Manufacturers and National Association of Regulatory Utility Commissioners.