The biggest violator of federal pollution laws may be the federal government. And one of the best examples of its violations may lie in the thousands of gallons of oily water trapped behind a primitive earthen dam near here.

The dam is midway between the nuclear weapons component factory and uranium fuel plant in the atomic complex that is the leading industry in this hilly, sparsely populated part of southeastern Tennessee.

Federal officials, who had the dam built 15 years ago to contain seepage from an industrial waste trench higher in the hills, call it a "farm pond." But state officials, who have found disturbing concentrations of PCBs, a dangerous chemical, in the murky water, call it something else: an illegal toxic waste dump.

Oak Ridge has become a symbol of what many consider the nation's most disturbing hazardous waste problem: the enormous amount of waste generated and dumped by the federal government, much of it at sites which, ostensibly for reasons of national security, operate beyond the reach of the law and out of the sight of state inspectors.

Tennessee officials have accused the Department of Energy of creating a "witch's cauldron" of environmental problems at its Oak Ridge Operations site here. The "farm pond," they contend, is only one of dozens of potentially hazardous waste impoundments pockmarking the 92-square-mile federal reservation, fouling streams and leaching chemicals into underground aquifers.

The Environmental Protection Agency has come down gingerly on the state's side; the investigative hounds of Congress are baying at the DOE's heels.

And Oak Ridge, which eight months ago gave itself a gold star for environmental good behavior, is scrambling to find the money for equipment to clean up its garbage.

"I've got the same guy doing the dumping telling me how they've fixed it," said Barry Sulkin, the Tennessee Department of Water Management engineer who has spearheaded the assault on the Oak Ridge facility. "And I have to take their word on it. They've decided it's safe, and they've made that choice for people."

In addition to pitting a $15,000-a-year state employe against the federal establishment, the Oak Ridge situation reveals the failure of federal enforcers and program managers, congressional budget overseers and the environmental laws to come to grips with Uncle Sam's toxic wastes.

Despite nearly universal agreement that federal waste sites are a problem, no one knows the scope or the severity of the problem.

The answers have eluded Congress, which has held sporadic hearings on the issue. The EPA, which is supposed to have an inventory of federal dangerous toxic waste sites even though it cannot use the $1.6 billion "Superfund" cleanup money to correct them, says that it has "no estimate" of how many there are.

"One would hope it would be fewer than civilian," said William Hedeman Jr., head of the Superfund office. "But they are still in the process of determining the extent of the sites, if any. We are working with them to identify the universe."

Tennessee's Sulkin doesn't pretend to have determined the extent of the problem. His attention is centered these days on a single site, a four-mile-long jungle of concrete, steel and smokestacks called the Y-12 plant.

It is one of the three largest federal installations at Oak Ridge and the most secretive. The government builds components for nuclear bombs at Y-12.

In their latest environmental assessment, Oak Ridge officials reported last December that, except for excessive emissions from its power plant, Y-12 operations "comply with all federal and state environmental laws, regulations and permit requirements."

Six months earlier, an appraisal done at the DOE's headquarters in Washington reached the same conclusion. "The overall performance of Oak Ridge in the area of hazardous waste management activities is considered to be outstanding," it said.

State officials vehemently disagree. "They effectively have no treatment," Sulkin said. "They're in a prehistoric era."

After a recent inspection of the area surrounding the plant, he reported "major" pollution problems and numerous violations of state water-quality laws. He found:

* Dozens of pipes pour waste water directly into a stream that runs through the Y-12 plant. The water is contaminated with heavy metals, chemical solvents and radioactive debris. None of the pipes has a discharge permit. Oak Ridge officials term the stream an "industrial ditch" not subject to state water-quality laws.

* The stream runs into a settling basin called New Hope Pond. The pond's outflow is discharged, under a federal permit that requires monitoring only for acidity and oil/grease content, into the east fork of Poplar Creek, which meanders off the reservation and through the southern edge of the city of Oak Ridge.

* Sludge dredged from New Hope Pond, containing the hazardous substances that have settled out of the water, is dumped atop a nearby ridge in a surface depression never approved as a hazardous waste landfill.

* The plant uses four unlined ponds as receptacles for plating sludges, acids, solvents and waste water containing radioactive material. The ponds leak into the headwaters of Bear Creek, a tributary of the Clinch River.

* "Isolation areas" and pits have been used to bury or store everything from metal scraps to enriched uranium waste. Water stands three feet deep in some of the pits.

"Y-12 is a witch's cauldron of environmental problems," Dr. Michael Bruner, associate state commissioner of health, said at a congressional hearing in Oak Ridge last month. " . . . If the antiquated waste-handling methods at Y-12 are representative of the Oak Ridge operation, then the surface may have only been scratched in terms of the total magnitude of the problem."

A scientist imported by the House Science and Technology panel that held the Oak Ridge hearing was even more succinct.

"I do not think that anybody that would let something like this happen is aware of the magnitude of the problem," said Frank D'Itri of Michigan State University. "I think the practices should stop yesterday . . . . They are not treatment methods; they are disposal methods. And they are destroying the ground-water resources of the state of Tennessee."

Oak Ridge's manager, Joseph LaGrone, conceded at the hearing that the 1982 report giving Y-12 a clean bill of health was "defective."

His chief environmental official, J.F. Wing, acknowledged that the unlined acid ponds would not pass muster under the Resource Conservation and Recovery Act (RCRA), the law governing hazardous-waste facilities.

But Wing insisted that the Y-12 plant was as much in compliance with the law as it needed to be. The law's applicability to Y-12 "at that time was still, as it is to this day, unresolved," he said. "So it is in fact not in violation."

State officials said that is a major part of the problem: the laws intended to protect the public from the perils of toxic wastes do not apply to large parts of Oak Ridge operations, at least as DOE officials have interpreted them.

A provision of the RCRA exempts certain nuclear wastes and byproducts from facilities already regulated under the older Atomic Energy Act, an escape clause that affects scores of federal sites. Oak Ridge officials have argued that since their radioactive waste is mixed with their nonradioactive waste all of it is exempt from the RCRA.

Until recently, the EPA went along with that argument. But under the glare of publicity in Tennessee and after the hazardous-waste controversy that cleaned out its top management, the agency has done an abrupt about-face.

In an internal memorandum written last April, after a meeting of state, EPA and DOE officials, an Oak Ridge environmental official said, "One of the most important things to come out of the meeting was the principle that, henceforth, EPA and the state of Tennessee 'will speak with one voice' on Oak Ridge environmental matters. We can no longer expect EPA to buffer us from the state."

Wing, who has since been transferred to the Clinch River Breeder Reactor, which is also in Tennessee, signed Y-12's 1982 environmental assessment. And, in an interview before his transfer, he described Y-12's stream as an "industrial ditch" and its contaminated oil pit as "a small farm pond to trap surface seepage."

"I think what we're talking about is a difference in perspective," he said.

He said that he was sympathetic to Tennessee's concerns, but added that the remedies the state is seeking are costly "and the sources of those dollars have not been identified."

Officials at the Oak Ridge facility also look on their environmental problems in budgetary terms and suggest that a sluggish appropriations process in Congress is to blame.

But Tennessee officials tend to see government policy-makers and bureaucrats rather than congressional penny-pinchers as the chief impediment.

In 1974, for example, an Oak Ridge scientist reported that the Y-12 acid ponds were leaking into a Clinch River tributary. He noted, however, that "money has been allocated for a corrective project." Nine years later, the acid pits are still in operation, uncorrected.

In fiscal 1978, Congress appropriated money to design a modern hazardous-waste treatment facility at Y-12. In fiscal 1982, Congress forked over another $4 million to build the facility.

The DOE, it appears, took the money and ran. Despite a promise in its 1982 environmental report that construction would begin that year, somebody seems to have decided there were higher priorities at the department. The cleanup money went underground.

"The dollars were pulled back and essentially used elsewhere," said Oak Ridge manager LaGrone. He said he doesn't know by whom or for what.

In Washington, Assistant Secretary William A. Vaughan, who is in charge of environmental management for the DOE, also said that he doesn't know what happened to the money.

"I don't track that," he said. "That part is a line function, and of course I'm not responsible for that."

Vaughan is responsible for seeing that DOE facilities operate in accord with environmental and safety laws.

"Mainly, our purpose is to assure that they have a system in place that complies with environmental laws and a managerial system in place to keep that compliance going," he said. "We are not in sufficient strength to actually act as a police force.

"On environmental matters, it's the local, state and EPA authorities. We, for example, do not go down ourselves and take effluent samples . . . . We don't have the manpower to do all that work."

It was Vaughan's office that in July, 1982, gave Oak Ridge an "outstanding" rating for hazardous-waste management.

Wherever the waste treatment money went, it has miraculously resurfaced. LaGrone said last week that the department has "reprogrammed" $5.4 million from its fiscal 1983 budget to start building a treatment facility. Congress added $1 million more in its fiscal 1984 conference report. And LaGrone said he expects to get an additional $1.4 million next year.

That is welcome news in Tennessee, but state officials say that they have just begun to agitate for change.

Of 265 hazardous-waste sites identified in the state, 90 are owned by the DOE or the Department of Defense. Thirty-three of those are at the Oak Ridge National Laboratory, down the road from Y-12.

The EPA has cited the facility for hundreds of water-quality violations stemming from an antiquated sewage-treatment system. Oak Ridge officials have promised to correct those, just as soon as they can get the $1.4 billion it will take to build a new system.

Sulkin, of the state water department, said that he suspects that there are more than a few stray bacteria involved. "They're treating radioactive lab wastes in a system designed to treat toilet water," he said.

Farther down the road is the Oak Ridge Gaseous Diffusion Plant, which turns out enriched uranium for nuclear power plants. Sulkin said he found "minor problems" there.

"We found more questions than problems," he said. "We got some data showing contamination, but it may not really be reflective of the situation. We've asked for more data."

But state officials found something they considered interesting at the diffusion plant: a building full of nearly new stainless-steel equipment designed to treat hazardous waste.

"It was for a process that they don't use any more," Sulkin said.

The facility stands idle, 20 miles from Y-12.