Maryland officials say Bethlehem Steel, the state's largest industrial employer and the largest industrial polluter of the Chesapeake, is an example of all that has gone wrong under the Clean Water Act.

The discharge permit for Bethlehem's Sparrows Point plant, issued shortly after the act was passed in 1972, allows it to dump more than 10,000 tons of solid debris, more than 38 tons of cyanide, more than 879 tons of ammonia and more than 488 tons of metals into the bay each year, state health department records show.

Stricter limits were to go into effect in 1977 but did not. Today, the company is still operating under the limits of the old permit, which it routinely exceeds.

An examination of Bethlehem's permit records from December 1983, when the bay cleanup effort was announced, through September 1985 shows that the steelmaker stayed within its permit limits in only two months -- October 1984 and March 1985.

State officials said they have fined the company twice over the years for water pollution violations but generally have not attempted to make the company comply with its permit. That is because they have been negotiating a new permit, officials said, that will go into effect in 1987 with limits about 10 times stricter.

"Rightfully or wrongfully, we decided to go ahead on the new permit as opposed to going backward to collect civil penalties," said Ron Nelson, chief of the Maryland Waste Management Administration.

"To draw the permitting process out this long on the single largest discharger in the state is inexcusable," countered Scott Burns, a lawyer with the Chesapeake Bay Foundation. "Every day the stuff's still going in, and nobody's looking at the cumulative effect."

In 1984, the Chesapeake Bay Foundation and another national conservation group, the National Resources Defense Council, filed a lawsuit against Bethlehem over its discharges. Last May, U.S. District Judge Joseph H. Young ruled that the company exceeded it discharge permit 304 times between April 1979 and April 1984.

Young is to hold a hearing this fall to determine a penalty for Bethlehem. The groups are asking that it be fined $3 million, saying that it saved millions by not investing in enough pollution control equipment.

Bethlehem said in a statement that it has spent $75 million since 1973 to control water pollution at Sparrows Point. An additional $25 million will be spent on new controls that will remove about 98 percent of its water pollutants by 1987, it said.