Every day, giant Bethlehem Steel Corp. dumps the equivalent of a small river sullied with tons of waste into the Chesapeake Bay's Baltimore Harbor. A few miles north, the Army's Aberdeen Proving Ground discharges untreated wastewater tainted with explosives debris into the bay.

On the Eastern Shore, the sewage treatment plant at Easton spills out human waste that has been crudely treated in two slimy, green lagoons.

The wastes from Bethlehem Steel, Aberdeen and Easton, combined with those from about 5,000 other factories, military bases and sewage plants from Virginia to New York, are killing life in the Chesapeake. Almost all species of the bay's creatures are declining dramatically -- the annual oyster catch, for example, is down by two-thirds in a little more than a decade.

The decrease is attributable in large part to the accumulation of wastes in the bay, which traps them like a giant sink. Only 1 percent of the pollutants is flushed out to sea.

Runoff from farms and other areas has speeded the bay's deterioration.

Fourteen years ago, the federal government enacted a law designed to stop factory and sewage pollution of the nation's waterways by 1985. The Clean Water Act of 1972 gave state officials an important tool to use in enforcing the law: a system of permits limiting the amount of pollutants that individual dischargers could dump into any body of water.

Those permits are being routinely violated in the Chesapeake region, according to a Washington Post study of two years' worth of environmental records. An examination of the discharge permits issued to the 124 major industrial companies and community sewage systems in Maryland and Virginia that dump into the bay or its tributaries shows that every one has exceeded its legal levels of discharge in one or more pollutants.

The records also show that during that period -- July 1983 through June 1985 -- Maryland and Virginia officials rarely punished the violators, except for occasionally issuing fines, often in amounts far less than the law allows. Regulators have done only slightly better in the past year, the records indicate.

The Post examined the discharge permits for businesses and public sewage plants in Maryland and Virginia because most of the pollutants in the bay come from those states. The National Oceanic and Atmospheric Administration estimates that each year, industries and sewage plants along the shores of the Chesapeake in Maryland and Virginia discharge nearly 4 trillion gallons of wastewater into the bay, or about one-fifth the amount of water in the bay at any given time. That discharge includes nearly 5 million tons of four common pollutants -- enough to fill 10 supertankers -- according to NOAA.

The same pattern of violations shows up in the permits of the military facilities surrounding the bay, and environmental officials in charge of regulating those facilities have done even less than their civilian counterparts to force the military to abide by the law, the records show.

Illegal discharges have gone largely unnoticed by the public and by some public officials, many of whom believe the bay's overall quality is improving because they no longer see the floating debris and dirty foam of a decade ago. The much-touted Save the Bay Campaign, announced in 1983 by the federal and bay-state governments, has contributed to such rosy assumptions.

But what the public does not see -- and what most of the money appropriated for Save the Bay does not address -- are the toxic pollutants from industries and sewage treatment plants, including ammonia, cyanide and chlorine, that are largely invisible and that make the bay deadlier as they accumulate.

Such toxic discharges pose a difficult problem for a permit system that has not adequately stemmed the flow of conventional pollutants into the bay, environmental and other experts say. Unless the permits are upgraded to restrict toxic waste -- and are then strictly enforced -- the bay's slow decline will continue, they say.

"The bay really is as everyone's been saying . . . a national treasure. But it's also a national challenge," said William D. Ruckelshaus, who, as the U.S. Environmental Protection Agency's first administrator, ushered in the Clean Water Act. "As of this moment, it's an open question as to whether we're going to rise to meet that challenge."

The Chesapeake's slow death has affected the lives of thousands of people. Last year Jimmy Rogers, 34, of Easton had to close his fishing-guide service of 10 years; 67-year-old Robert Fuller, also of Easton, no longer hopes for perch when he ambles out onto his dock, spinning rod in hand; Marguerite A. Anderson, a 58-year-old homemaker from Timonium, searches in vain for a delicacy that is as light and flavorful as striped bass, known locally as rockfish.

For their part, industry executives say they have spent millions of dollars on getting rid of visible pollution in the bay. There are no cumulative figures for what businesses have spent doing so.

But nationwide, manufacturing industries spent nearly $38 billion, adjusted for inflation, on water pollution control equipment between 1972 and 1985, according to figures recently compiled by the economics division of McGraw-Hill Inc.

Those investments amounted to about 4 percent of the companies' 1972 capital spending, according to McGraw-Hill; that percentage fell to about 1 percent last year.

"Industries . . . will control as much pollution as they can economically or as much as they feel they have to, because if they don't they'll be thrown in jail," said Andrew E. Stevenson, spokesman for the Water Pollution Control Federation, a 30,000-member national group of professions subject to the Clean Water Act.

The officials who run municipal and regional sewage systems that discharge into the bay say that thousands of new sewage plants have been built since the Clean Water Act was passed and that sewage treatment has advanced. The quality of water discharged from the treatment plants has improved as a result, they say.

A Flood of Studies

The Chesapeake has been the subject of nearly 4,000 studies since the early 1970s, according to the Chesapeake Research Consortium Inc. That attention comes in part because it is the nation's largest and most magnificent bay and is extremely important to the economies of the states that surround it.

Catches of oysters, clams and crabs, together with commercial and sport fishing, inject more than $440 million a year into Virginia's economy and about $410 million a year into Maryland's, according to state officials. Most of the catches come from the bay and its tributaries.

Among the many studies was one that cost the EPA $27 million and took seven years to complete. It resulted in the Save the Bay cleanup program, announced in December 1983 by Ruckelshaus, who was then the EPA's administrator, as well as by the governors of Maryland, Virginia and Pennsylvania and the mayor of the District of Columbia.

President Reagan embraced the program in his 1984 State of the Union address, and the administration said it would spend $40 million on the bay over four years. Maryland, Virginia, Pennsylvania and the District committed varying sums from their budgets, with Maryland's efforts being the most generous. Their programs have been aimed at controlling farm runoff and, with the exception of Pennsylvania, building improved sewage systems.

Two and a half years into the federal campaign, much of the U.S. money -- about $7.25 million a year -- has been spent to manage soil runoff, largely by encouraging an estimated 24,000 farmers to control erosion and the use of pesticides and fertilizers that find their way into the bay. The rest is spent on periodic sampling of water.

Critics charge that the federal program aimed at farmers ignores a major cause of the bay's decline: Industrial and municipal discharges in excess of the levels allowed under the permit system, known as the National Pollution Discharge Elimination System.

The system is replete with problems, according to scientists, environmentalists and some state officials:

*From the beginning, it has been self-policing. Initially, the law allowed industries and cities to set their own discharge limits, based on what technology was available and what they believed they could afford to do, rather than what would bring water quality up to certain standards. Officials based later rounds of permits on the originals.

In addition, dischargers were made responsible for notifying state agencies when they exceeded their limits. Random inspections by officials in Maryland and Virginia have been rare, although officials in both states said inspections have been stepped up since the Save the Bay accord.

"The enforcement has been weak in the permit system," said Ron Nelson, head of the Maryland Waste Management Administration, which oversees the permits.

"It was a paper exercise. Industry told us what they were doing, and what they were telling us was they weren't meeting their permit limits. They weren't hiding anything, it's just that no one was doing anything about it. I hope that has changed in the last year."

*The paper work has been overwhelming. Every month, 570 industrial companies and 278 sewage treatment plants in Maryland and Virginia are supposed to file records with their state governments, saying whether they have adhered to their permitted levels of dumping.

Industrial records jam rows and rows of metal cabinets and overflow into cardboard boxes in a windowless room at the Maryland Department of Health and Mental Hygiene's building in Baltimore. Across the hall, sewage permit files act as room dividers, separating those who write permits from those responsible for enforcing them.

Similar paper work bulges from drawers in a one-story building 145 miles away in Richmond, the headquarters for the State Water Control Board, and at six regional offices across Virginia.

Such paper work, intended to make it easier for state officials to monitor pollution, instead swamps those offices, to the point where flagrant violations sometimes go unnoticed. The Easton sewer plant, for example, failed to file its monthly reports with the state for the first 10 months of 1985, but Maryland officials were unaware of the lapse until a reporter brought it to their attention. The plant received no penalty as a result of the lapse.

*A number of the 17 major federal facilities around the bay, and scores of smaller ones, virtually ignore the permit system, according to state and federal records and sources.

Those that do abide by their permits must limit only the most basic pollutants. And their limits are generous, scientists say: the Naval Supply Center in Norfolk, for example, was permitted to discharge more than 410 tons of solid debris and more than 136 tons of oil and grease from March 1984 to February 1985. The Naval Surface Weapons Center at White Oak, Md., is allowed to discharge more than four tons of oil and grease each year and more than six tons of solid debris.

*Hundreds of industries have circumvented the system by sending their waste to publicly owned sewage treatment plants. Such facilities are not designed to remove toxic chemicals and most other industrial wastes; under the permit system, that is industry's responsibility. But many companies do not take such so-called pretreatment seriously, saying -- correctly -- that the federal government has not issued the pretreatment standards for them to follow.

Indeed, the EPA has issued treatment standards for only two of the 21 types of industry that are supposed to have them: electroplaters and metal finishers.

State officials say they have no way of knowing how much waste industries discharge through sewage treatment plants. They also cannot say how often that waste is pretreated, though Virginia officials said their huge regional sewage treatment systems insist on it.

But there are hints at the scope of such use: The study that preceded the Save the Bay campaign found that wastewater from seven of eight major sewage treatment plants discharging into the bay had the high or moderate levels of toxicity typically expected of industrial chemical waste rather than sewage.

"You're dumping cyanide into your pipe, which goes into a sewage system that doesn't treat for it, so cyanide's going to come out at the other end, into the bay," said James Thornton, an attorney with the Natural Resources Defense Council, a national environmental group. "It's an incredible national scandal . . . and nobody knows about it."

*Permits limit common pollutants -- including suspended solids, nitrogen, phosphorus and biological and chemical materials that rob water of oxygen -- but most do not require testing for toxic chemicals. The permit system "is geared to conventional pollutants at a time when we now realize the heavies are carcinogens and organics," said Thornton.

Federal studies have been done on isolated instances of toxic discharges, and those reports show how full of poison industrial wastes and sewage can be.

For example, scientists working on the study that preceded the Save the Bay campaign reported finding 480 different toxic chemicals in bottom mud from the Baltimore Harbor, 327 in mud from the main stem of the bay and 310 in mud from the Elizabeth River in Norfolk.

Levels of toxicity were highest near industrial and sewage plant discharges, the study said.

The study noted that each year, industries in Maryland dump more than 2,763 tons of heavy metals into the bay. Metals can be toxic to marine life and are potentially toxic to people who eat contaminated fish. More than half of the industrial metals came from Bethlehem Steel, the study found.

The study said Virginia industries dump more than 424 tons of heavy metals into the Chesapeake each year.

"The overall effect of the toxic discharges is hard to figure -- how much a river, a stream or a bay can take . . . . " said Scott Burns, an attorney with the Chesapeake Bay Foundation, a regional environmental group. "But when you go down to the Elizabeth River and every other fish you pull out has a lesion or fish rot, there's no question that there's a toxic problem."

Efforts to salvage the bay should have begun more than a decade ago, scientists say, when the underwater grass flats in Pennsylvania's Susquehanna River, at the head of the bay, began dying.

The grasses were dying because the growth of algae -- fueled by nutrients such as nitrogen and phosphorus -- was robbing the water of the sunlight and oxygen the grasses needed to grow. Nutrients come from city and farm runoff, sewage treatment plants and industries.

As the grasses disappeared, so did the bay's aquatic life, which depends on them for food and breeding grounds. Toxic chemicals that build up in the bottom of the bay, its water and the tissues of wildlife added to the problem.

Between 1970 and 1983, the annual oyster catch in the bay -- which the American Indians called "the great river in which fish with hard shell coverings abound" -- dropped by two-thirds, according to various studies. The bay has lost to the Gulf of Mexico its former claim as top provider of the nation's oysters.

A drastic decrease in the annual haul of rockfish -- from 6 million pounds in 1970 to 600,000 pounds in 1983 -- has triggered a commercial fishing ban in Maryland and restrictions in Virginia aimed at reducing the annual catch by 55 percent. Historically, 90 percent of the nation's rockfish have come from the Chesapeake.

"At least once I week I'd have it if I could get it," said Anderson, of Timonium. "When I have fish now, the first thing I have to think is, 'What kind of fish tastes most like rockfish?' Then I pick it. But nothing tastes like rock -- it's just the best fish there is."

Commercial fishing for shad -- once an economic lifeline for Maryland watermen -- has become nearly extinct in the upper Chesapeake. Other fish, such as trout and herring, are on a similar slow slide toward extinction, as Easton resident Rogers knows only too well.

Rogers also mourns the loss of waterfowl, once so plentiful they prompted a Colonial writer to complain that they darkened the Chesapeake "as though it were a mass of filth or turf."

When the Maryland goose hunting season ended Jan. 31, Rogers closed the guide business he had run for 10 years out of the white farmhouse he shares with his wife and two daughters.

"It just wasn't working out. Too few geese," said Rogers, a rugged Vietnam veteran.

"Everything's declining. If I can see it in just the last five to seven years, I would think the guys that have been doing it for 20 years really could see the decline."

Actually, everything is declining except the blue crab, called the "water buzzard" for its ability to survive in polluted water. The bay still provides the world's largest catch of blue crabs -- which, steamed with spices or pan-fried while their shells are soft, are a regional specialty.

Environmentalists and others say that the decline of the bay might have been slowed had state and federal officials strictly enforced the stipulations of the Clean Water Act.

The permit system "ought to be an important tool in the process of cleaning up pollution," said Lyon, the former head of water quality enforcement in Pennsylvania. Factory and sewage plant sources "are the most easily controlled."

The act said that dischargers were to meet initial limits beginning in 1973. Five years later, a second group of permits containing stricter limits were to be issued, and five years after that a third and final set of limits were to come out.

By July 1985, all pollutants were to have been removed from the discharges. That deadline remains a distant target for most facilities.

Each day, for example, the municipal sewage treatment plant in Hopewell, Va., is allowed to discharge into the James River up to eight tons of biological and chemical materials that rob water of oxygen. That maximum daily limit was violated twice in December 1983 by as much as 275 percent, twice in February 1984 by as much as 33 percent and twice in January 1985 by as much as 667 percent.

The plant also is allowed to dump up to 14 tons of solid debris each day. That limit that was violated twice in January 1985 by up to 103 percent and once in September 1985 by 5 percent, and no punishment was levied. Virginia levied no punishment for any of these violations.

Since late last summer, officials from Maryland and Virginia say, their enforcement of the Clean Water Act has improved.

In Virginia, officials have concentrated on problems at sewage treatment plants. Between July 1985 and February 1986, they obtained three consent orders, which are negotiated agreements in which sewage plant operators agree to schedules of improvements. In the two years prior to July 1985, officials had gotten one such order.

In Maryland, officials levied 55 fines against industrial water polluters between July 1985 and February 1986, compared with 20 fines in the two years prior to that.

But such action does not nearly begin to address the much larger problems of the permit system, environmentalists and others say.

"For us as a country to have allowed that bay to deteriorate as it has over the last 20 years, in the face of all the public support for the environment, is really unconscionable," Ruckelshaus said.