The Velsicol Chemical Corp. has agreed to stop selling chlordane, the nation's most widely used termite pesticide, until it can devise application techniques that do not contaminate houses, the Environmental Protection Agency announced yesterday.

EPA officials said the unusual agreement was worked out late Monday night, hours before a scheduled news conference at which the agency was expected to announce a ban on chlordane and related chemicals because of their ability to cause cancer, liver damage and nerve disorders.

More than 30 million U.S. houses and commercial structures have been treated with chlordane in the last 40 years. Although newer and safer pesticides have since been developed, the chemical still accounts for nearly two-thirds of the termite-control business and is used in a million homes annually.

EPA officials said the action is likely to increase the cost of controlling termites, because substitute chemicals are more expensive than chlordane and may have to be applied more often.

Velsicol, the sole U.S. manufacturer of chlordane products, said it agreed to halt sales because of the expense of defending the chemical and "customer concerns about negative publicity." The company said it does not believe that chlordane endangers health.

John A. Moore, EPA's assistant administrator for pesticides, said the agency decided to accept the agreement because it would remove the chemicals from the market quickly. Velsicol could have appealed the agency's proposed ban, he said, opening an administrative procedure that could have left chlordane on the market for years.

Environmental groups attacked the agreement, however, noting that it does not prevent pest-control companies from using chlordane already in stock. "This only stops sale, not use," said Jay Feldman of the National Coalition Against the Misuse of Pesticides. "The EPA has data that shows chlordane, even when properly applied, results in unacceptable air levels in the home."

The coalition and several other environmental and labor groups sued the EPA last month, seeking an emergency suspension of chlordane. Feldman suggested that the "This only stops sale, not use."

-- environmentalist Jay Feldman

agency stopped short of an emergency ban to avoid having to buy and dispose of existing stocks, as would have been required under federal pesticide law.

Moore denied that financial considerations played any part in the decision. He said the EPA did not believe it could justify an emergency ban, which requires a finding of an "imminent health hazard."

"I do not have reason to believe that large quantities of stocks exist in distributor or applicator warehouses," he said.

Two of the nation's largest pest-control companies, Orkin Exterminating Co. and Terminix, stopped using chlordane earlier this year. EPA officials estimate that exterminators and distributors have no more than a three-month supply of chlordane products.

Chlordane and its chemical relatives -- heptachlor, aldrin and dieldrin -- are among the "dinosaurs" of the chemical industry, developed decades ago and brought into commerce without submitting to the kind of health and environmental studies that new products must undergo.

The chemicals, called cyclodienes, were extensively used as agricultural pesticides as well as termite killers until the mid-1970s, when the EPA canceled most uses because of concerns about their health effects and persistence in the environment.

The agency allowed cyclodienes to stay on the market for termite control because there were no acceptable alternatives and because the EPA did not believe the chemicals would seep into houses if properly applied.

In the late 1970s, however, the Air Force discovered high levels of chlordane in military housing. Velsicol maintained that the contamination was a result of improper treatment, but a company study completed this year found chlordane vapors in houses that were treated in strict compliance with label directions.

Under the agreement, Velsicol cannot resume chlordane sales unless it can demonstrate an application technique that will leave no detectable residues in indoor air. Moore said it would be at least six months before sales could resume, assuming the new techniques pass muster.

Velsicol also has agreed to eliminate many of the application techniques that EPA officials believe have resulted in high chlordane levels, such as high-pressure injection or injection through holes drilled in the floors of basements or crawl spaces.