LIBERTY, MO. -- Behind the Douglas Chemical Co. factory here, in the heart of America's grain belt, men wearing white spacesuits stuff metal drums into a mechanical can opener named "Captain Crunch." The pesticide ethylene dibromide (EDB) inside the containers is drained through a hose into large metal storage tanks for eventual destruction.

It is a scene that might have spelled disaster for Douglas, which blended and packaged EDB as a profitable grain fumigant for 30 years until the Environmental Protection Agency banned it in September 1983 for causing cancer in rats.

Instead, the spacesuited men are Douglas' saviors, compliments of an EPA bailout program for the holders of pesticides banned by emergency decree.

Douglas has already received $1.2 million in taxpayers' money, and the meter is running. Most of the payments -- $655,000 -- fall under a highly controversial provision of the federal pesticide law that reimburses companies for unused stocks of chemicals considered such an "imminent health danger" that they must be embargoed immediately, without the phase-out time allowed for routine chemical bans.

Another provision, which requires the EPA to take charge of and destroy embargoed pesticides, has put the agency in the incongruous position of renting space from Douglas -- at a rate of $32,000 per month -- to store and drain cans of EDB, including those for which the firm has been subsidized. Moreover, the EPA pays Douglas up to $50 an hour for its employes to run the can-opening operation at the factory.

A second firm, hired by the EPA to manage the EDB removal and destruction at Douglas for about $1 million, has already doubled its contract in cost overruns.

It may not seem like a high price to pay for safe disposal of toxic chemicals, as intended by the provisions. But none of Douglas' EDB has been eliminated four years later. Indeed, half of the corrosive chemical, stored in flimsy cans at the factory, leaked while the EPA was determining what to do with it.

The political fumes wafted all the way to Washington, where members of Congress view the Douglas case as a debacle revealing government bungling and the bankruptcy of a statute that extends special protection to the pesticide industry.

"What you have here is a federally paid insurance program for a privileged class of corporations," said Rep. Mike Synar (D-Okla.), who wants Congress to delete the provisions from the pesticide law. "They should be in no better category than food, drug and car companies that find that their products become problems. They eat the costs. That's one of the risks of doing business."

Even Jack Moore, the EPA's top pesticide regulator, concedes that the EDB effort is "not a shiny example of how everything should be done."

The EPA, traditionally lax on pesticide regulation, has invoked the emergency ban once before the EDB case. Now, as the agency comes under congressional pressure to tighten controls, officials consider the number of pesticides that may qualify for emergency bans and shudder at the potentially huge costs.

One pesticide that the agency named in an emergency decree last October, dinoceb, would cost up to $200 million in reimbursements and disposal, according to the EPA, or more than three times its annual budget for the pesticide program.

"We just don't have the resources for this work," Moore said. "It should be the responsibility of the companies to do it, not the government."

The provisions, enacted by Congress in 1972 as amendments to the Federal Insecticide, Fungicide and Rodenticide Act, were intended as financial incentives to pesticide manufacturers and distributors to quickly surrender to the EPA all stocks of a chemical caught in the emergency ban.

Fifteen years later, the EDB case has shown Congress how the best intentions can go awry.

A popular pesticide used nationwide to kill insects in soil and grain, EDB was suspended from sale and use four years ago after laboratory tests demonstrated that it causes tumors, genetic mutations and adverse reproductive effects. The emergency suspension was made permanent in February 1984.

There were 328,000 gallons of pesticide containing EDB at the time of the ban, one-third of it owned by Douglas. The firm, 15 miles from Kansas City, Mo., had been using the colorless chemical since 1954 as an ingredient in two liquid grain fumigants. Its vapors were effective in killing weevils and beetles.

Douglas recalled its product from distributors, storing it in the warehouse in small cans and large drums. The EPA paid Douglas and other holders of EDB for the market value of their product, a total of $2.3 million.

"If we didn't get our money back, we would've been out of business," said Jerry McCaslin, Douglas' president, whose firm received more than one-fourth of the indemnity. "If EPA approves a chemical and then a few years down the road changes its mind and wants us to bring it back, it should bear the financial burden. Somebody has to pay for it," McCaslin said.

With EDB stocks under its control, the EPA awarded a contract to the GARD Division of Chamberlain Manufacturing Corp. in August 1985 to dispose of it. The firm agreed to empty and destroy the EDB containers, a process called decanning, and to chemically reprocess the 328,000 gallons of pesticide into safe, resalable byproducts. It promised to complete the job in 18 months for $972,000.

Because most of the nation's EDB supplies were in Missouri, including 112,000 gallons at Douglas, GARD decided to set up its disposal operation at the McCaslin factory here. Douglas thus became an EPA subcontractor.

It turned out to be a controversial decision. The factory lies over the city's underground water supply, which would be vulnerable to a toxic spill.

Douglas already had environmental problems. The EDB containers in its warehouse since late 1983 had started to corrode, releasing poisonous vapors. The EPA eventually spent $10,000 to build a concrete wall around them. But as much as half of the pesticide, bought by the agency to assure safe disposal, vaporized and was driven out of the factory by a fan, according to officials.

More than a year passed before GARD started operations. Philip A. Saigh, the firm's director of marketing and sales, blamed the delay partly on mechanical problems with a $100,000 decanning device.

Saigh said further delay was caused by demands of the state government to construct concrete barriers to contain spills and install a hood to contain fumes from decanning. A total of $165,000 has been spent in building improvements at Douglas.

By September 1986, GARD had exhausted its contract funds and began its first overrun. Yet decanning operations did not begin until the next month and did not get into full swing until last January. Since then, Douglas' EDB has been drained into storage tanks along with 80,000 gallons that have been transferred to the factory here from other warehouses -- most of which was discovered to be leaking.

Cost overruns by GARD have reached $1 million, doubling the original contract, and they are expected to increase another $500,000 before the firm completes the decanning in December -- nearly a year after all of the EDB was to be chemically reprocessed.

Not a drop of EDB has been reprocessed, however, and the EPA is considering alternative methods. The agency now estimates costs as high as $8 million to neutralize the pesticide and cannot say how long it will take.

"What this tells us is that we have a regulatory mess on our hands," said Synar, chairman of the House Government Operations subcommittee on environment, energy and natural resources.

Much of GARD's costs are absorbed by subcontracts it negotiated with Douglas. The firm receives more than $10,000 each month for warehouse space, where EDB containers, including those for which it had been reimbursed, are kept. The area now holds drums of the pesticide sent to Liberty for decanning by other companies.

Each month, Douglas receives rent of $20,000 for the decanning area, $1,500 for office space for EPA and GARD officials and $450 for use of its rail spur for 13 tank cars in which decanned EDB is stored, according to EPA officials.

Judy Heckman, the EPA's project officer for EDB, said the rental arrangement that GARD worked out with its subcontractor, Douglas, has thus far netted $381,000 for Douglas.

Saigh said Douglas is "entitled" to rent because it is providing valuable storage space for materials owned by the EPA. "If you stored it in your back yard," he said, "you'd expect to get someting for it." He said the rates paid Douglas seem "reasonable," noting there is no industry standard for toxic chemicals.

GARD also pays Douglas for the services of several employes to run the decanning operation -- $153,000 thus far, according to Heckman.

The labor rates, which were not cleared by the EPA, include $49.93 an hour for a Douglas vice president who manages operations and $37.51 an hour for the project's technical supervisor, according to an EPA document.

Saigh said the labor rates include "overhead," such as vacation, sick time, utilities and insurance.

Malcolm Huneycutt, the EPA's contracting officer for EDB disposal, said a recent EPA audit identified excessive charges for storage and overhead. He said the agency plans to seek "substantial" rebates in negotiations with GARD.

Any suggestion that Douglas is profiteering is rejected by McCaslin.

"We're not getting fat off this deal," he said. "I'd much rather have the chemical on the market."