When the North Carolina state legislature, last year, voted to limit the discharges of a toxic-waste treatment facility into the Lumber River, it acted to protect the drinking supplies of the 10,000 citizens of nearby Lumberton.

But the legislature also precipitated a major battle with the federal Environmental Protection Agency, which contends that the legislation is an unreasonable restriction and is "inconsistent" with the national program to deal with toxic wastes.

In a case with broad national implications, EPA has threatened to withdraw North Carolina's authority to run its own hazardous-waste programs because of the new state law, which regulates the amount of discharge a GSX Services Inc. treatment facility in adjacent Scotland County can make into the slender Lumber River, which flows by the plant before it gets to Lumberton.

Lumberton citizens and environmentalists noted that the federal toxic-waste law specifically grants state and local officials the right to draw up regulations more stringent than federal rules.

When Lumberton citizens told her of EPA's threat, Velma Smith of the Environmental Policy Institute said she responded: " 'They can't do that. Don't worry about it.' I sure called that one wrong."

EPA officials say they want to "send a message" to the states, which they contend have increasingly used their regulatory discretion to block development of toxic-waste facilities.

Louisiana, for example, has banned waste incinerators in the one parish where an incineration company had expressed interest in locating. In Oklahoma, proposed facilities must receive approval from local voters. Other states have attempted to restrict out-of-state waste, usually by imposing higher disposal fees.

"Our concern is that there be enough capacity nationally to handle hazardous waste," said one EPA official who asked not to be identified. "We're sending a message to all the states that we're watching this."

The message has not been well received in North Carolina, which is considered a leader in the effort to control toxic waste.

"EPA has adopted a position that says the states can't have standards more restrictive than federal standards or we will lose our {toxic-waste} permitting program," said Dan McLawhorn, a state lawyer. "The rules say we can't be unreasonable, but they define unreasonable. As far as we're concerned, they've set the minimum and the maximum."

"That's not true," said Lee A. Dehihns, regional administrator in Atlanta. "The concern we have is that the North Carolina legislature's intent was to block the construction of a facility."

State officials contend that the new law is designed to protect public health, not ban toxic-waste facilities, and wouldn't prohibit the GSX facility in Scotland County.

The new law states that any stream receiving discharges from a toxic-waste facility must be capable of diluting it by a ratio of 1,000 to 1. Its supporters say the provision will assure that such facilities don't exceed the "assimilative capacities" of the state's rivers and will provide a "margin of safety" to downstream water systems.

But the stream dilution factor means that GSX, which had planned to discharge 500,000 gallons a day, could discharge no more than 72,000 gallons.

GSX did not return a reporter's telephone call. State and EPA officials said the company has told them that the facility cannot be run profitably unless it has a large quantity of waste coming in.

The facility is supposed to treat mixed waste from Superfund sites as well as liquid waste leaking from a GSX landfill in South Carolina. "It's a witch's brew," McLawhorn said. "No one knows what's in it."

GSX has proposed discharging its waste through a public sewage plant in nearby Laurinburg, N.C., and EPA officials say that the treatment will be adequate to remove whatever dangerous chemicals might remain after the GSX plant has treated the waste. But citizens in Lumberton are skeptical.

Richard Regan, who works for a local group called the Center for Community Action, said the state has drinking-water standards for only 20 of the 300 or more chemicals GSX expects to treat. The EPA has only 62 such standards.

"The purpose is to provide some kind of safety margin for the people who drink the water," he said.

As a national policy, dilution is not supposed to be the solution to pollution. But it isn't entirely ineffective, and even the EPA leans on it from time to time, as it did last week when it announced that an oil slick traveling down the Ohio River was not a health threat because it was gradually becoming diluted.

State officials concede that the dilution requirement is an imperfect solution, but they defend the law as a reasonable and prudent move in the face of uncertainties about the level of contaminants and their potential hazard to health.

"We can get some guppies and if they die, we know it's bad for the fish," McLawhorn said. "We don't have any little boys who are 4 years old that we can pour a glass of this water into every three hours and see what happens in 10 years."

Dehihns said there are other methods available for determining contamination level and controlling pollutants. "There is no scientific basis for this whatsoever," he said. "You have to draw a line at some point."

But environmentalists say they fear that the EPA's move against North Carolina will have a "chilling effect" on other states as they attempt to balance their citizens' concerns against the need for modern toxic-waste disposal. By removing an impediment to a facility's size, Smith said, "EPA seems to be arguing that you have to have enough capacity for any out-of-state waste that wants to come here."

EPA officials deny the allegation, but they say they are concerned about the constitutionality of any provision that might hamper the "free flow" of toxic waste. "It's unconstitutional to ban interstate commerce," said one official.

J. Winston Porter, EPA's assistant administrator for toxic-waste programs, said the agency also was concerned that states that lag behind in siting toxic-waste facilities may face a cutoff of federal funds needed to clean up existing problems. "Under the Superfund law, they have to certify by October 1989 that they can handle their hazardous waste or they get no Superfund money," he said.

But he acknowledged that EPA is not eager to take control of North Carolina's toxic-waste program. "It's a long, tedious process and we're not frankly that interested in doing it," Porter said. "It's a tough call."

EPA and North Carolina will make their cases to an administrative law judge, who will send his recommendations to Dehihns. Dehihns, who approved the petition seeking withdrawal of North Carolina's toxic-waste program, will make the final decision.