On this eastern edge of Cape Breton Island, past the quaint Acadian fishing villages and around the bend from some of the most dramatic coastline anywhere, lies one of the worst toxic waste sites in North America.

The tourists who flock each summer to Nova Scotia, in the Atlantic Ocean northeast of Maine, are largely unaware of and unaffected by the stain on the area's picture-postcard reputation. But for residents of this hardscrabble steel and coal mining community, it is yet another painful legacy of an industrial era whose demise has brought unemployment, population decline and some of the highest cancer rates in Canada.

"It is a national disgrace," declares Peter Mancini, the local member of Parliament who sees it as Exhibit A of a lax attitude toward environmental regulation in Canada.

"It's our Love Canal," said Debbie Ouellette.

Her complaints about an orange, arsenic-laced ooze seeping into her basement forced a reluctant government to buy as many as a dozen houses in a neighborhood where residents had long suffered from persistent headaches, vomiting, fatigue and diarrhea. The purchases are one of several recent developments that residents point to as the first signs of progress in a two-decade struggle to clean up the mess.

Another apparent turning point came last month, when the federal and provincial governments provided $40 million requested by a community group charged with solving the waste problem. "I think we've finally turned the corner," said Carl Buchanan, the group's outgoing chairman.

The problem starts at the end of Frederick Street, where a 30-foot-high mountain of household and industrial waste leaches into a brook that flows past the rusting hulk of an abandoned coke oven. The brook meanders by a decaying tar pit, then picks up speed and volume from the raw sewage flowing from 30 or so municipal pipes before running under the heavily traveled Victoria Street Bridge and emptying into two ponds nestled between the century-old Sydney Steel plant and the abandoned rail yard.

The presence of this toxic chowder of polychlorinated biphenyls (PCBs), benzene, arsenic and mercury smack in the middle of downtown is bad enough. Worse still is the fact that, twice a day, the ponds are flushed by ocean tides, which explains why fishing has been banned in the harbor for nearly 20 years and swimming for even longer than that.

Documents uncovered by activists show the government was aware of environmental problems emanating from the steel plant and its coke ovens as far back as 1972, although nothing was said about it at the time. It was only in the mid-1980s that the federal and provincial governments embarked on a cleanup program to suck 700,000 tons of toxic sludge from the tar ponds and pump it to a state of the art incinerator a mile away.

Although the $40 million incinerator passed all its tests, the piping system failed to deliver the right mixture of water and sludge--and the cleanup process ground to a halt.

Environmentalists took the opportunity to press their case that incineration would never work. Cape Bretoners, who had lived through years of bitter labor relations and corrupt provincial governments, saw it as another confirmation of their natural distrust of authority. Federal and provincial officials belatedly realized that it would not do any good to clean up the tar ponds without rerouting the raw sewage and cleaning up the landfill and the coke oven and the tar pit upstream.

In 1996, the provincial and federal governments passed control of the project to a local citizens group, which last month was awarded the $40 million to conduct further studies on what needs to be cleaned up and how it might be done. But even if the group can overcome internal squabbling, it is likely to be at least a decade before the actual cleanup begins--and then only if the federal and provincial governments are willing to commit the $1 billion that many feel will be necessary to do the job.

"I seriously doubt government is prepared to spend the money," said Sydney Mayor David Muise, himself a cancer survivor who worked in the coke oven as a teenager before heading off to law school. "They'll give us just enough coffee money so we'll keep fighting among ourselves."

The cleanup may be only part of the bill. According to several officials, one reason the government has been slow to determine the extent of the environmental problems in Sydney--or acknowledge any link to public health problems--is that it faces a potential flood of lawsuits. Not only does the government still operate the landfill at the top of Frederick Street, but since the 1960s the federal or provincial government has also operated the coke plant and the steel mill after private owners threatened to shut them down. The CN Railroad, which operated the adjacent rail yards, was until recently a government-owned corporation. So is the Nova Scotia Power Co., which for years used to dump transformer fluid into the ponds.

Although studies show that overall cancer rates are 16 percent higher on Cape Breton Island than elsewhere in Canada--and many times higher than that for certain types of cancer--government officials have refused to acknowledge that environmental causes may play a significant role. Instead, they repeatedly point to "lifestyle factors" such as heavy smoking and poor eating habits among Cape Bretoners, and recent research suggesting genetic causes.

To Eric Brophy, that attitude is "criminal." Brophy grew up in the neighborhood overlooking the steel and coke plants and moved back there 15 years ago when he retired from the air force. Now, walking up and down Lingan Street a mile downwind from the steel plant, he can tick off the names of more than a dozen neighbors who have died of cancer or heart disease before reaching 60, including his first wife, who also grew up there.

The cult of denial, however, extends beyond the government, Brophy says: "We go to funerals, we go to wakes, we act as pallbearers and yet we don't draw the relationship to the pollution. It's as if it is too threatening to the way of life here."

And a threatened way of life it is. Official figures indicate that 20 percent of Cape Breton Island's work force is unemployed; unofficial estimates put the figure closer to 35 or 40 percent. The steel plant, which once employed 5,000, is now down to 700, with the new provincial government threatening to sell or close it after losing a reported $1.8 billion over the past 20 years. And last year, the federal government announced it was pulling the plug on the nearby coal plant. That could cost another 1,100 jobs.

"The truth is that people are much more concerned about the economy here than the environment, and these are desperate economic times," said Mayor Muise.