HALACO ENGINEERING OPERATES A METAL RECYCLING BUSINESS. ITS PRODUCTION PROCESS IS THE SMELTING OF NON-FERROUS METALS FOR RESALE. WASHWATER FROM THE SMELTING PROCESS (CONTAINING DIRT FROM SCRAP METAL AND FLUX SALTS) AND FROM ITS AIR POL- LUTION SCRUBBER EQUIPMENT IS DISCHARGED INTO A SETTLING POND WHICH IS LOCATED ON HALACO'S PROPERTY. THE PLANT AND THE SETTLING POND ARE LOCATED ADJACENT TO THE PACIFIC OCEAN AND ARE SEPARATED ONLY BY SAND DUNES AND THE BEACH. THE AREA WAS ONCE CHARECTERIZED BY EITHER WETLAND VEGETATION OR BY STANDING SURFACE WATER. SEVERAL STATE AGENCIES HAVE MADE ATTEMPTS TO CONTROL THE DISCHARGE FROM THE PLANT TO THE POND AND INTO THE AREA JUST NORTH OF THE POND. THE ARMY CORP OF ENGINEERS ISSUED A CEASE AND DESIST ORDER IN 1977 TO STOP HALACO FROM EXPANDING ITS POND AREA. HALACO FILED SUIT AGAINST THE CORPS FOR DE- CLARATORY AND AN INJUNCTION. THE CORPS THEN RECONSIDERED THE CASE AND DECLARED THAT THE EXPANSION WAS OUT OF ITS LE- GAL JURISDICTION. EPA BEGAN INVESTIGATING HALACO'S DISPOSAL ACTIVITIES AND PARTICIPATING IN INTRA-AGENCY DISCUSSIONS IN EARLY 1980. ON JULY 17, 1980, EPA ISSUED A FINDING OF VIOLATION AND AN ORDER TO APPLY FOR A NPDES PERMIT OR CEASE ALL DISCHARGES INTO THE POND. HALACO THEN FILED A SUIT AGAINST EPA FOR DE- CLARATORY JUDGEMENT AND FOR INJUNCTIVE RELIEF. EPA AND DOJ HAVE ALREADY FILED THE A