SILVER BAY, Minn. (AP) - Crews excavating the grounds of the former Reserve Mining Co. taconite plant have unearthed thousands of 55-gallon drums of contaminated lubricating grease and other toxic industrial waste.

More than 2,400 rusted and crushed barrels have been found at the Silver Bay site so far, and contaminated soil weighing about 322 tons has been removed.

In addition to black and yellow grease, crews have found old tires, conveyor belts, metal and other industrial waste left behind by Reserve at the hazardous waste Superfund site overlooking Lake Superior.

The Minnesota Pollution Control Agency says there may be another 2,000 barrels and tons more of grease to remove.

"We're hoping to be done by October," said MPCA project manager Susan Johnson.

The cost of cleaning up the site is already more than $3 million and is expected to hit $5 million, Johnson said.

Tests indicated the gear lubricant in the barrels contains 270 milligrams per liter of lead, far more than the federal standard of 5 milligrams per liter to be considered hazardous waste. Lithium grease, diesel fuel, solvents and heavy metals also have been found, Johnson said.

Tests by the MPCA show the waste has seeped into and contaminated the groundwater immediately below the dump but has not yet reached nearby streams or Lake Superior, which is about a third of a mile downhill.

Workers in haz-mat suits sift through the barrels, grease, soil and junk, testing each load on the site. If it is heavily contaminated, the waste is stored on a concrete pad and shipped away.

The contaminated material is 25 feet deep in some places.

"It's a big pit of greasy goo on the bottom," Johnson said.

"And rags. Thousands of rags. I guess in the days before paper shop towels they used a lot of cloth rags to wipe off the grease."

The materials considered the most hazardous are being trucked to Illinois and Texas to be burned at a cost of $12,000 per truckload, Johnson said. Less-polluted soil is trucked away, mixed with concrete and buried in licensed landfills closer to home.

The dump is part of the legacy of pollution left by Reserve, which pumped tons of taconite tailings that carried asbestoslike fibers into Lake Superior. The company also abandoned 3,500 huge tires, each weighing about a ton, near its Babbitt taconite mine. The Minnesota Department of Natural Resources is handling that cleanup.

A contractor has agreed to haul away the tires to sell as cattle watering troughs in the Dakotas, said Steve Dewar, mineland reclamation field supervisor for the DNR.

"They're going to do it at no cost to the state, so it's a pretty good deal," Dewar said.

Other Reserve cleanups have occurred at a test plant in Babbitt and a coal ash pile in Silver Bay.

About $2 million for the latest Reserve cleanup projects came from an environmental fund established when Reserve, the state's first taconite operation, closed under bankruptcy in the mid-1980s.

"That's been exhausted now and our money is coming from the state Superfund fund," Johnson said.

The taconite plant continues to operate as Northshore Mining, but the current company isn't liable for Reserve operations under an arrangement state officials crafted to help encourage the plant's reopening in 1989.

Northshore Mining is cooperating and assisting with the cleanup, MPCA officials said.