HERCULANEUM, Mo., May 1, 2002 (AP) - The nation's largest lead producer has agreed to buy out 166 houses as part of a final agreement with the state to cleanup a town where blood tests reveal high levels of lead.

The Doe Run Co. and the state finalized a deal to make buyout offers to 26 households with young children and to then offer buyouts involving about 140 other houses by 2004.

In exchange, the state has dropped its legal bid to force the company to change the way it hauls lead ore to the 110-year-old smelter in the 2,800-resident community about 30 miles south of St. Louis.

The company faces a possible $1 million fine if it fails to complete the buyout.

State health officials have found that about 45 percent of children tested near the smelter have high levels of lead in their blood, a condition linked to decreased intelligence and other health problems.

The agreement calls for houses to be assessed at a rate based on last August's market value. If the appraisal is lower than an equivalent property in an untainted area, Doe Run will make up the difference, Stephen Mahfood, the Missouri Department of Natural Resources' chief, said Monday.

The agreement also gives the residents the right to appeal unsatisfactory appraisals.

Copyright 2002, The Associated Press