ENVIRONMENT / DIAMOND PARK : Public May Lose Access to Gems : Mining interests want to take over site in Arkansas. Conservationists fight move.

Ruth Watters pulled a tiny, sparkling stone out of a paper bag and held it up in the intense sunlight, asking for a second opinion.

“I was just walking alone and I saw it on the ground,” Watters, of St. Petersburg, Fla., said. “Does that look like a diamond to you?”

Only here, at Crater of Diamonds State Park, would that question not sound foolish. The park, tucked into the lush pine forests of southwest Arkansas, is the only place in North America ever to produce gem-quality diamonds and the only diamond mine in the world that allows the public to find and keep the gems.

For $3 (or $1.50 for children), visitors may dig and scratch at about 35 acres of gray volcanic soil and dream of finding a stone that will dwarf “Uncle Sam,” the 40.23-carat record-holder found here in 1924.

Already on this day, two lucky prospectors had found diamonds, bringing this year’s count to 533. But the fun has been tempered by controversy lately, ever since the state decided it might sell the park’s most productive sections to private mining concerns.

Last summer, diamond-mining interests persuaded the Arkansas Department of Parks and Tourism to initiate testing to determine the size and shape of the diamond-bearing ore deposit. Four potential bidders put up $87,500 each to pay for the testing, and a Tennessee company under contract to the state began drilling on July 8 with an apparatus that resembles an oil-well drill rig.

The test drilling prompted a federal lawsuit this year by conservationists who contend the tests are a prelude to full-scale commercial mining at the park.

“It would be like shooting the last whooping crane or killing the last bald eagle,” said Terry Horton, director of the environmentalist Arkansas Wildlife Federation, which is among the suit’s plaintiffs. “It’s so unique that the very idea of turning it into a commercial mining operation is vulgar.”

Since the state bought what had been a privately owned mine in 1972 for $750,000, about 14,000 diamonds have been plucked from it. The 889-acre park averages 700 visitors a day.

In 1986, Gov. Bill Clinton appointed a task force to study the idea of commercializing the park. That led to the Department of Parks and Tourism’s decision last year to give testing the go-ahead. The federal Department of the Interior, which granted the state $720,000 of the purchase price 18 years ago, initially opposed the drilling but changed its stance last July, although Clinton now says he is against commercialization.

Representatives of several diamond-mining companies contended that commercial operation would be a boon to economically depressed Murfreesboro and its 1,900 residents. A spokesman for Arkansas investors interested in a private mine said that such an operation would create 400 permanent jobs.

A proposal drawn up by the task force two years ago set aside for the mining company the entire 35-acre field that the state now plows regularly for public mining and envisioned a huge pit reaching hundreds of feet deep. The state would keep part of the park for public use, but Jim Cannon, the park superintendent, said the rest of the park’s ore deposits are of a different type that is too hard to plow. Opponents say commercialization would leave the public to scour the park’s least productive areas and destroy the diamond-hunting experience.

The environmentalists’ lawsuit contends that converting the public land to private use is illegal. The federal Land and Water Conservation Fund Act prohibits such conversion unless the lands taken away are replaced with other lands of like value and use.

But the Interior Department allowed testing a year ago as a temporary non-conforming use. U.S. District Judge Susan Webber Wright thus far has allowed the first phase of testing to continue but has hinted that she might rule on a permanent injunction by Aug. 3.

Meanwhile, visitors continue to scan the surface and dig as usual, while the drill rig hums away.