WASHINGTON -- The Environmental Protection Agency yesterday reached a $16.5 million settlement with the DuPont Co. over the company's failure to report possible health risks associated with perfluorooctanoic acid, a chemical compound used to make Teflon.

The fine, the largest civil administrative penalty the agency has ever obtained, includes a $10.25 million penalty and a pledge by DuPont to spend an additional $6.25 million on environmental projects.

The agreement, which is subject to approval by the EPA's Environmental Appeals Board, ends the agency's 16-month push to hold DuPont accountable for not turning over evidence to the government from as far back as 1981 about the substance also known as PFOA. That evidence documented that the compound -- which is used to produce nonstick and stain-resistant materials -- could be transferred from a woman to her baby via the placenta. Other studies showed rats dying after inhaling the chemical.

"This settlement sends a strong message that companies are responsible for promptly informing EPA about risk information associated with their chemicals," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance. "This is an unprecedented penalty in the administrative context."

DuPont officials, who did not admit legal liability as part of the agreement, said they did not deliberately withhold information from the government and settled with EPA only to avoid a long and costly court battle. The agency could have fined the company as much as $313 million. The highest penalty previously levied by the agency was $6.4 million in 1994 against Tennessee Gas Pipeline Co.

As part of the accord, the company agreed to spend $1.25 million over the next three years on a "green chemistry" project in Wood County, W.Va., to reduce the risks that some chemicals pose in schools, and $5 million to gauge whether nine of DuPont's products might degrade into PFOA over time.

DuPont settled a class-action lawsuit this year accusing it of allowing PFOA to contaminate drinking water in Ohio and West Virginia communities near its Parkersburg, W.Va., plant. The Justice Department still might conduct a criminal investigation.

The EPA is considering whether PFOA is a health risk to humans and should be regulated. The chemical has been linked to cancer and possible birth defects in animals.

Environmental Working Group President Kenneth Cook, whose advocacy group gave EPA the information that initially spurred it to act against the chemical giant, said the penalty was a small fraction of what DuPont owed the public. He said the fine amounted to less than half of 1 percent of the company's after-tax profits from Teflon-related products over the past 20 years.