By Marton Dunai

KOLONTAR, Hungary (Reuters) - Shortly after noon on a sunny day last October, 56-year-old Janos Fuchs was plowing his field in western Hungary when a nearby reservoir wall collapsed, unleashing a torrent of toxic waste that destroyed all in its path.

Fuchs managed to reach higher ground on his tractor but he could do nothing but watch as the flood of caustic red mud -- the waste from a nearby alumina plant -- swept away his village, ruining his mother's home as well as his own.

She would be found dead three days later, half a mile downstream.

"When I returned to my house, I reached for my keys... only to realize the door was gone," Fuchs said.

The disaster, the worst in Hungarian history, killed 10 people and injured 120, polluted a town and two villages, including Kolontar, bleached nearby rivers and spread 1.9 million cubic meters of a soft sludge, the color of tennis clay, which emitted a pungent acidic smell that could be detected miles away.

The physical cleanup is nearly complete.

Crews have removed 53,000 truckloads of the sludge from the fields. Hundreds of damaged houses have been bulldozed and about a hundred new ones were built for those who requested them. Vegetation and soil have been replaced. Two memorial parks are being erected.

But the emotional scars will take much more time to heal.

Hungarian Aluminum (MAL), the metals company behind the sludge, was under state management for months. Eight of its employees are suspects in an ongoing investigation, and the company has received a 135-billion-forint ($632-million) fine.

MAL, which controls 4 percent of the global alumina market, offered condolences and apologies, but denied wrongdoing and disputes the fine.

Despite the cleanup and the fines, the fierce anger toward MAL's private owners still burns strong.

"These people are billionaires, and they couldn't care less about the rest of us," said Fuchs, who was the first to launch a lawsuit seeking damages. "Enough is enough. Innocent people die while they live happily ever after?!"

MAL declined to answer Reuters questions.

HEALING SLOWLY

Kolontar now has a lopsided look to it. The Catholic church, once in the center of the village, now stands on the very edge, the neighborhood beyond erased from the map.

On a World War II memorial column at the foot of the church hill, a newly carved marble plaque reads: "Remembering the human and natural toll of negligence and greed. 4 October 2010."

Mayor Karoly Tili says things in the village, most of whose 850 residents worked in agriculture or at the alumina plant, are slowly returning to normal. As the cleanup crews wrap up work in the next few months, Kolontar can begin to focus on things that mattered before the sludge rewrote everyone's lives.

"Healing is so complex," Tili said. "Those who lost loved ones will never forget. But those who did not have mostly got past the memories by now. We have had a psychotherapist on the scene for a year. Lots of people have visited her."

He added that the big fine levied on MAL could help, but he did not hold out much hope of collecting it.

"It's just a number. It would be a miracle for MAL to fork out this much, but if the actual damages were recovered, that could at least show that nobody can avoid the consequences of a disaster like this."

Environmental advocates and the government also did not expect the whole fine would end up being paid out, but said the principle was what mattered.

Zoltan Illes, Hungary's state secretary for the environment, did not exclude the possibility the state may eventually take over MAL.

"Even if 100 percent state ownership were introduced, the law must be obeyed," he said.

"The Hungarian government will support all the activities of the company, will stand behind this company, to keep its 6,000 workplaces in that region, and also to keep this alumina processing activity," Illes said.

AN EXPENSIVE LESSON

The Kolontar site is only one of dozens of toxic waste depositories in central Europe, which remain open until they are filled, after which they are covered with soil. Many of the sites are in poor condition and at risk, the environmental activist group Greenpeace has said.

"In general, the government did a good job cleaning up the toxic material that spilled all over the region," Greenpeace campaigner Balazs Tomori said. "But there is no guarantee that a next Kolontar, another toxic waste spill won't happen again."

"The ex-Socialist bloc is full of (toxic waste) deposits, legal and illegal... We'd be happier to see stronger prevention. That is always the cheapest for everyone."

The Hungarian government is aware of the risks, environment secretary Illes said, but even in places where alumina reservoirs are directly on the banks of the Danube, the only truly safe solution -- relocating the waste -- is prohibitively expensive.

Illes said he has proposed to the European Union that the group create a type of Superfund, similar to one managed by the U.S. Environmental Protection Agency, with an initial 5-7 billion euros of EU funds.

Even the area around Kolontar faces further pollution. MAL has switched to another technology which produces dry waste, not the liquid that swept over the landscape. The problem now is flying red dust, which can cause respiratory illnesses.

Jozsef Kovacs, whose house in Devecser town was destroyed by the mud, moved a few km (one mile) further away as soon as he received compensation.

"We left our town because my daughter was pregnant and we thought a little distance would be a good idea. But the wind still blows red from time to time," he said.

"Like in every environmental case, there is no perfect solution," Illes said, adding that the red dust was by far the lesser of two evils.

The residents of Kolontar are happy just to resume a semblance of normality after months spent in rental apartments paid for through donations.

Jozsef Holczer moved into a previously owned home in May, up the hill from the spill which erased his home and his vineyard. Recently retired, he had planned to make wine to augment his pension.

"I was about to press the first batch when that filth came," he said. "But there are grapes in my new yard again, and they are good enough for some wine."

To commemorate the calamity, Holczer decided he would never shave again. He has grown a long white beard in the past year. He walks with a slight limp, and his smile is slow to curve.

"I was twice reborn last year... it is impossible to forget. But go elsewhere? I've never lived anywhere else. Where else would I go?" ($1 = 213.75 Hungarian Forints)

(Editing by Sonya Hepinstall)