Gov. Evan Bayh of Indiana has awarded Gary Regional Airport $500,000 in state and federal funds for an economic study and environmental assessment of the airport's possible expansion, following Mayor Richard M. Daley of Chicago's announcement that plans for a new airport on the Illinois-Indiana border are dead.

Curt Wiley, executive assistant to Gov. Bayh, said the governor decided to promote improvements at Gary Regional Airport to replace the economic growth that had been expected from the canceled $10.8 billion airport, which would have been partially located in northwest Indiana.

Mr. Wiley said the economic study will determine Gary Regional Airport's role in revitalizing the area and outline future development at the facility. The environmental assessment will determine the extent of contamination at the airport, which is surrounded by several hazardous waste sites, he added.

Mayor Daley abandoned his plans for the new airport when legislation to set up an Illinois-Indiana authority for the project stalled in the Illinois Senate earlier this month. The bill, which also would have allowed the authority to control Chicago's O'Hare International and Midway airports, had been approved by the House on June 26.

The authority would have been empowered to issue the $8.5 billion of revenue bonds Chicago had included in its financing plan for the airport.

Gov. Jim Edgar of Illinois, Gov. Bayh, and Mayor Daley had signed an agreement on June 17 to form the authority. The Indiana legislature also would have to approve a measure to create the authority.

Though Gov. Edgar has said the measure can be passed in the fall, Gov. Bayh took Mayor Daley at his word that the plan is "dead," Mr. Wiley said, adding that the governor believes the project cannot proceed without the backing of Mayor Daley, who had pledged financial support.

The economic study and environmental assessment of Gary Regional Airport are expected to be completed within the next year, Mr. Wiley said.

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