SACRAMENTO — State prison officials hope to build a $97-million trash-to-energy plant at the new prison on Otay Mesa, where 800 inmates could be put to work sorting through tons of garbage by hand each day.

The plan, proposed by the Prison Industry Authority after two years of quiet study, would be the first in the country to use cheap prison labor to promote recycling, produce electricity and ease the garbage crisis that threatens to overwhelm landfills in San Diego County and the rest of the country.

The county's shrinking landfill capacity was one reason why prison officials settled on the Richard J. Donovan Correctional Facility in Otay Mesa for the proposed trash-to-energy plant, said a consultant hired by the state Department of Corrections.

'The Have Plenty of Garbage'

"They have plenty of garbage, . . . and they are aware they have a problem," said Peter Stasis, project manager with Stone & Webster Engineering Corp. in Denver, of San Diego. "We realized we could handle some of that for them."

The plan is still in its conceptual stages, and prison officials concede it could face significant environmental hurdles and community opposition. But proponents and at least one county supervisor Monday expressed guarded optimism that the trash-to-energy plant could be built by the 1993 target date.

"I would say it has at least a 50-50 chance," said Larry Harrison, chief of the prison authority's new-industries implementation division.

Under the plan, discussed in a voluminous preliminary report, the prison plant would cover 40 of the 774 acres at the Otay prison and cost $94 million to $97 million.

Using cheap inmate labor, it would be the state's largest and most lucrative prison industry, making $26 million a year, according to projections.

"We came up with the ability to move 98% of the material back into the economic system," Harrison said of the garbage. "We feel with the inmate labor, which is a cheap labor force, we could economically do that and make a profit at the same time."

1,000-Bed Addition May Be Proposed

The plan may also call for building a 1,000-bed addition to the medium-security prison to house a wing for minimum-security prisoners allowed to work in the trash plant, Harrison said.

In a letter dated June 26, prison officials asked the county to consider signing a 20-year contract to commit 1,000 tons a day of residential garbage to the prison that would otherwise go to county's Otay Mesa landfill, about 3 miles from the prison.