State regulators called for tighter restrictions Thursday on a troubled wastewater-sludge recycling company in Wilmington, and reported that a huge stockpile off East 12th Street contains unacceptably high levels of arsenic.

Department of Natural Resources and Environmental Control Secretary Collin P. O’Mara said the permit limits proposed for VFL Inc. — which could trigger a public hearing — were part of a push for a permanent fix to sludge problems at the city-run regional wastewater-treatment plant.

“We need a long-term solution,” O’Mara said. “The actions we’re taking now are really key steps to make sure the situation doesn’t get any worse.”

Sewage sludge “is dealt with responsibly all over the country,” but has been a problem in Wilmington “much too long,” O’Mara said.

VFL, owned by Utah-based Headwaters Resources Inc., has hundreds of thousands of tons of “stabilized sludge” piled at East 12th Street near I-495. Most of the material is made up of power plant coal ash, incinerator wastes and other industrial castoffs, much of it imported from other states.

State officials have not yet released details about the arsenic finding, but DNREC Deputy Secretary David Small said several samples from the company’s stockpile violated environmental risk limits for the toxic element.

The violations could lead to sanctions, and raised concerns about the effectiveness of VFL’s stabilization process and “long-term use of the site,” Small said.

Jody Bacher, a VFL manager, said company officials are aware of DNREC’s proposals.

“As far as the notice of violation for arsenic,” Bacher said, “we’ll see.”

VFL was allowed to pile the material near the wastewater plant only because it was mixed with a small fraction of city sludge and marketed as a fill material. Buyers never materialized, and VFL’s operation was cited repeatedly for pollution violations as well as illegal dumping of coal ash.

Most of VFL’s output, some 1.5 million tons, went only to the nearby, city-owned Pigeon Point Landfill for a drainage and landscaping job due to end next year. Headwaters shut down the recycling operation earlier this year, noting a lack of an alternative for using the remaining stockpile.