LAWRENCE - Monarch on the Merrimack, a $200 million converted-mill condominium community, may not open until early next year because of asbestos discovered in the ground outside the mammoth building.

Some 50 future residents expecting to move into the luxury, loft-style residences in October received letters from developer Robert Ansin that their move-in date could be delayed two months or more.

"At this point we have determined that unfortunately there appears to be no way to avoid a delay," Ansin wrote in his letter dated Thursday, July 19.

"The final date will depend on how soon we are given final approval to proceed from the state. I did not want to wait however to tell you that it is highly unlikely that we will in fact be able to deliver the lofts in the fall as planned," he said.

In an interview on Friday, Ansin estimated a December or January opening, and blamed state budget cuts within the Department of Environmental Protection with partially contributing to the delayed opening.

Completion of the project, seen as a linchpin to the city's downtown revitalization, had a setback three months ago after the site contractor uncovered construction debris during excavation around the exterior of the mill's commercial section at the corner of Merrimack and South Union streets, according to the letter. The debris, believed to be from the demolition of the Wood Mill's twin building in the 1950s, was tested and showed traces of asbestos, prompting a shutdown of all exterior work, Ansin said.

Ansin's development company, MassInnovation, contacted the Department of Environmental Protection asking for guidance and hired an environmental consulting firm to develop a plan for the removal of the asbestos.

But after submitting a plan in May, MassInnovation is still waiting for a state response. In his letter to future Monarch unit owners, Ansin blamed "significant budget cuts" to the DEP in recent years as contributing to the delay.

"Unfortunately, it appears we are now suffering from the effects of a diminished DEP," Ansin wrote.

"The state's inability to respond in a timely fashion has caused a major disruption to our project, slowing progress and adding major additional costs to a $200 million development that local, state and federal officials have called 'highly important to the revitalization of Lawrence,'" Ansin said.

"While it is true that some delays are to be expected on any large-scale construction project, the fact that significant parts of the Monarch site have had to remain idle since April has had a domino effect, preventing some subcontractors from being able to work at all and severely disrupting the schedules of others," he said.

DEP spokesman Joe Ferson said the agency was not aware of Ansin's concerns about DEP being short-staffed and its impact on the Monarch project, but disputed it as being the reason for the project's delay.

"It has to do with the modifications of their plans that are necessary to address the asbestos in the soil," Ferson said.

"We've been discussing the need to modify the existing plan, to fully assess the asbestos and the debris," he said.

Once known as "the eighth wonder of the world," the Wood Worsted Mill was the largest industrial building of its type when it was built in 1905 - covering 3 million square feet over 60 acres.

The first phase of the project involves 200 luxury residences. But the plans are to develop 600 units, all of them heated and cooled year-round using geothermal energy from deep underground. Some officials have dubbed it "the largest eco-friendly housing-development project in the state."

The city's Inspectional Services Commissioner Myles Burke has called on DEP officials to "facilitate an action plan so this project can get back on track and attempt to meet some very aggressive timelines for delivery of these units.

"This project is highly important to the future of our city from a homeownership opportunity perspective to overall reinvestment of private developers who believe in the renaissance of Lawrence," Burke wrote in a recent letter to DEP's Northeast Regional Office in Wilmington.

"I firmly believe Mr. Robert Ansin shares those beliefs and has assembled a first-rate development team and invested millions of his own money to demonstrate that commitment," Burke said.

Ansin saida lack of state regulation over asbestos found in the soil has bogged down the project, because there are no specific requirements dictating when the state must issue a response to the developer's plan.

Burke said the developer is getting penalized despite its commitment to being environmentally responsible in the project.

"I think it's important to note that Mr Ansin's project didn't contaminate anything," Burke said.

"What they did is uncover some prior contamination, probably as far back when previous owners took down part of the mill. Keep in mind this is the largest green project going on in the commonwealth, and they're very sensitive of what can be done to save energy and be good for the planet. The state needs to work with these people instead of delaying the project," he said.