The site of a toxic former manufactured gas plant in downtown Sag Harbor has been reclassified to a less serious level by the state because it “no longer presents a significant threat to public health and . . . the environment.”

In a report released Tuesday, the state Department of Environmental Conservation said the site, owned by National Grid, has been reclassified to a safer level because of remediation work completed from 2008 through 2010, which cost $50 million. Groundwater at the site continues to be monitored.

Still, the DEC report notes that the “potential for exposure to remaining contaminated material on- and off-site” remains, and will be addressed in a continuing site management plan.

That plan requires that buildings near the site continue to be evaluated for “the potential for vapor intrusion.” It also limits the use of groundwater below the site, prohibits vegetable gardening or farming on the site, and restricts “ground-intrusive activities” that would disturb “remaining contaminated materials.”

The DEC also imposed restrictions on commercial use of the property, because excavation at the site “might result in contact with contaminated material,” said spokeswoman Erica Ringewald.

“The whole thing is crazy, but it’s the remnants of this place,” said Sag Harbor Village trustee Ken O’Donnell, who owns a restaurant across from the cleanup site. “The fact is that Sag Harbor was an industrial village for a large part of its existence.”

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The former plant site is now a municipal parking lot. O’Donnell said the parking lot provided by National Grid is a help during the crowded summer season.

While the DEC-approved plan to remediate the site called for the evacuation of 14,000 cubic yards of coal-tar-contaminated soil to a depth of about 10 feet, tar-laden material below that depth — up to 90 feet — was left in place because of the difficulty and expense of deeper removal. Millions of gallons of contaminated water were treated and removed.

The former plant on Bridge Street made a form of gas used in cooking, heating and lighting more than 100 years ago, through a process that burned coal in liquid fuel to release vapor that was stored on-site. Seven large former manufactured gas plant sites were located on Long Island, from Hempstead and Bay Shore to Sag Harbor. More than a dozen additional smaller sites used less toxic materials to develop and store gas.

National Grid inherited the sites from KeySpan in 2007. KeySpan acquired them from the former Long Island Lighting Co. The main plant site was at 5 Bridge St. in the village.

National Grid spokeswoman Wendy Ladd said the company was adhering to the approved site management plan and “continues to monitor the site.”