The government is poised to allow nuclear power generators to use ordinary landfill sites for dumping "hundreds of thousands of tons" of waste in an attempt to reduce the £73bn cost of decommissioning old reactors.

The move has triggered a swath of applications around the country from big corporations trying to cash in on this potential new business, but infuriated local councils and campaign groups.

The issue of waste is critical to the government as the stockpile is potentially much greater than previously thought and ministers are keen to encourage the power industry to build a new generation of reactors. Actions being considered by the Department of Energy and Climate Change (DECC) and its Nuclear Decommissioning Authority include:

• Allowing the nuclear industry to use ordinary landfill sites for disposing of radio​active waste in a more extensive way.

• Allowing the main independent nuclear waste dump at Drigg in Cumbria to reduce its costs by scaling back the level of containment.

• Building a £1.5bn radioactive liquid-waste processing plant at Sellafield, Britain's biggest atomic site, despite a history of project cost overruns and wider safety concerns there.

• Extending a blueprint for dealing with existing high-level waste to cover that created by future nuclear stations – an "unjustifiable" step, according to the chair of the committee that created the blueprint.

Cumbria county council, regarded as the most pro-nuclear authority in the country, is among those trying to stop at least two landfill sites from being used for dumping radioactive waste.

The council's frustration threatens to undermine the government's attempts to persuade it to host the country's first high-level radioactive waste repository.

Tim Knowles, cabinet member for the environment on the council, said: "A tiny amount of nuclear waste went into the Lillyhall landfill site in the past but now they are trying to vastly expand that and use a former open-cast mine at Keekle Head.

"We are talking about moving from a few tons to hundreds of thousands of tons," he said.

The cost of dealing with existing waste has risen to £73bn and been made worse by the discovery that there is 13m cubic metres of "potentially contaminated land" around sites such as Sellafield. This is as well as the existing 3.2m cubic metres of low-level waste and a smaller amount of more radioactive, high-level waste.

A report seen by the Guardian, dated October 2008, from the Nuclear Decommissioning Authority (NDA), says: "In a worst-case scenario, this supplementary volume could increase the volume of land as waste to the point that it dwarfs the current baseline for UK low-level waste. This uncertainty presents significant challenges to the development of a national low-level waste strategy."

The NDA recently completed a 14-week consultation on low-level waste and said it was close to finalising a new strategy. Extending landfill is clearly part of that.

Martin Forwood, of Cumbrians Opposed to a Nuclear Environment, said he was "appalled" by moves to spread the waste around the county. "This is all being done because the Treasury wants to cut the cost, while the one proper licensed waste site at Drigg is almost full up. People seem willing to bend over backwards to help nuclear in a way they don't for anyone else."

Waste management firms have moved swiftly to apply for permission to dispose of nuclear material. A French-owned company, Sita (through its Endecom subsidiary), is applying to the Environment Agency for authorisation for a Radioactive Substances Act disposal unit for its Clifton Marsh landfill site near Preston.

Sita has also presented local councillors and industry professionals with plans to convert a former open-cast mine at Keekle Head, near Whitehaven, Cumbria.

A rival waste company, Augean, is trying to convince locals it should be allowed to dump nuclear waste at the East Northants Management Facility at Kings Cliffe village, near Peterborough. And EnergySolutions, a firm with deep roots in the nuclear industry, wants to extend the use of a landfill site at Lillyhall in Cumbria.

Rob Scott, from Sita's nuclear consultants, Nuvia, said: "Planned decommissioning of nuclear installations will generate significant quantities of low-level waste and very low-level waste, such as building rubble and soil.

"It is now clear that the continued disposal of this low-level waste to the highly engineered national Low-Level Waste Repository, near Drigg in west Cumbria, is not sustainable and is very expensive for the taxpayer. This means alternative solutions have to be found."

The energy department said last night it expected a decision on low-level waste from the NDA within "months" but said this would not affect the timing of its wider nuclear programme. It said a policy dating back to 2007 allowed landfill to be used for the disposal of very low-level waste "subject to appropriate regulatory authorisations" though it is unclear if any waste has been disposed of in this way.

But Melanie McCall, one of the campaigners opposing the Augean move near Peterborough, said: "People don't want to be guinea pigs. The dump is completely inappropriate for this waste."

Augean said it was satisfied there would be no "harm to our employees, the public or the environment".

Low-level waste is made up of a wide range of materials used in the atomic industry, including plastic and clothing as well as metal and building rubble. It makes up approximately 90% of the total volume of the UK's radioactive waste but, the NDA argues, it contains "less than 0.0003%" of the total radioactivity.

The government expects high-level waste to be buried in a deep repository and two local councils in Cumbria have made "expressions of interest" about housing the dump, although discussions remain at a very early stage. The waste from future reactors will be lower in volume but highly radioactive.