A catalytic process that could help paper mills save millions of dollars a year by converting a polluting by-product into formaldehyde, a useful product, has been discovered and patented by an engineering professor at Lehigh University in Bethlehem. Israel E. Wachs, professor of chemical engineering, says his method, which was tested by Georgia-Pacific Corp.(G-P) in mobile pilot plants for two years, succeeded in converting a methanol-water waste stream contaminated by sulfur compounds and small amounts of hydrocarbons known as terpenes into formaldehyde.