"Industrial waste" can cover a lot of different types of materials - not all of which are worthless. It would be worse if waste products from one industry are sent to a dump when they can be re-used for other productive purposes.
"authorities currently favor one explanation for the pollution"
Tells me that they don't have proof this is the source of the PFAS pollution. If they did, they wouldn't "favor" the explanation, they would just say that's the explanation. I don't support making wide changes based on hunches. Sure - replace the fertilizer with something else for a while and see if that changes the PFAS levels. If it does, sure ban the paper products from being used as fertilizer. But there is a cost associated w/ doing that and that cost has higher-order effects.
Or, just ban things with high levels of pfas being used as fertilizer, and test the paper slurry?
For all we know, the the critera being used for "is this suitable as fertilizer" did not go beyond "has it got what plants crave", and "and also doesn't contain poison" didn't make the list.