A bitter clash between federal and Michigan environmental officials over building an 18-hole golf course on a luxury resort in scenic northwestern Michigan is shaping up as a conflict that could set national standards for wetlands preservation.

Environmentalists said they are watching the case as a barometer of the Bush administration's commitment to wetlands protection, while Michigan authorities said the case is a model of strict guidelines for permitting wetlands development.

Valdas Adamkus, the Environmental Protection Agency's Midwest regional administrator, already has ruled that the site chosen by The Homestead for the golf course is environmentally wrong because turf chemicals might contaminate the pristine Crystal River and nearby Sleeping Bear Dunes National Lakeshore.

The project proposed to fill in pockets totaling 3.68 acres of cedar swamp wetlands, which Adamkus also resisted because wetlands destruction is a highly sensitive environment issue.

In an unprecedented move, Adamkus on Nov. 21, 1990, revoked a wetlands development permit offered to the condominium resort by the Michigan Department of Natural Resources and turned the case over to the U.S. Army Corps of Engineers.

It was viewed as a slap in the face by Michigan, the only state to which the EPA has delegated authority to issue wetlands development permits. The state has issued 20,000 of them.

The EPA declared the golf course project "dead."

Passions smoldered until Michigan's new governor, John Engler, raised the issue with EPA Admimstrator William Reilly. On Sept. 17, Reilly ordered the case reopened.

Officials from the EPA and Michigan are to meet next week.

John Truscott, the governor's spokesman, said the EPA "is intruding on the authority they have given us,... We should be allowed to issue the permits, or we'll turn it back to EPA.

"What The Homestead has done is set the standard for the whole country as far as wetland permits," Truscott continued. "That's the one silver lining in this whole process. The permitting process and the protection process has jumped light-years ahead of where it was just a couple of years ago."

Environmentalists call it the most bitter wetlands preservation battle in the nation.

"This is the test case over whether EPA is willing to stand behind wetlands protection in this country," said Brett Hulsey, director of the Sierra Club's Great Lakes program. "Everything we've seen indicates the Bush administration is retreating on its promise to protect wetlands.

Wetlands are nature's sponges, soaking up flood waters and high lake levels--even filtering out pollution in waterways. They are nurseries for fish and waterfowl.

Under pressure from farmers, developers and the oil industry, the Bush administration is redefining wetlands so that as much as a third of the 100 million acres of bogs, swamps and marshes in the Lower 48 states would be vulnerable to development.

Scott Jones, president of Friends of Crystal River, a grass-roots group opposed to the golf course, called Engler's action "a blatant abuse of political pressure and highly inappropriate for the governor to intervene on behalf of a private developer."

The Homestead, a $ 120 million, 500-acre resort in Glen Arbor, about 25 miles northwest of Traverse City, is Michigan's largest resort.

Owner-operator Robert A. Kuras said he needs a golf course to retain a competitive edge in the state's rapidly growing resort industry. In 1986 Kuras proposed building a $3.5 million golf course on 26 acres adjoining the resort, including 83 acres of wetlands--of which 3.68 acres would be filled.

The wetlands area is heavily wooded with cedar trees and dry except during heavy rains. It is ridged by shallow swales, and cut by the meandering Crystal River, which flows through The Homestead and adjacent Sleeping Bear Dunes National Lakeshore before emptying into Lake Michigan.

In a 1987 referendum, Glen Arbor Township residents voted 285-209 to rezone the land for the golf course. In 1988 and again in 1989 Michigan's Natural Resources Department denied the permit, citing the river.

From the beginning , Friends of the Crystal River fought the plan.

"We're not agatnst a golf course for the resort," said Jones, a Hinsdale resident who has a summer home near The Homestead. "We just don't want it in the wetlands." He has alternative sites 4 or 5 miles away.

Kuras said the golf course must be close to the resort to be practical and economical, and he sued the department. An administrative law judge ruled in support of the permit on Aug. 27, 1990.

Nine days later the EPA warned that filling any wetlands would be a violation of the federal Clean Waters Act.

On Nov. 14, 1990, the Michigan agency offered The Homestead a permit with 20 conditions that included managing and monitoring pesticide and fertilizer chemical runoff from the golf course.

Kuras objected. "I have yet to find anything remotely close to the standards we've been held to," he said.

Adamkus says the case breaks down into two issues, preserving wetlands and a pristine river.

"To keep the greens in top shape, it will take a lot of chemicals that will run off into the stream and leach into the ground," says Adamkus. "We don't see how we can sacrifice one of the clear, pristine streams remaining in the country."

Fish and Wildlife Department, the Army Engineers and the National Park Service also object to the golf course in that location, said Adamkus. The proximity of the 71 ,000-acre Sleeping Bear Dunes National lakeshore is a major concern since it was set aside by Congress in 1970 for preservation in its natural condition.

The greater issue is wetlands.

"We've lost half of the wetlands in the country," notes Adamkus. "From what I see, the remaining wetlands are in danger.