A federal order last week that could sink a $500 million proposed dam and reservoir to serve Denver drew angry charges of interference from some Colorado officials, but environmentalists praised it as wise and courageous. EPA Administrator William Reilly said the Two Forks Dam project near Denver ``could result in very serious adverse environmental impact.'' He ordered the regional office to immediately examine ``alternative water sources'' with city officials.

Mr. Reilly announced he had begun procedures that in effect overrule a construction permit issued earlier this month by the US Army Corps of Engineers. The procedures could lead to a veto of the project if compromises are not worked out.

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