The Environmental Protection Agency has decided to veto the Two Forks dam and reservoir because the controversial project, designed to provide water for Denver's growth into the next century, is too environmentally damaging, the agency said Friday.

Opponents of the project said the veto was the first opportunity to test President Bush's pledge to be an "environmental president." Many national environmental organizations had made defeat of Two Forks their top priority and hailed the EPA's decision.The EPA's Friday ruling is tentative only and may not be finalized for as long as a year, but is expected to stand.

Two Forks, estimated to cost $500 million to $1 billion, was proposed by the Denver Water Board and 42 suburban partners for a scenic stretch of the South Platte River in the foothills about 25 miles southwest of Denver. The Army Corps of Engineers earlier this year approved the project.

Environmentalists have attacked the project because it would destroy a "gold medal" fishing stream and damage the habitat of several endangered species, including the whooping crane, in Colorado and Nebraska. Opponents have said there are less environmentally damaging water projects availble.

Newly appointed EPA administrator William Reilly, who made the veto decision, said in a statement that he believed there were too many unanswered questions to let the Two Forks project proceed.

Leaders of several environmental conservation groups praised the decision.

The Two Forks dam was proposed to be built at the confluence of the South Platte and its north fork, filling the scenic Cheesman Canyon with water 350 feet deep. More than $40 million has been spent on an environmental impact statement.