ANNAPOLIS, AUG. 17 -- Federal officials agreed today to give Maryland regulatory power over the state's non-tidal wetlands, a step that could begin resolving a feud between environmentalists and rural landowners who feared the loss of development rights.

In an action announced late this afternoon, the U.S. Army Corps of Engineers proposed to let the state decide whether to allow a broad range of building and landscaping projects in the environmentally sensitive areas. Non-tidal wetlands cover hundreds of thousands of acres in Maryland, and more than half of some counties in the state.

The U.S. draft proposal, still subject to public comment, would allow the state to grant or deny permits for many projects that would destroy less than 10 acres of wetlands, making Maryland one of only a few states to have such oversight. The proposal exempts from regulation small residential and farm projects, an idea that grew out of complaints that stricter control would virtually halt development on the Eastern Shore.

Federal officials would still retain permitting power over larger projects and could intervene on smaller ones for a host of reasons. But the proposal would force the Corps of Engineers to decide within 45 days whether individual projects require its review as well as the state's, a rule designed to speed the regulatory process.

"It does meet our two main objectives of protecting non-tidal wetlands and streamlining the permit process, and in that respect we are very pleased," said David G. Burke, head of the non-tidal wetlands program for the state Department of Natural Resources.

Non-tidal wetlands, including swamps and bogs as well as some land that is dry most of the year, serve an important environmental role, soaking up pollutants before they migrate to tidal waters such as the Chesapeake Bay and freshwater underground aquifers.

Initially, the state had asked the Corps of Engineers to exempt from regulation any projects on two acres or less of farmland, an exemption environmentalists claimed would have allowed farmers to develop their fields one lot at a time. In a compromise, the Corps of Engineers proposes exempting only legitimate farm projects and revoking permits for projects that turn out to be piecemeal developments.

Currently, the Corps of Engineers has authority over the areas, but its regulatory process has been criticized as slow, lax and cumbersome. Last year, state lawmakers, in an effort to speed the regulatory process and to offer better protection, enacted their own set of regulations.

Since then, the issue has been mired in controversy, with landowners complaining that too much of the state -- as much as one third -- fell under the new rules, and environmentalists opposing any concessions. Meanwhile, federal officials began undertaking a lengthy review to see whether the state program met their standards. Without federal approval transferring oversight, the state's programs would be redundant, subjecting landowners to both federal and state review.