Interior Secretary Cecil D. Andrus has decided to ask Congress to cut back drastically North Dakota's Garrison irrigation project, one of the nation's most controversial public works.

The decision, if approved by the White House, could invite a new eruption of the two-year battle over water projects that has engaged Congress and President Carter.

Garrison, which would divert Missouri River water into a vast network of canals and reservoirs, is part of a giant federl reclamation program. Such projects, coveted by thirsty western farmers, are under increasing attack as environmentally destructive and economically wasteful. Garrison, environmentalists charge, would mean a $500,000 subsidy for each affected farm.

"A dog is a dog," Andrus said yesterday of the $690 million Garrison project, which has been attacked by environmentalists and the Canadian government. As authorized by Congress, he said, it would take 220,000 acres out of crop production in order to irrigate another 250,000 acres.

In an interview with The Washington Post, Andrus said he will recommend legislation to amend Garrisonhs 1965 authorization act to reduce the irrigated acreage from 250,000 to 96,300. The modified project would cost $390 million.

So far, $160 million has been spent to build a pumping station and 74-mile canal. But the project has been in limbo since it was placed on Carter's water projects hit list in 1977. Andrus has delayed spending $18 million authorized by Congress because of a National Audubon Society law suit and protests from the Canadian government.

Critics say the project will pollute Canadian waters and damage fisheries, as well as eliminate 13 critical wildlife refuges on the North American flyway for migratory birds. Proponents, including North Dakota's governor, legislature and congressional delegation, say it will increase agricultural production and provide jobs.

Andrus predicted yesterday that his cutback proposal "is going to hit the fan" in Congress However, he said he would have preferred an even more drastic recommendation: kill the entire project.

"Gut instinct tells me that I ought to just say deauthorize the whole thing," he said. "That would be the right thing to do. But if I fail, then they (Congress) could shove the whole 250,000 acres down your throat. So what's best -- to go down in the flames of being morally right or to reduce the plan to about 90,000 acres?"

Andrus acknowledged, however, "There's a flaw in my proposal... You're still going to be removing about the same amount as you're going to put water on." Indeed, to irrigate 96,300 acres, the government would have to purchase and remove from production 103,000 acres, an Interior staffer said.

Besides the land under canals and reservoirs, the 103,000 acres includes 56,000 acres for wildlife "mitigation." Law requires the government to compensate for the destruction of the wetlands that nurture migratory birds and other animals.

Andrus' proposal would allow the discount rate for borrowing project money to be computed at 3.125 percent, as it was in 1965. That permits the project's supporters to argue that its benefits exceed its costs -- $1.53 worth of benefits for $1 worth of costs.

If the official 1979 discount rate of 6.875 percent were used, there would be only 84 cents worth of benefits for $1 worth of costs -- a situation prohibited by law.If today's actual borrowing rate -- now over 10 percent -- were used, the benefits would be reduced even further.

Andrus' proposal is likely to be opposed by the Canadians because it preserves the proposed Lonetree reservoir, which they say would damage their rivers. Environmentalists, gunning for full deauthorization, are equally uncompromising.

Adding to the controversy is the fact that the steeply sloped walls of the 74-mile McCluskey canal have caved in at several points.