In 1978, a mining company asked the Forest Service if it could rebuild and use an abandoned road in an area of California's San Gabriel Mountains where bighorn sheep live. The Forest Service granted the permit and the company was ready to proceed.

But environmentalists objected, and this summer, four years later, a federal appeals court nixed the arrangement because the Forest Service had failed to do one thing -- issue an environmental impact statement before approving the permit.

In the 12 years since Congress gave birth to the impact statement in the National Environmental Policy Act (NEPA), the EIS has been praised and denounced, credited with protecting environmental treasures from a host of federal builders and criticized for adding undue delay to projects of minimal importance.

The Reagan administration, like its predecessors, is taking a look at the EIS to see how it might be modified. The Council on Environmental Quality, the environmental arm of the White House, is in charge of the effort, and officials there say they anticipate making only minor changes in the procedures. But the Environmental Protection Agency, which has to do most of the legwork on EISes, has come out in support of narrowing the scope of the law.

Under the 1970 legislation, all federal agencies must consider environmental factors before taking actions such as funding an urban renewal project, widening a highway or expanding a military base. Eighty-nine federal agencies have what is called a NEPA liaison officer, a staff member who worries about complying with the law.

In routine cases, the agency only has to perform an "environmental assessment." But in cases involving a major federal action that could have an effect on the environment, a formal EIS is required. That means detailing the potential environmental impact of a project and suggesting alternatives that the agency could take.

During its infancy, the EIS process ballooned into an unwieldy animal as environmental groups discovered a new vehicle for court suits and federal agencies began preparing 15-volume EISes to cover themselves in case of litigation.

The CEQ eventually decided that the system had run amok and in 1978 issued regulations that set deadlines that EPA and the other agencies had to meet and limited an EIS for a routine project to 150 pages.

Under CEQ's procedures, agencies file both their draft and final EISes with EPA's Office of Federal Activities, which now receives an average of 18 statements a week. A staff of three reviews them to make sure the proper procedures and forms have been followed, a process that takes about three to four hours. About 20 percent of the EISes are found to have problems and must be sent back to the agencies for revisions.

When the impact statement is returned to EPA, it is reviewed for substantive issues to make sure it reflects the requirements of NEPA and the Clean Air Act. Nearly all of these reviews are handled by the regional offices. A small staff in the federal activities office, which has dwindled from about 15 to 9 in the past two years, reviews EISes with a national scope, such as those for Outer Continental Shelf development, decommissioning of power plants and barrier island regulations.

While an agency must outline alternatives, it does not have to pick the one that is best from an environmental point of view. After it received the draft EISes, EPA has traditionally urged the agencies to adopt plans that were more sensitive to the environment. But since the start of the Reagan administration, this has dropped off, according to a staffer who has worked with the program for many years.

If an agency fails to address potential environmental problems raised by EPA or other agencies, then the objecting agency can refer the case to the CEQ for arbitration. Over the years, only 20 projects have been referred to the council.

Outside groups that are unhappy with CEQ's decision can turn to the courts, the avenue that is available to those unhappy with any part of the environmental review. In 1980, 140 cases were filed challenging federal actions under NEPA, most contending that an agency failed to prepare an EIS when it should have or that the statement was inadequate. But injunctions were issued in only 17 of the cases.

The National Association of Manufacturers, which represents several companies that have had permits tied up because of EIS litigation, has recommended that Congress amend the law to make the CEQ the "final arbiter" of whether an EIS is satisfactory, rather than the courts. Daniel W. Cannon, the NAM's director of environmental affairs, said environmental groups have used litigation to "foster indecision and to delay projects badly needed."

But a wholesale rewrite does not look likely now. When CEQ Chairman A. Alan Hill took office last year, he solicited comments on how the EIS process could be improved. The agency received about 150 comments, most suggesting specific revisions, but few recommending that the law be rewritten, according to a CEQ staffer.

One of the more negative comments came from EPA. At recent public hearings, EPA officials criticized the EISes for failing to assess the negative economic impact of abandoning or changing a project for environmental reasons. The agency said the EIS should be changed to allow applicants to consider fewer alternatives.

EPA said the regulations should be amended so that agencies do not have to "affirmatively solicit comments. The public may comment if it so desires, but there is no legal requirement that the lead agency stir up dissension or opposition to a project and the regulations should reflect this fact."