It is often said that Interior Secretary James G. Watt is President Reagan's lightning rod, absorbing untold amounts of controversy that otherwise would bombard the White House. But Watt is also a lightning rod for his own agency, diverting so much congressional and media attention that Interior's other work and workers frequently go unnoticed.

In the past week, for example, two House subcommittees strongly criticized Interior's 1982 sale of coal leases in the Powder River Basin of Montana and Wyoming--the largest coal auction in history, which Watt has defended as a "resounding success" and which congressional investigators have called a "fire sale" of government resources.

Meanwhile, in North Dakota and Montana, Interior officials are moving steadily forward on another major coal-leasing project, this one to be held in July, that has stirred considerable controversy in the area. Interior proposes to lease more than 700 million tons of coal in the Fort Union coal region in what internal agency memos indicate is a soft market unlikely to generate competition for most tracts.

A memo to Mike Penfold, director of Interior's Bureau of Land Management in Montana, reported in January that coal companies had no interest in bidding on more than 500 million tons of coal being considered for leasing. (At Powder River, eight of the 11 tracts leased drew only one bidder.) Since the memo was written, the BLM has reaffirmed plans to put the Fort Union tracts in question on the block in July. The plans are awaiting final approval by Assistant Interior Secretary Garrey Carruthers, who oversees the coal program.

Like the Powder River sale, the Fort Union project also has raised environmental concerns. Russell E. Dickenson, director of the National Park Service, wrote in a memo last January that coal development plans on one of the North Dakota tracts would lead to an increase in sulfur dioxide concentrations, posing threats to "sensitive plant species" in Theodore Roosevelt National Park, about 30 miles away.

The Clean Air Act imposes strict protections on air quality in pristine areas, and would not allow such development unless Interior could certify that there would be no damage to park resources, Dickenson wrote. "Based on available data, such a certification may be difficult to obtain," the memo said.

Archaeologists are worried about Fort Union, citing ancient artifacts likely to be disturbed by mining activity at one of the coal tracts, known as Dunn Center. A proposed water supply pipeline to the tract would cross one of the Knife River flint quarries, which contains aboriginal artifacts dating back more than 5,000 years, according to Lawrence L. Loendorf, head of the University of North Dakota's anthropology-archaeology department.

The July Fort Union sale would be blocked if Congress approves the House Appropriations Committee's ban on further coal leasing this year. The committee passed the moratorium, which would allow leasing only under certain "emergency" conditions, on a voice vote last night.

But Watt has vowed to fight it, and his chances are considered good in the Senate.

RHETORICAL FLOURISHES . . . . With so many spotlights and microphones trained on Watt, Interior's other rhetoricians often get little attention. But one of them, David Russell, deputy director of the Minerals Management Service, recently made a splash in the western Canadian press for some barbed remarks directed at that country.

Last January, the Canadian Embassy protested to the State Department when Interior, in a Federal Register notice, claimed jurisdiction over areas of the Pacific Ocean for mineral development, including areas near Juan de Fuca and Gorda Ridges islands off the coast of British Columbia. Interior has proposed leasing polymetallic sulfides there, and the Canadians expressed concern that certain areas covered by the Federal Register notice "clearly fall within the jurisdiction and sovereign rights of Canada under international law."

Alerted to the Canadian protest, Russell said in an internal memo: "Our response to Canada's terse diplomatic note should be 'Dear Canada: Our F.R. Federal Register notice obviously pertained to our offshore areas, not yours. Therefore, up yours! Love America.' "