Twelve years after the federal government banned the insecticide DDT, the Environmental Protection Agency has taken the first step toward banning it again.

Citing "unreasonable hazards to fish and aquatic bird populations," the agency yesterday proposed to outlaw all uses of the pesticide dicofol, a popular cotton and citrus pesticide found to contain DDT. It is sold under a variety of brand names such as Kelthane, Acarin and Mitigan and has been sold in the United States for more than 25 years under a registration that listed DDT as an "inert ingredient."

A civil servant spotted the listing in 1979 during a routine check of dicofol's registration. But the agency did not launch a formal review of the chemical until last March, after U.S. Fish and Wildlife Service researchers found increasing levels of DDT in birds, insects and fish in some citrus- and cotton-growing areas of Texas and California.

EPA spokesman Al Heier said yesterday that the DDT was an impurity from the manufacturing process for dicofol "and we were puzzled about how to regulate it."

As a result of the dicofol/DDT situation, however, the EPA last week proposed to tighten its procedures regulating impurities and inactive ingredients in pesticides. Among other changes, the EPA wants pesticide labels to name impurities comprising more than 0.1 percent of the product -- less if it has a known toxic effect.

The agency has banned other pesticides because of impurities, including the weed-killer silvex, which contained dioxin as an unwanted manufacturing byproduct. More recently, the herbicide 2,4,5-T appeared to be targeted because of the presence of dioxin.

The EPA said it rejected a chemical manufacturer's proposal to reduce the DDT levels in dicofol.

DDT is a persistent chemical, resisting breakdown in the environment. It also accumulates in the tissues of plants and animals, posing an ever-greater danger as it works its way through the food chain.

The chemical was banned in 1972 after it was linked to reduced hatching rates for bird and fish eggs. By that time, more than 90 percent of Americans had some DDT residues in their bodies, a figure that has since slowly declined.

More than two million pounds of dicofol are used annually in this country, about two-thirds of it on cotton and citrus crops. It is also used on ornamental trees and shrubs, golf courses, some vegetables and nuts.

According to the EPA, a dicofol ban could cost growers $13 million to $42 million a year.