A bitterly contested telescope project atop Arizona's Mount Graham was slated for final approval today after the U.S. Forest Service rejected an Interior Department recommendation for new studies on the endangered Mount Graham red squirrel.

The Forest Service said it will issue permits today that will allow the University of Arizona to build three telescopes atop the 10,700-foot peak in the Coronado National Forest. The international scientific venture has pitted astronomers against biologists, who say the project will doom the squirrel.

The Forest Service decision, reached after consultations with the Justice Department, overrules a recommendation by Interior's Fish and Wildlife Service to suspend the project. The spruce-fir forest atop the remote peak is the last known habitat of the Mount Graham red squirrels, an endangered subspecies whose numbers have dwindled to about 150.

The decision seems certain to fuel congressional debate on the merits of the Endangered Species Act, one of the nation's tougest environmental laws. Much like the snail darter and, more recently, the spotted owl, the squirrel has become a symbol to conservationists who say the law is being flouted and to others who say it goes too far.

"We're outraged," said Bob Irvin, an attorney with the National Wildlife Federation, which has joined other environmental groups in opposing the project in court. "This is further proof that the University of Arizona is willing to bulldoze a species into extinction to satisfy its institutional greed."

University spokesman Steven Emerine said "we're pleased" with the decision and that construction will resume on the project "as quickly as we can sign contracts with the low bidder." The university maintains that the project will actually benefit the squirrel because it includes a number of provisions to improve its forest habitat, such as closing roads and planting trees.

University officials have warned that additional delays could spell the end of the ambitious multinational project, whose partners include the Vatican and West Germany's Max Planck Institute.

Conservationists have directed much of their anger at Congress, which in 1988 passed an unusual rider to a wilderness bill that cut short formal environmental reviews of the project. The rider was based on a Fish and Wildlife opinion concluding the telescopes would not harm the squirrel, although the agency left open the possibility of additional reviews if new information were discovered.

In later court depositions, however, the biologists who worked on that opinion said they had been pressured into reaching their conclusions, statements corroborated earlier this summer in a congressional investigation. The General Accounting Office said the final decision on the project was based in part on "non-biological considerations," such as its value to astrophysical science.

A special Fish and Wildlife team subsequently reexamined the project and earlier this month recommended a new round of studies. The recommendation was based in part on "new information that reveals the action may affect the Mount Graham red squirrel in a manner or to an extent not previously considered."

The recommendation for new studies was endorsed by several key members of Congress, among them House Interior Committee Chairman Morris K. Udall (D-Ariz.), a reluctant partner with the Arizona delegation in the original 1988 rider.

"The supporters of the Endangered Species Act never would have cleared {the legislation} for passage if we believed that it undermined the integrity of {the act} or precluded {new studies} under the set of circumstances" contained in the Fish and Wildlife report, Udall said in a statement Aug. 6.

But a Forest Service spokesman said that Justice Department attorneys had concluded that the 1988 bill should take precedence over the Fish and Wildlife recommendation. "The {bill} doesn't provide for further consultation," the spokesman said.