ATLANTA -- What began as a plan to draw more water from local lakes for this booming metropolis has landed the Army Corps of Engineers in federal court while neighboring Alabama effectively caps Atlanta's water supply at current levels and threatens to halt this area's rapid growth.

After a 16-year study, the Corps concluded last year that the best way to quench the region's growing thirst would be to reallocate, as drinking water, some of the water used for hydropower generation on three area lakes.

The Corps conducted a preliminary impact study, planning to allow Atlanta "interim" increases in water withdrawals pending congressional authorization of the changes.

Alabama officials, concerned about the impact on the two river systems involved, petitioned the Corps to undertake a more comprehensive, four-year, $5 million study and filed suit last June to block interim withdrawal arrangements.

The suit has been stayed to give the two states a chance to negotiate their differences. But for now, no additional water for Atlanta is forthcoming.

"We're taking the water we have and stretching it to where it's almost at the breaking point," said Joel Stone of the Atlanta Regional Commission (ARC), an area planning organization. "Without those interim contracts we're going to see water restriction year-round and restrictions on residential and commercial development. We're right up against our permits in all areas."

Seeking growth in the shadow of a seemingly out-of-control giant, Alabama officials fear that if more water is sucked out of the Chattahoochee-Flint-Apalachicola river system flowing along the eastern border, and the Coosa-Tallapoosa-Alabama system that flows through the state, Alabama's progress could be impeded. They say decreased river flows into Alabama, made up of more treated waste water, could affect industrial and community development as well as degrade recreation areas and wildlife habitats -- particularly in drought years.

Florida has threatened to join Alabama in the suit, worried that reallocation could endanger its barge traffic and already threatened oyster beds in Apalachicola Bay.

"We feel that Georgia has taken the position that it wants to grow at whatever levels it chooses, regardless of harm to Alabama and Florida," said Walter Stevenson Jr. of the Alabama Department of Economic and Community Affairs. "We're not trying to slow down their growth. We're just trying to ensure that Alabama has an equitable share of water for its own growth, and if giving us that share slows growth in Georgia, then that's a consequence."

Proposed reallocation increases, Stevenson said, would provide Atlanta with 662 million gallons of water per day (mgpd), 106 percent more than Alabama's current daily water usage. With a population of 2.4 million, Atlanta now uses 377 mgpd. According to ARC figures, the metropolitan area here ranked fourth nationally in population increases and second in new jobs in 1984-87.

Georgia intensified the water dispute last month when it announced plans to build a 4,200-acre regional reservoir on the Tallapoosa River, five miles from Alabama's eastern border, that would draw another 125 mgpd from the system.

"It is no longer a controversy. This water thing has reached a boiling point. We are in a water war," Rep. Glen Browder (D-Ala.) said at a Corps-sponsored public hearing on the project.

Water experts say this sort of dispute is becoming more common in a region made rich in water by an abundance of streams replenished by Gulf of Mexico evaporation wrung from the air by northerly cold fronts. Though the issue has not taken on epic western proportions with barbed wire strung around rivers, states are riding closer herd on water resources since a series of droughts in the 1980s.

"Despite the wealth of the Southeast in water, we are starting to encounter these interstate conflicts more frequently because of the sheer magnitude of urban growth and the concentration of demand," said David Moreau, director of the University of North Carolina system's Water Resources Research Institute in Raleigh.

Disputes often start, Moreau said, when urban areas try to implement water-increase measures. Caught off guard with no clear idea of how their water needs will be affected, smaller downstream communities try to halt the process while they get in the game. Alabama, Stevenson acknowledged, is years behind Atlanta in planning and is looking to the Corps study to define water needs and water resource capabilities for the entire basin.

Since the federal Water Resources Council was abolished during the Reagan administration, Moreau said, states have had no alternative but to take their differences to court -- a time-consuming and costly solution complicated by political differences that tend to magnify problems. Several disputes between Virginia and North Carolina, he said, have been snarled in litigation for years. Other regional and interstate wranglings are similarly entwined.

Georgia and Alabama officials are trying to avoid this through bargaining. "We intend to enter into earnest and meaningful negotiations with Alabama starting soon," said Georgia Natural Resources Commissioner Joe Tanner, recently appointed by Gov.-elect Zell Miller (D), who takes office Jan. 14.

Under such conditions, Stevenson said, Alabama is willing to consider agreeing to "reasonable" Atlanta water increases while the Corps study proceeds. Part of the study will investigate means of anticipating and settling future differences before they get out of hand. Browder has called for the formation of a tri-state water commission among Georgia, Alabama and Florida.

Congressional approval of the reallocation is not certain, state officials say. Opposition is expected from western representatives leery of changes in the use of Corps dams and lakes. The one certain thing, Moreau said, is that as long as Sun Belt growth flourishes, the region's water systems will face greater demand and more conflict will arise.

"The situation is going to get worse and it's going to call on us to do a lot better water management than we've been doing," Moreau said. "Urban areas will have to use water more efficiently and we will have to improve our conflict resolution arrangements."