The U.S. Army Corps of Engineers and a small South Dakota Indian tribe were locked in a macabre dispute tonight over what to do with dozens of human skeletal remains that were unearthed from the shoreline of a reservoir along the Missouri River last month when the Corps lowered the water level by reducing the flow through a dam.

After negotiating for six hours, the Army engineers and tribal leaders of the Yankton Sioux Tribe exchanged several proposals aimed at ending the impasse but were "still deadlocked," tribal attorney Mary Wynne said. No further meetings were scheduled.

The tribe's members say that the exposed bones are the remains of their ancestors and that they need time to properly rebury them according to ancient tribal customs. They contend that if the federal engineers go ahead with their plan to raise the water level again, the bones will be washed away and lost forever.

However, the Army engineers have maintained that if they cannot dump more water into the man-made Lake Francis Case, about 100 miles southwest of Sioux Falls, S.D., water will back up in two larger upriver reservoirs that are intended to catch the spring runoff. The result could be flooding, widespread damage of property and threats to public safety, officials asserted.

"The longer it goes on, the potential for flooding is greater," said Paul Johnston, a spokesman for the Corps' Northwest division headquarters in Omaha. "We've got to move some water, but at the same time we want to be sensitive to their concerns."

In addition, officials said hydroelectric power plants upriver would not be able to operate at full capacity. Sen. Tim Johnson (D-S.D.) said he had been told by the Western Area Power Administration, which operates hydroelectric dams on the Missouri River, that there was a "$3.8 million cost consequence" if the Lake Francis Case water level remains lowered through February because the power plants will not be able to put enough water through the upriver dams to maintain power output levels.

The dilemma is emblematic of similar disputes across the country in which federal and state agencies and Native American tribes are arguing over how much control Indians should have over public works and other projects affecting sites the Indians regard as sacred, including ancient burial grounds.

The Lummi Tribe near Blaine, Wash., has filed a claim of $30 million in damages over the removal of more than 40 skeletons during excavation for a new wastewater treatment plant and has asked the federal government to put the burial ground into trust. Near Minneapolis, militant Dakota Indian protesters have been attempting to forcibly block an $83 million state highway project they say will destroy a sacred tribal burial site.

Native American advocacy groups contend that there are scores--possibly hundreds--of sacred sites at risk on or near other reservations, even though the 1990 Native American Graves Protection and Repatriation Act was supposed to give Indians a greatly expanded role in protecting ancient burial grounds.

Tribal member Faith Spotted Eagle, who said her ancestors are buried alongside the Francis Case reservoir near Pickstown, S.D., said, "The Corps of Engineers seems to believe that if people are poor enough and have no political leverage, it's okay to destroy the remains of their relatives." Spotted Eagle and other Yankton Sioux members erected a protest encampment of tepees and have been tending ceremonial fires at the grave site around the clock in an attempt to protect the bones.

The tribe won a reprieve on Dec. 23 when a federal judge in Sioux Falls issued a temporary restraining order preventing the Corps of Engineers from raising the water level. However, federal mediation efforts ordered by U.S. District Judge Larry Piersol failed to resolve the dispute, and the judge, after holding a two-day trial last week to hear arguments in the Indians' lawsuit against the Corps, said he would issue his opinion Tuesday.

Tribal leaders contend that, according to their oral histories, the Yankton Indians' burial of their dead at the site goes back at least to 1838 and probably centuries before that. The tribe's lawsuit argues that federal engineers promised more than 40 years ago to remove 438 Indian graves in the church cemetery before flooding the area for a reservoir when the nearby Fort Randall Dam was built. Court documents indicate that some bodies were reinterred elsewhere under a contract with a funeral home, but that apparently many were left behind.

Yankton spokeswoman Tessa Lehto said tribal elders recall that when they were being evacuated from their homes on the future reservoir site in 1950, they saw partially disinterred graves with bones sticking out of the ground. "Even though the Corps had a contract to remove all the bodies and told people that they were moved, obviously they were not because human remains, including complete skulls, are there lying in the sand," Lehto said.

Johnson said the origins of the dispute were "just outrageous" because the federal engineers have known about the danger of graves being opened by receding water for decades but failed to do anything about relocating the remains.

"It's unfortunate that the remains were not relocated with the proper dignity in the first place, and this current situation needs to be handled in a timely fashion, but with the utmost respect for the Yankton Sioux Tribe and their ancestors," Johnson said. "Unfortunately there is a low level of trust and confidence that needs to be addressed quickly."

Corps of Engineers officials said that last month the Corps lowered the level of Lake Francis Case by 18 feet to create enough capacity to hold water released at two hydroelectric generating plants at the Big Bend and the Oahe dams farther north on the Missouri River. They said the river's six dams and reservoirs operate in a coordinated system designed to create enough capacity to hold the expected watershed runoff during March thaws.

Col. Mark E. Tillotson, the Corps' Omaha district commander, said his agency has sought to balance the operation of the dams with the handling of the human remains.

"We will do everything possible to operate the mainstream system for the congressionally authorized purposes, while allowing sufficient time for the respectful recovering and reburial of the human remains," Tillotson said. "We are taking steps to resolve this issue respectfully, responsibly and as soon as possible."

However, Lehto said that last week the Corps gave the tribe permission to have Todd Kapler, a Sioux City, Iowa, archaeologist, map the site today but then on Friday revoked the permission. Lehto said she believed that the Army reversed itself because during a brief visit to the site on Thursday, Kapler found baby coffins and a particularly grotesque, nearly intact skeleton above ground and that the Corps feared that photographs taken of the remains could cause a "public relations disaster."

Maggie Oldham, a Corps spokeswoman, said the reason was that Army officials wanted to check Kapler's credentials and references. Also, she said, mapping would be "premature" in light of the resumption of negotiations.

Kapler, in a telephone interview, said that besides bones, he found prehistoric artifacts, including stone tools. He said the tribe was operating on "borrowed time" because cold weather and snow could make mapping of the site impossible.

CAPTION: Dayla Irving and Beverly Wright walk toward the cemetery where their relatives are buried near Lake Francis Case.

CAPTION: Remains from the cemetery have washed up along the shores near Pickstown, S.D.