FALMOUTH, Mass., Nov. 13 - Nantucket Sound lies between Cape Cod, Nantucket Island and Martha's Vineyard, some of the nation's best-known vacation spots. Now a private company is proposing to build the world's largest offshore wind power plant right in the middle of it. Depending on who is talking, the results would be either a hideous blot on the landscape or a significant step toward clean power and energy independence.

The argument over the proposal intensified last week, when the Army Corps of Engineers issued a draft environmental impact statement finding few flaws in the plan. But instead of helping to settle the question, the report fed the debate over building there and where - or whether - other wind farms should be built in the nation's coastal waters.

The 4,000-page draft gives new support to environmental groups that praise the project as a safe, nonpolluting and desperately needed alternative to fossil fuel power plants. But opponents challenge the report, the process that produced it and the idea of building the turbine array in the first place.

Regardless of its environmental impact, they say, it is just too ugly - an industrial development that would wreck pristine vistas in a major tourism area. Many add that no offshore energy projects should be considered until the government establishes a better review process for proposals to use federal lands offshore.

The project would be the nation's first offshore wind power plant, and it is being closely watched up and down the Eastern Seaboard. A similar proposal is under consideration off Jones Beach, on Long Island, and officials in New Jersey are looking into offshore wind power.

The Corps of Engineers' draft concluded that the project, proposed by Cape Wind Associates of Boston, would not unduly hinder ferry operations, commercial and sport fishing, boating, aviation or other activities at its site, a 24-square-mile area in the part of Nantucket Sound called Horseshoe Shoals. It said the project's 130 support towers, turbines and blades, which together would rise about 420 feet above the water, would not seriously affect currents, waves, water quality, sand movement, fishing conditions or noise levels.

Adequate steps can be taken to protect marine mammals and shellfish, the report said. Birds will fly into the towers and die, the statement says, but probably at a rate of only about one a day, not enough "to cause bird population declines."

And while opponents predict that the field of towers would drive away tourists, the corps said the project might actually attract sightseers.

The report is preliminary, and the public will have at least until Jan. 10 to comment on its findings, said Karen Adams, who supervises the permit process for the Corps of Engineers. A final environmental review may be completed as soon as a year from now, she said.

Mark Rodgers, a spokesman for Cape Wind, said the company must still raise capital for the project. But if all goes well, he said, the plant could be producing power as early as 2007. The power would go into the regional grid, not precisely to Cape Cod and the islands, he said. But on a day with average wind, it would produce about 420 megawatts - three-fourths of average electricity needs for the local area.

"Many of the more hysterical fears that opponents had been speaking of in the past three years were not supported in this analysis," Mr. Rodgers said of the impact statement.

But that is no surprise, according to the Alliance to Protect Nantucket Sound, an organization that opposes the wind farm. As is required, Cape Wind paid for the work that went into the report. "As a predictable result," the alliance said, "the document is strongly biased toward Cape Wind."

Ms. Adams and the project's supporters dismiss that criticism. The corps requires applicants to pay for studies of their proposals, she said, because it would not be right for taxpayers to pay for them. The corps independently chose the experts who produced each section of the report, she said, and Cape Wind willingly financed whatever the work the corps requested.

She added, however, that some in the corps did not expect to find themselves in the position of issuing federal permits for the project. "We had to do a lot of learning real quick," she said.

But some officials - including Gov. Mitt Romney, Senator Edward M. Kennedy and Representative Bill Delahunt, whose Congressional district includes the project site, say the project should not go forward yet. They say offshore projects of all kinds need a more systematic federal review process.

Advocates of the wind farm say establishing such a process would only mean unnecessary delay. And several environmental organizations have found themselves in the unaccustomed position of praising the Corps of Engineers, which many have criticized in the past as being too quick to approve development projects.

"At first, obviously, it was pretty frightening because of their history," said Kert Davies, United States research director for Greenpeace, which favors the project. But he added, "I think the effort was very solid, and they were under a lot of scrutiny."

Mr. Davies also dismissed as "an elitist and local view" assertions that the wind turbine array would spoil a pristine environment. Nantucket Sound is far from that, he said, filled as it is with "mega boat traffic and jet skis and fishing boats and ferries - it is not the Grand Canyon these guys are painting it to be."

Others say that regulatory issues aside, the aesthetics are perhaps the biggest issue standing in the project's way. "It's a legitimate concern," said Bruce Bailey of AWS Truewind, a research firm in Albany that consulted on the Cape Wind project.

But, he said, "it's based on expectations, not based on what people have actually seen." He said photo simulations of what the wind farm will look like from shore - it will be 4.7 miles away at its closest point - assume the clearest of weather conditions. Often, he said, the distant view from shore is obscured by haze.

Besides, advocates say, a diminished view is a small price to pay for clean power. "If we are not willing to accept that tradeoff, I think it says something pretty profound about our priorities and our commitment to moving to cleaner sources of electricity," said Randy Swisher, executive director of the American Wind Energy Association, which represents developers, suppliers, consultants and others in the wind power industry.

The corps's statement did not address in detail another criticism opponents have voiced: that the project is economically viable only because of tax credits or because the federal government is giving the company free use of the site, issues that some say should be considered in a broader federal review of development of offshore lands.

But advocates contend that all kinds of fossil fuel energy projects benefit from federal incentives. And Mr. Rodgers, the Cape Wind spokesman, said that "non-extractive" users of coastal lands - companies that run telecommunications cables and the like - are not required to pay for the privilege. Still, he said, should the federal government decide to require lease payments, the company would "absolutely" pay.

Mr. Rodgers said the site offered several important advantages. It is in the middle of an area whose population - and electricity demands - are growing. And it is a short distance to Barnstable, where power generated by the windmills can feed into the national grid.

Similar considerations are prompting interest in wind power off Long Island and in New Jersey, several experts said. "It's difficult to site a large wind development in the Northeast," Mr. Swisher said.

Advocates of wind power cite Denmark as an example, saying it generates 20 percent or more of its energy from wind, and Mr. Davies of Greenpeace says the record there suggests that offshore wind farms can become tourism destinations. "In Denmark, day sailors take off and sail to these things," he said.

He and others at environmental groups said they hoped the Cape Wind proposal would win final approval and would become the first of many offshore wind projects. "The United States," he said, "is way behind in the clean energy race."