U.S. to Tighten Water Subsidy Rules : Farming: In settling suit, Bureau of Reclamation discards Reagan-era regulations favoring agribusiness.

Signaling a major shift in federal water policy for California and the West, the U.S. Bureau of Reclamation agreed Thursday to revise its rules for allocating subsidized water and to enforce a longstanding limit on subsidies for large farming operations.

Settling a lawsuit brought by environmentalists, the agency said it would throw out its controversial Reagan-era rules for distributing water held behind big dams all over the West and write new regulations that take into account environmental consequences and water conservation.

“It would reopen all of the rules governing water prices, water conservation and acreage limits,” said Jeff McCracken, a spokesman for the bureau. “Conceivably it could cost farmers water. It could increase the cost of water to farmers.”

The old rules, adopted in 1987, had come in for sharp criticism because they allow large corporate farmers to skirt a law limiting subsidized water to farms that are 960 acres or less. In some cases, farmers divided their huge holdings into 960-acre parcels and put them in the names of relatives so they could keep receiving low-cost water.

The Natural Resources Defense Council, which brought the lawsuit in 1987, praised the Clinton Administration for rejecting a policy that environmentalists said had benefited corporate farmers at the expense of cities and wildlife.

“What is terrific about the settlement is that the government is now agreeing to obey the law and carry out the subsidy limits properly,” said Hal Candee, an attorney with the environmental group. “The big losers are those big agribusiness interests whose lobbyists were able to create loopholes in the law with the help of the Reagan Administration.”

The new rules could cause significant changes in the allocation of water and the kind of crops grown in California by making large farming operations pay market prices for their water, he said.

Rice and cotton, which consume large amounts of water, may prove too costly to grow in California without the benefit of federal subsidies, he said. And urban areas such as Los Angeles, which pay as much as 400 times more for water than do federally subsidized farmers, could benefit from more equitable water costs, he said.

“Right now, over 80% of the water in the state is used by agriculture, which is encouraged to waste water because of huge federal subsidies,” Candee said. “In this new set of rules, we hope the Administration will cut down on subsidies and increase the prices so that water conservation becomes standard practice among Central Valley farms.”

The settlement is one of the first significant policy changes at the Bureau of Reclamation under its new commissioner, Daniel P. Beard, who in his previous post as staff director for the House Committee on Natural Resources had been a frequent critic of the agency.

The bureau, whose major dam projects helped irrigate millions of acres of farm land in 17 Western states, had seldom paid much attention to the environmental results of its actions.

“The mission and role of the Bureau of Reclamation has changed,” McCracken said. “We are no longer in the development business. We are now a water management organization.”