A handful of thirsty corporate farmers are robbing the taxpayers and the U.S. Treasury of millions of dollars in cheap irrigation water because federal regulators refuse to do their job.

Big western landowners have managed to sop up most of the benefits of a public water program that was designed to help the little guy.

At the turn of the century, Congress decided to encourage family farmers to make the western deserts bloom. The Bureau of Reclamation was established and water projects cropped up all over the West to irrigate family farms. The promise was that the taxpayers would pay part of the water bill. In its naivete, Congress thought that if it set a 160-acre limit on the farms that got subsidized water, only small farmers would benefit.

But Congress didn't reckon with the ingenuity and greed of corporate farms, nor did Congress imagine that the Bureau of Reclamation, which was supposed to regulate the program, would crawl in bed with the big farmers.

Earlier this month, an older and wiser House of Representatives voted to change the rules to prevent the big corporations from scamming the government. A similar bill is pending in the Senate. But judging by the record of the corporate farmers, they will soon find a way to get around the new restrictions, and the Bureau of Reclamation will look the other way.

Large landowners used to skirt the 160-acre limit by leasing their big farms in pieces to smaller operators. Congress caught on in 1982 and tightened the rules. At the same time, Congress acknowledged that the 160-acre limit may be too strict, and raised the maximum to 960 acres.

The big farmers simply changed their tactics. They now organize their land in a patchwork of trusts, partnerships and corporations, each owning 960-acre farms.

In one case, eight "farmers" signed up for subsidized water from a water district in California. The names were different, but the phone numbers and addresses were the same. Each claimed to be a separate farm, but in reality one land company was sucking up cheap water for 6,730 acres.

Wade Hill, 63, grows potatoes, lettuce and wheat on 160 acres in the San Luis Valley of Colorado. He irrigates his farm from a private water project built nearly 100 years ago, and it burns him up to see wealthy farming corporations soaking in subsidized water. Hill says he can't compete when he pays for his own water and the big companies hit up the taxpayer for the bill. Hill has a word for what's happening -- "Farmgate."

Phil Doe, who used to head the Bureau of Reclamation office that wrote the water rules, told our reporter Melinda Maas that the agency is as guilty as the farmers. "The water users and regulators have a cozy relationship paid by taxpayers," Doe said. "Many bureau officials go to work for them {the farming industry} when they leave government."

Doe claims that the Bureau of Reclamation protects its friends by writing flimsy rules. When Doe tried to tighten those rules, he was transferred. He now works in a toxic waste unit, an area he knows little about.