In the dry plateaus of the Far West, Colorado and Arizona are competing urgently for the water in the Colorado River, which does not have enough for both. Among the things riding on this competition is which major city will have its growth restricted by lack of water, Denver or Tucson.

In the Panhandle region of Texas, farmers are mining the Ogallala Aquifer so heavily that the water table is dropping as much as seven feet a year. In 35 years, about 4 million acres, which now produce a fifth of all U.S. cotton, could revert to desert.

In California, 9 million people were ordered to ration water this year. Water cutbacks were also imposed in Northern Virginia.

Is the nation running out of water? So it seems.

Everyone knows there is an energy crisis. Oil, which once was plentiful and cheap and became the basis of our economy and culture, is suddenly scarce and expensive.

The same thing is happening, although at an uneven pace, with another basic commodity: water. Aggravated by recent droughts, serious shortages are occurring in many parts of the country.

And just as this year an alarmed Carter administration sent Congress an energy plan aimed at conserving oil, so next year it will propose a major new water policy that is likely to rely on similar techniques: on the one hand, raise the "price" of water, and on the other, subsidize steps to save it.

The water problem is at its worst in the West, where water is known as "liquid gold," and a frenzy of competition has erupted among farmers, energy companies, fast-growing cities and rights-conscious Indian tribes. Battles over water have pitted Northern California against Southern California, Eastern Colorado against Western Colorado and Mexico against the United States.

Even in the rainy East, temporary droughts, poor planning and antiquated delivery systems have made cities such as Washington, New York and Boston increasingly vulnerable to critical supply problems. And, where water is abundant, it is often polluted.

"In the arid West and across the entire nation, we must begin to recognize that water is not free - it is a precious resource," said President Carter last April, as he riveted national attention on water by trying to cancel $4 billion worth of "wasteful" dams, irrigation and flood control projects.

In May, the President called for "comprehensive reform of water resources policy, with water conservation as its cornerstone." Three agencies, the Office of Management and Budget, the Council on Environmental Quality and the Water Resources Council, will make recommendations to Carter in February for changes that could have far-reaching economic and political effects.

While Carter's water policy is likely to be less imposing than his energy policy, it promises to be at least as controversial. It will affect the $10 billion a year that the federal government spends on dams, reservoirs, canals and sewage plants - which in turn affect profits in the private economy, thus rousing powerful political interests across the nation.

A preview of general water revision options in the Federal Register a few months ago roused a storm of protest from Western governors and congressmen. Fearing a "federal takeover" of states' water allocation rights, 35 senators sponsored a resolution in October imposing a six-month moratorium on any new water policy while Congress reviews the proposals.

"Water has an almost religious mystique," said Rep. Morris K. Udall (D-Ariz.). "The attitude in the west has always been that there's no limit to what water could obtain for you."

Nonetheless, the resolution's chief sponsor, Sen. Carl Curtis (R-Neb.), agrees to the need for a new policy. "The issue of future water sufficiency of our nation may be the most important domestic concern we will have to face, overshadowing even the energy shortage," he said.

At the turn of the century, the United States used 44 billion gallons of water a day; we now use 420 billion gallons. During the same period, invididual consumption rose from about 10 gallons to 168 gallons a day. If population trends and wasteful practices continue, the nation will use about 33 per cent more water by the year 2000, according to the U.S. Geological Survey.

"For most of the country, water demand in the year 2000 will significantly exceed supply," predicts Leo F. Laporte, a University of California expert. 'Of the major drainage basis within the 48 states only three - regions in the Northeast, Southeast and Ohio valley - will have an assured supply if current water use trends continue."

Ironically, the nation's driest states are among its fastest-growing - a fact that can only lead to even more critical water problems. In the last three decades, with the migration from the Northeast to the Sunbelt, population has increased 197 per cent in Nevada, 91 per cent in Colorado, 75 per cent in Utah.

These states are often the greatest water wasters, not only because the climate requires more water to grow a bright green lawn around a suburban house, but also because antiquated state water laws and huge federal irrigation projects discourage conservation. Arizona, for example, the second driest state in the nation with an average of 10 inches of rain a year, has a per capita water consumption double the national average.

The rapidly dropping water table in Arizona has resulted in saltier water, which destroys crops, and 1,000 square miles of subsided land.

"If we are neighbors, I am free to pump as much water as I wish - even though it lowers the water table under your land, making your well run dry and perhaps causing subsidence that can crack the foundation of your home and break your water and gas pipes," Udall said.

"The only price I have to pay for that water is the cost of running my pump. As a practical matter, this law creates an incentive to pump now - before somebody else sucks the basin dry - instead of conserving," he said.

People don't realize groundwater is crucial to the supply, says Sen. Milcolm Wallop (R-Wyo.) They think "underneath the earth's crust run little men in brown coats and green hats that mix chemicals and come out with water . . . But you can't mine water as a resource and not face human disaster."

In the East, much groundwater is lost, but not from overuse. A recent Environmental Protection Agency survey of 50 industrial disposal sites in 11 Eastern states found that 43 had poisoned water with arsenic, cyanide and other chemicals.

Sewage and industrial chemicals have made many Eastern rivers unswimmable, unfishable and undrinkable, requiring billions of dollars in expensive treatment system. The EPA is examining ways to tie conservation requirements to federal grants, thus reducing the need for large tax-payer-funded plants.

The rivers of the West have become battlegrounds for a host of interests, all competing for the same molecules of water.

The Colorado River, which serves Colorado, Utah, New Mexico, Nevada, Arizona and California, doesn't have enough water for all the people that want it. Thus, Colorado is frantically building storage facilities it doesn't yet need, so that Arizona won't become dependent on water Colorado will later require.

Economics often determines the outcome of competitions among farmers cities and industry. Denver suburbs and oil shale companies are buying up Colorado farmers' water rights. In Arizona, Udall said, "We've got to make plans to phase out agriculture. Irrigated farming is based on cheap water. Homes and factories will pay 10 times what you get for growing alfalfa."

Thus water is becoming a commodity, subject to the law of supply and demand, which is forcing up the price. However, unlike oil, which sells for a fixed amount per barrel and is ruled by federal price controls, water rates vary from city to city and from irrigation project. Under state laws in the West water was allocated on a first-come, first-served basis. Unless it is used, it is lost, so the incentive is to use as much as possible.

In a speech last May, Interior Secretary Cecil D. Andrus said, "I would hope (states) could begin cooperative efforts to bring laws, rules and institutions governing water into the 20th century. If this does not occur, eventually the federal government will be encouraged to step in, and another area of state prerogatives will be lost."

But when preliminary water options last July included possible federal intervention in water allocation, Western politicians complained so noisily that the administration hastily precluded any such course - thus, in the eyes of som, eliminating the likelihood of a tough national conservation effort.

"I want to make clear that there absolutely will be no federal pre-emption of state or private prerogatives in the use or management of water," Carter told a Denver audience in October, adding that "water policy will not be developed in secret. We are not going to spring anything on anyone."

But without attacking western water laws, Carter's conservation policy could be "more sound than fury," according to one veteran observer, House Interior Committee staffer Jim T. Casey.

The laws give people, "the immutable right to waste water," he said. "When you start talking about saving water, you're talking about people not exercising their water rights."

One alternative is to "bribe" people to conserve. For instance, the federal government could pay farmers to line irrigation ditches and install water-efficient drip systems to replace open canals. According to the General Accounting Office, more than half of federal irrigation water is now lost through seepage and over-watering of crops. Eleven billion gallons a day are wasted - more than is used by Los Angeles and New York City combined.

The Environmental Protection Agency can pay for water meters in unmetered cities like Denver and New York. With meters, customers are charged more if they use more - resulting in up to 30 per cent reduction in use, economist say.

The question for President Carter in water policy is similar to the one facing Congress now in energy policy: how much the federal government should pay to get conservation.

"The states are going to resist," Udall predicts. "It has to be tied more to the carrot than the stick."

But the stick is already in use. The federal government has warned Arizona that before receiving Colorado River water from the $1.6 billion Central Arizona project, it must pass strict groundwater conservation laws.

In Denver the proposed Foothills Treatment Complex, a huge dam and reservoir project, would provide water for an estimated doubling of the city's population by 2000. The EPA opposes the project as "growth-generating", advocating instead "an aggressive program to change the water-use habits of Denver-area residents."

The federal government could raise the water rates on irrigation projects and require water efficiency for any federally subsidized construction in the nation - two options suggested by Interior Secretary Andrus.

The move toward conservation marks a significant departure from past water policy. Expensive dams, reservoirs, and irrigation projects to increase supplies would be replaced by careful management schemes, such as flood plain zoning, if Carter gets his way.

The federal water bureaucracy, now scrattered in 25 agencies with overlapping missions from the Army Corps of Engineers to the Bureau of Reclamation, is likely to be cut back.

"The day of considering money to be the only solution to water problems is over." Andrus says. "We want results, not in the form of more dams and canals, but in the form of rational use of this precious resource."