Fifty years ago, a young attorney at the Department of Interior wrote a memo saying growers in California's rich Imperial Valley are violating federal irrigation acreage law.

The opinion of Northcutt Ely, executive assistant to the secretary, was potentially costly for the farmers. But by 1933, a week before the Hoover administration left office, Secretary Ray Lyman Wilbur had overruled Ely.

Wilbur wrote in a letter that the Reclamation Act of 1902, limiting growers' federal water subsidy to 160 acres, was not intended to apply to the Imperial Valley.

Wilbur's letter, in combination with Interior's subsequent nonenforcement of the 1902 law, became keys in the development of huge farming enterprises, using low-cost federal water to make the arid valley bloom.

Controversy over the Imperial Valley subsidy to such major argibusiness operators as United Brands, Castle and Cook, and Purex has raged for years.

This week the controversy reached the Supreme Court. Attorney Ely, now 76 and in his 34th year on retainer to the Imperial Irrigation District, went before the court to defend, in effect, Secretary Wilbur's exemption for Imperial.

The case, a consolidation of three suits, has been working its way toward the Supreme Court since 1967, when the Johnson administration sued in an effort to establish that the 1902 law applied to Imperial.

An appeals court held for the government and now the Supreme Court is being asked to rule in a case that carries enormous consequences for growers in one of the world's most productive agricultural regions.

Close to half of the one million acres in the valley are irrigated with cheap federal water, carried through a canal from Hoover Dam on the Colorado River. More than half of the irrigated land in the valley is held by owners who exceed the 160-acre limit.

The valley's yearly agricultural production is estimated at $500 million, much made possible by the water and the federally financed All-American Canal.

Application of the 1902 law would mean the breakup of the valley's big operations -- the largest being 15,000 acres held by Steven H. Elmore of Brawely, Calif. -- and a limit to the water subsidies.

The Interior Department says the valley's subsidy will be $500 million over the life of the irrigation project. Agriculture says a 640-acre farm in the district gets a yearly subsidy of $40,000 -- the effect of the low-cost federal water.

With this federal help at stake, the status of the Imperial district has been a political hot potato, dating at least to 1945 when Interior solicitor Fowler Harper began challenging the Wilbur holding.

Controversy was heightened during the years of the Nixon administration, when a decision was made not to appeal a district court dismissal of the government's 1967 case.

The dismissal occurred shortly after Nixon in October 1969 had agreed to pay the Elmore family $100,000 for 2.9 acres he needed to increase his San Clemente estate. Nixon aides denied any conncton between the court case and the land sale.

More recently, as pressure has mounted on Congress to revamp the 1902 law, the status of Imperial again has been controversial. A Senate-passed bill last fall included language, pushed by Sen. Alan Cranston (D-Calif.), to exempt Imperial growers from acreage limits.

The Carter administration has opposed such an exemption and House bills offered by Reps. Morris K. Udall (D-Ariz.) and George Miller (D-Calif.) would bring Imperial under full coverage of the irrigation law.

Attorney Ely, meanwhile, said after yesterday's Supreme Court hearing that he found no inconsistency with his arguments today and those of his department in 1933.

"I'm sustaining the same position that Secretary Wilbur held," Ely said. He also denied occasional reports that he -- not Wilbur -- was the author of the 1933 letter.

And the 1930 memo, in which Ely said the reclamation law should apply to the Imperial Valley?

"I wrote that memo two years after I got out of law school," he said. "As Justice [Robert H.] Jackson once said, 'I'm astonished that a man of my intelligence could have held such an untenable position.'"