While the rest of American agriculture wilts under a searing summer without rain, the vast flat fields around Fresno are lushly green and rich with the produce of more than 200 different crops.

Wheat, corn, grapes, almonds, melons, walnuts, peaches, vegetables, cotton, alfalfa, avocados, boysenberries, strawberries, tomatoes, rice, sugar beets, apricots and dozens of other crops are thriving.

Fresno County in the San Joaquin Valley has all the water it needs. From the winter's dense snow pack in the Sierra Nevada, it gushes down to brimful reservoirs, then through a network of canals and into the outdoor factories that earned farmers here more than $2 billion last year.

The San Joaquin Valley's rainmaker is not Mother Nature. It is the more reliable federal government. Through the federal Bureau of Reclamation's irrigation projects in 17 western states, the nation's taxpayers provide plentiful below-cost water for farmers.

This subsidized federal water has created empires and set off great political flaps in the valley. It has made millionaires of farmers who fly about in their own planes, whose wives and daughters dart about desert backroads in Jaguars and Mercedes Benzes. It has spawned a huge support industry of brokers and packers, equipment and chemical suppliers who skim their share before crops go to market.

Firebaugh farmer Willoughby Houk thinks highly of the Bureau of Reclamation. "It's feast or famine in California on the water issue," he said. "More battles are fought over water than anything else here. I actually saw a woman shoot her brother because he took her irrigation water."

The battles Houk talks about still are being fought. No one is predicting massive upheaval in the status quo, but Congress last year directed major changes in the federal irrigation law that made possible the economic flowering.

The bureau, part of the Interior Department, plans mid-October publication of final rules and regulations that will increase the price of water and require some large landowners, such as the Southern Pacific Railroad, to give up excess holdings. In the big Westlands water district here, for example, Southern Pacific leases about 106,000 acres of irrigated land to farmers.

"We have about 200,000 acres of excess lands," said Jerald R. Butchert, manager of the 600,000-acre district. "Sales of these excess lands at the earliest would be about 18 months from now . . . . You'll see new farmers moving in, more specialty-crop farming, with an average farm being about 960 acres."

The heated congressional debate centered on the Reclamation Act of 1902, which aimed to bring irrigation water to the arid West and settle small family farmers on 160-acre tracts. The bureau built the dams and set up the irrigation districts that were to pay back the cost of the projects through user fees.

By and large, the law worked, even though growers in most districts paid far less for the water than it cost the government to deliver.

There were other abuses. Washington winked at violations of the size and residency requirements. Smart farmers took advantage of loopholes and nonenforcement to build their empires. They hired smart lawyers to protect them in Washington. Friendly members of Congress assured that the waters would not be roiled.

Then the empire was threatened. In the 1950s and 1960s, a small group of farmers and local activists began to agitate. No fair, they argued: the acreage limitation was not being enforced, farms had gotten beyond their legal size, owners did not live on the land as the law required, a few were soaking up a federal subsidy meant for the many.

One of the challengers was Berge Bulbulian, an Armenian immigrant's son who raises 150 acres of grapes southeast of Fresno.

"We simply wanted enforcement of the 160-acre law," he said. "We thought we would win because the greed of those big farmers would do them in. They want to live in a totally ruleless situation."

Bulbulian and his activist friends went to court. Under the banner of National Land for People, they sued and, to their own surprise, won in U.S. District Court in 1976 and were upheld on appeal in 1977. The court held that the 1902 law had not been enforced. If the times and farming technology had outdistanced the law, it could be rewritten by Congress, the court said. But meanwhile, Interior should prepare to enforce it.

By most calculations, more than 90 percent of Interior irrigation lands in the West were in compliance with the 1902 law. Parts of California, however, were not--particularly in the 600,000-acre Westlands water district on the west side of Fresno County, where fewer than 250 farmers dominate.

The court order aimed at the heart of the empire. As the Carter administration set to work on regulations that would enforce the 1902 statute, with the threat of breaking up the huge holdings and distributing the federal irrigation subsidy to the many, California growers also went to work.

" The Carter rules galvanized the West," Butchert said. "There is no question they had a grudge against Westlands . . . . California had tried to change the law since the 1940s but never could get support. Then the West was galvanized, and it coalesced."

Westerners spent tens of thousands of dollars to defend the empire. They hired a bevy of Washington lawyers to plead their case at Interior, at the Carter White House and in the halls of Congress. They contributed heavily to congressional campaigns. They poured money into the Democratic National Committee.

The fight over a rewrite of the 1902 law raged on Capitol Hill through the late 1970s. It centered on a fair price for the water, on a fair size limit on the irrigated farms, on residency and on distribution of access to land declared in excess of the acreage limitation.

The battle ended last year when President Reagan signed the rewrite into law. It set a 960-acre limit on land that can be irrigated with federally subsidized water, although it raised the rates, at the insistence of Rep. George Miller (D-Calif.) and Sens. Howard M. Metzenbaum (D-Ohio) and William Proxmire (D-Wis.).

George Ballis, a small farmer and experimenter from Fresno who masterminded the National Land for People campaign, walked away distraught. He and his allies felt they had been abandoned by Miller and other liberals. Miller insisted that he got the best that could be gotten, given the growers' power.

Ballis put it this way: "What lost for us was that what we wanted was against the warp of modern America. It really wasn't the money that won it for the biggies. There was very little grasp of the concepts we were talking about. We are all so divorced from the earth that no one understood it.

"The measure really is whether the powers that be are going to give you a piece of the rock. We learned very slowly. About two years after the growers got organized, it became obvious we couldn't win. I should have realized that in 1954 when I got into this."

The new law allowed unlimited leasing of additional irrigated land and wiped out the residency requirement originally intended to stimulate family farm development. It also set higher water rates for large corporations and established procedures for divestiture of excess lands.

Western growers were happy. Most of the empires would remain intact. Miller cheered the rewrite as "a revolution in water policy." Metzenbaum said it did not go far enough and voted against final passage. Environmentalists said it was more subsidy for big corporate farms and would not foster conservation of a scarce resource.

Interior has held hearings throughout the West and is drawing up final rules to implement the new law this year. NLP isn't taking part because, in Ballis' words, "It's like participating in a discussion of whether you're going to be hung or shot."

Bulbulian gave up the presidency of NLP about six months ago and devotes himself now to his grapes.

"How California is run," he said, "is very important to the rest of the country . . . . I interpret free enterprise as an opportunity to start. Most of the growers around here see it as an opportunity to get as big as you want."

He added, "We would have had a more vital community out here if we had won the water battle. But our efforts were not wasted. We educated a lot of people. The bill they finally passed was better than what would have been without a National Land for People. They will pay more for water."

Houk, who farms with his father, four sons and daughters with nonfederal water from the nearby San Joaquin River, was another of those early NLP critics and challengers of his neighbors with the subsidized water.

He saw the 1902 law as a way for his sons to get into farming on their own, sharing in the federal largesse. He envisioned the huge Westlands district as a sort of paradise populated by thousands of small farmers, sharing in the subsidy and making comfortable livings.

"The only thing we had going for us was public opinion," he said. "Our NLP people were Quixotes jousting at windmills; they did a helluva job, but it wasn't enough. You know, the price of your food is controlled by the people who control the land. When agriculture is in a few hands, you'll spend 40 percent of your income on food."

"To me," he added, "we're in a critical situation. In the American revolution, farmers fought for the right to own a piece of land. We'll get right back to that, we'll have a helluva mess here when our farmers don't control their own land . . . . That 1902 law was intended to put farmers on the land. It wasn't for the few."