The water moves tranquilly across the desert floor in a grid of earthen canals, cutting through spiny stands of ocotillo and sage on its way to the lush green fields of the Imperial Valley.

For more than eight decades, the Colorado River has irrigated this arid land, bringing forth a cornucopia of grains, fruits and vegetables -- more than $760 million worth last year.

But scarcely 100 miles away, across the stony Vallecito Mountains, the sprawling coastal cities of southern California have turned a covetous eye on the Imperial Valley's brimful canals.

Facing a cutback in allocations from the Colorado River and stymied in their efforts to import more water from the north, the cities are looking for supplies from somewhere else -- and the Imperial Valley is tantalizingly close.

There is a new battle brewing over water in California, where the courses of rivers are as likely to be set by politics and power as by nature.

But this time, the water warriors have introduced a novel concept in western water politics. It's called the free market.

In a startling divergence from the past that could have profound implications, the Los Angeles-based Metropolitan Water District is not seeking to wrest the Imperial Valley's water from it in court.

It wants to buy some.

The water district is willing to pay more than 10 times the going rate for the water, which would be diverted into its aqueduct from the Colorado instead of being shipped to the valley's lettuce and alfalfa fields.

The proposal is billed as a conservation measure. The water district says it is only interested in the water that can be saved by lining the Imperial Irrigation District's earthen canals and installing other water-saving equipment.

Engineers say they believe that such equipment could salvage millions of gallons of water a year -- enough to make up for the Colorado River allotment that southern California will lose when deliveries to Arizona increase next year.

But promoters and detractors alike say that the Imperial Valley proposal goes to the heart of water policy throughout the arid West, where water has long been regarded as an inalienable right rather than as a commodity to be bought and sold.

An agreement here could set the stage for more "water trading" between agricultural and urban interests in other booming Sun Belt states, where as much as 90 percent of available water now goes to irrigate crops.

In the long run, according to some experts, farmers in the fertile deserts of California and Arizona might find it more profitable to "farm" their water than to till the land.

The thought already has occurred to the Metropolitan Water District, which brokers water to 12 water districts and 14 cities, including Los Angeles.

"Right now, with farming so bad, a lot of farmers would be willing to talk to us," said Carl Boronkay, the water district's general manager. "Ultimately, it may come to this. I feel we ought to make use of the available water first, and we can do that with conservation facilities. At some future date, we can consider whether to pay people not to farm."

The notion is no less enticing to some farmers.

"Maybe we can make a deal on drought insurance for dry years," said John R. Benson, an Imperial Valley grower who sits on the board of the irrigation district. "At $500 an acre-foot, we could give the money to farmers around here and start drying up crops."

But the proposal raises troubling questions as well. Like most farmers in California's arid valleys, growers in the Imperial Irrigation District owe their existence -- and their cheap water -- to the federal government.

Farmers here pay $9 an acre-foot for water, enough to flood an acre of land to a depth of one foot. At that rate, Imperial growers are paying nearly twice the average for federal water in the state's central valley, but the price is still less than the cost of operating and maintaining the elaborate system of dams, canals and desilting facilities.

The Metropolitan Water District is willing to pay upwards of $100 an acre-foot for the same water, probably more in a dry year.

What that adds up to is a lucrative deal for the farmer, which in the irrigated West is as likely to be a sprawling corporate operation as a stereotypical family farmer.

Even the most ardent supporters of free-market water are swallowing hard over that prospect, including some conservationists who think that water sales are otherwise a dandy idea that could ease the pressure for more expensive and environmentally damaging water projects.

"It may be in everybody's best interest, but that windfall will be hard to explain," said an official at the Interior Department, which nonetheless has given the proposal a green light.

In a recent letter to a lawyer involved in the negotiations, Assistant Secretary Robert N. Broadbent said the department considered the proposed deal "of no direct concern to the federal government."

Gary Stone, an attorney for the Parsons Corp., an engineering firm that has helped map the strategy for the water swap, said the Imperial proposal appears legal.

"We've had a number of water experts and legal experts look into it," he said. "This is not a historical methodology in dealing with water, but we've talked with federal officials and we think it would stand any court test."

Stone's analysis, however, is limited to the proposal for selling conserved water.

"No part of this proposal entails paying farmers not to farm," he said. "What that might evolve to would be speculation."

Critics of federal water projects already have begun speculating, and they are unsettled by what they foresee.

Since the days of the New Deal, federal irrigation water has been priced according to the farmers' ability to pay, so long as the water was being put to beneficial use.

The result -- virtually endless repayment periods at little or no interest -- has been justified as necessary to protect the farm economy of the West and preserve an important food supply for the nation.

Nobody, it seems, anticipated the water being sent off to sprinkle golf courses in La Jolla.

The Imperial Valley, however, is not the only agricultural area investigating the water market.

The Westlands Water District in the San Joaquin Valley, under court order to find a solution to the problem of its contaminated drainage water, is also considering selling water as a way of financing a cleanup program.

Westlands growers envision a series of desalting plants, costing hundreds of millions of dollars, which would cleanse drainage water of accumulated salts, toxic selenium and agricultural chemicals.

The recycled water would then be shipped south through the California Aqueduct, where it presumably would fetch a price high enough to finance the desalting plants. Alternatively, the farmers could reuse the water on their fields and sell their allotment of incoming irrigation water.

That proposal raises another set of knotty questions, not the least of which is what will prevent farmers in marginally productive areas from simply electing to sell their water at an eye-popping profit.

"Some economists argue that even if that does happen, it would be better for everyone," said Hal Candee, an attorney for the Natural Resources Defense Council in San Francisco. "It would encourage farmers not to irrigate land that shouldn't be irrigated."

Environmental groups in California have blunted their swords repeatedly against the San Joaquin Valley's powerful agricultural interests, and most have remained a skeptical distance from the Westlands proposal.

"We're supportive of the effort and the strategy," Candee said. "But we're concerned that the government not be asked to bail out the farmers for a drainage system."

One group that has wholeheartedly embraced the idea is the Environmental Defense Fund, whose economic models provided the statistical underpinnings for both the Imperial and the Westlands proposals.

In an unusual marriage of old adversaries, EDF recently joined the Westlands farmers in a successful effort to get $3.7 million from Congress to study and test the concept.

"Some environmentalists would prefer to see the Westlands drown in their own toxics," said Thomas J. Graff, an attorney for the group. "Maybe the federal taxpayer will have to pay some, but forcing the farmers out is simply deferring the problem, not solving it."

Westlands farmers say they are optimistic about the scheme, although they are hedging their bets with a parallel study into the possibility of injecting their contaminated water into deep wells.

But in the Imperial Valley, there are misgivings. Growers here remember the Owens Valley, an oasis in the Sierras until a rapacious water grab by Los Angeles turned it into a parched desert nearly 50 years ago.

Last month, the irrigation district rejected a tentative agreement with the Metropolitan Water District and named new negotiators to seek a better deal.

"The Owens Valley syndrome is stronger than I thought it was," said board member Benson. "The Metropolitan Water District keeps saying they're not L.A., but urban water interests are all the same. It's like comparing Tamerlane with Attila the Hun."

The farmers' caution is rooted in a clear understanding that no matter what new concepts are introduced into western water policy, one central fact remains: When the water is gone, it's gone.

"We all think we would have one hell of a time getting the water back," Benson said. "We may get the money, but we'll never get the water back. And someday it may be more valuable to have the water."

Opponents of the proposal here have an unexpected ally. He is Ben Yellen, a local physician who unsuccessfully battled for years to bring the Imperial Valley's giant farming operations into compliance with the 1902 Reclamation Act's 160-acre limitation.

A small-farm advocate, Yellen is still battling the valley's big guns. But he said that selling the valley's water would end the last hope of settling the valley's eastern slope with small growers, as he contends the turn-of-the-century law intended.

"We have no water to sell," he said. "That water belongs to the East Mesa."

The debate over legal rights and policy implications is almost academic now, with the Colorado River bearing record snow melts down through the thirsty Southwest -- enough to satisfy the demands of both farmers and city-dwellers with a little left over to run into the Gulf of California.

But no one expects the river to run full for long.

"We either reach an agreement or there is going to be a severe drought and somebody is just going to take it away from us," Benson said.

The Metropolitan Water District's Boronkay, who expects water supplies in the southern megalopolis to fall nearly 30 percent short of demand within 15 years, agrees.

"They have the priority, and that's a real problem," he said. "But whether in a political context you can see a large urban area going without water while farming continues is something else. That water is going to be available to us."