Congress agreed yesterday to put the brakes on a pending Interior Department decision that critics contend would give millions of dollars in federal water subsidies to a group of wealthy California farmers.

Senate and House conferees agreed to put language in a massive end-of-year appropriations bill that would prevent the department from signing a legal settlement with the Westlands Water District in Fresno until Congress reviews the settlement and approves it.

According to Rep. George Miller (D-Calif.) and sources in California, Interior was close to quietly signing an agreement that would have granted Westlands farmers the legal right to cut-rate federal water for more than 150,000 acres of land brought under irrigation in violation of reclamation law.

The new congressional language requires Interior to give Congress at least 30 days to review any proposed pact with Westlands. Miller, who pushed for the language, argued that the secret proceedings violated the Reclamation Act's requirement that water contracts be negotiated in the open.

"This gives us carte blanche to look and see if it's in the public interest," Miller said yesterday. "It's a clear statement that there is not a lot of confidence in Interior's handling of the matter."

At issue in the lawsuit is whether the government is required to supply water to farmland annexed by Westlands in excess of the 500,000 acres authorized by Congress in the early 1960s. The district now covers more than 650,000 acres, much of it owned by large corporations and more than half planted to crops that are subsidized by federal farm programs.

Because Westlands buys federal water for far less than its delivery costs, a settlement favorable to the district would mean a multimillion-dollar gain for the farmers and a loss for the treasury.

Westlands has lobbied heavily for the agreement, hiring White House consultant Kenneth Khachigian, among others, to press its case. But Interior officials said this week that no agreement would be signed without a congressional review.

Interior recently delivered a thick pile of documents on the negotiations to Miller, who declined to comment on their contents.

"We feel we're on solid ground with many of our allegations," he said.