The House Appropriations Committee adopted amendments yesterday that would overturn many recent Interior Department regulations that relaxed water-subsidy law and would subject farmers for the first time to financial penalties for seeking to evade federal reclamation law.

The amendments, approved unanimously without debate, would impose new restrictions on the trusts and farm-management arrangements that many western farmers have adopted since Congress enacted the Reclamation Reform Act.

That 1982 law was designed to rein in sprawling farm operations, some of which receive millions of dollars a year in water subsidies, by setting a 960-acre limit on eligibility for low-cost federal water. Previous law set a 320-acre limit, but it was widely ignored or circumvented by lease arrangements that produced mega-farms of 10,000 acres and more.

Last April, however, the Interior Department began allowing farmers to avoid the acreage limitations by putting excess land in trusts and establishing management firms to operate the farms. Critics denounced the legal mechanisms as "paper farms" that essentially preserve the status quo.

The amendments adopted yesterday would put new limits on trusts established after June 3 and would forbid management firms from having any economic interest in the farming operation. Farmers could not establish management firms with themselves, their families and their business partners as officers, as many western farmers have done.

The panel also approved penalties for farmers who seek to evade the law by setting up illegal trusts or management arrangements. Interior officials had initially proposed similar penalties, but these were stripped from its final rules at the insistence of western farmers.

Rep. George Miller (D-Calif.), a leading critic of reclamation policies who helped draft the 1982 law, called Interior's April rules a "capitulation to a small number of special-interest irrigators who are "It seems to create new loopholes . . . . businesses will do whatever is needed on paper to protect their subsidy."

-- Hamilton Candee, Natural Resources Defense Council

more interested in farming the Treasury and the taxpayers than in farming the land."

Joining him yesterday in offering the amendments were House Interior Committee Chairman Morris K. Udall (D-Ariz.), Rep. Vic Fazio (D-Calif.) and Majority Whip Tony Coelho (D-Calif.), whose San Joaquin Valley district includes some of his state's largest farms.

"I think people understand how much jeopardy this last set of rules puts the program in," Miller said. "There are a handful of people getting more and more privileges. If it continues, the program dies."

Interior officials had no comment. Conservationists said they welcomed the panel's acknowledgement that "the rules are bad and need to be changed," but said the new provisions do not go far enough.

"It seems to create new loopholes," said Hamilton Candee of the Natural Resources Defense Council. "The one thing we have learned from the recent history of the reclamation program is that when you leave any kind of a loophole there are agricultural businesses that will do whatever is needed on paper to protect their subsidy. It has to have airtight language."

The amendments, added to legislation that would finance dozens of Bureau of Reclamation and Army Corps of Engineers water projects, could be removed on the House floor under a rule that forbids putting legislation into spending bills.

The rule is not infrequently ignored, however. and Miller said he is optimistic that the provisions will survive. "We're taking it one step at a time," he said.