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WASHINGTON - Citing crises in two of the world's key oil-producing regions, the Senate on Thursday passed legislation that would encourage domestic oil and coal production, provide incentives for energy conservation and expand the use of alternative fuels such as corn-based ethanol.

The bill passed 88-11; eight of those voting no were Democrats. It fell short of the comprehensive bill envisioned by either Democrats or Republicans because it had been stripped of a White House-backed proposal to drill for Alaskan oil and a Democratic plan to increase vehicle fuel efficiency standards.

The measure now must be reconciled with legislation the House of Representatives passed last August. Significant differences between the measures could delay its enactment into law for some time.

Still, the two bills cover common ground that could affect how Americans heat and cool their homes, what they pump into their gas tanks and what appliances they buy. Both bills also encourage greater research of new energy technologies and ease the way for construction of a natural gas pipeline from Alaska to the lower 48 states.

Democrats and Republicans both declared victory Wednesday, while conceding that the final product lacked key components.

"It's modest, but it's important," said Sen. Max Baucus, the Montana Democrat who helped craft the bill's conservation and production tax incentives.

Republicans were happy just to have a bill they can now try to alter to their liking in a House-Senate conference. Democrats were pleased to pass legislation that contains more conservation provisions than the House-passed bill and that significantly dampened any enthusiasm for oil drilling in Alaskan wilderness.

The bill's advocates said action was especially urgent at a time of turmoil in the Middle East, threats from Iraq to use oil as a weapon against the United States and political unrest in Venezuela, another major oil producer.

Environmental groups, however, dismissed the bill as inadequate and tilted toward oil and nuclear interests.

"Too many senators are catering to the industries that bankrolled their campaigns - or might in the future," said Joan Claybrook, president of the consumer advocacy group Public Citizen.

The Senate bill contains:

• $14 billion in tax incentives over the next 10 years to encourage production of new fuels, to help the oil and coal industry extract more fuel, and to promote conservation through the use of energy efficient appliances, hybrid automobiles and fuel cells. "On the margins it helps wean us from OPEC," Baucus said, referring to the Organization of Petroleum Exporting Countries.

• A requirement to increase use of renewable fuels, such as ethanol, from about 2 billion gallons a year now to 5 billion gallons by 2012.

• Requirements that federal agencies intercede on behalf of consumers in the event of an energy crisis such as befell California last year.

• Tax incentives and $10 billion in loan guarantees to build a natural gas pipeline from Alaska to the lower 48 states. Advocates say the pipeline could create hundreds of thousands of jobs and boost the ailing U.S. steel industry.

• An increase in energy assistance for low-income families from $2.25 billion to $3.4 billion a year.

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While Republicans presented a unified front on their issues, Democrats split on two key elements - a proposal to increase the fuel efficiency of vehicles and the provision to expand the use of ethanol.

Democrats from car-making states teamed up with most Republicans earlier this month to defeat higher mileage standards. They argued that the higher standard was arbitrary, would damage the auto industry and reduce highway safety. An effort Thursday to reduce vehicle fuel consumption a million barrels a day by 2015 failed 57-42.

California and New York Democrats tried to eliminate or delay the ethanol requirements, saying they would cost consumers on the two coasts more at the gas pump. But they were unable to overcome the coalition of farmers, environmentalists and oil industry lobbyists who backed the fuel-additive provision.

The ethanol provisions are "going to fleece the American taxpayer," said Sen. Charles Schumer, D-N.Y.

How the legislation ultimately affects consumers and the energy industry depends on what happens in the House-Senate conference. Rep. W.J. "Billy" Tauzin, the Louisiana Republican who likely will head the conference, said he hopes to complete negotiations by summer.

The House bill contains $33.5 billion in tax breaks, many aimed at oil and coal producers. It also contains a provision to drill for oil in the Arctic National Wildlife Refuge, which would be difficult to resurrect after the Senate's rejection. The Senate bill contains extensive electricity regulations that the House lacks.

"We have the tools for creating a bill that is acceptable to both chambers," Energy Secretary Spencer Abraham said Thursday during an appearance with Senate Republican leaders.

Copyright 2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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