In yesterday's editions, The Washington Post inadvertently identified a photograph of former senator Gaylord Nelson as that of Interior Secretary-designate James G. Watt. The picture was part of a panel of photographs accompanying an article of Watt's confirmation hearings; as a result of the error, two pictures of Nelson appeared, none of Watt.

Backers and critics of Interior Secretary-designate James G. Watt clashed yesterday at his confirmation hearing over the meaning of the word "balance" in environmental issues, with former senator Gaylord Nelson (D-Wis.) charging that Watt "does not share the same sense of urgency, concern or understanding" that moves most Americans.

Appearing before the Senate Energy and Natural Resources Committee on behalf of the Wilderness Society for the first time, the liberal ex-senator protested that Watt's "narrow private-interest views" were being redefined as balance for the Interior Department's next four years. He told the committee that it was "a code-word argument" and said he could not think of any environmentalist position that Watt or the Mountain States Legal Foundation, of which Watt is president, or its corporate supporters had ever endorsed.

"On every issue, they fought 'em all," he said. "The balance always goes their way. . . . To them it's interchangeable, extremist or environmentalist, and that's why we oppose him."

Sen. John Melcher (D-Mont.) called Nelson's speech "a clarion call" for the environmental movement. But a parade of other witnesses representing ranchers, farmers, energy groups and other conservation organizations including American Indians announced support for Watt, saying his view of balance reflected their own.

"Mr. Watt has removed many of our fears and doubts" with his endorsement Wednesday of President-elect Ronald Reagan's position on Indian tribal sovereignty, said Kenneth E. Black, executive director of the National Tribal Chairmen's Association. Originally, Black had said he was "troubled" by Watt's views on federal control over natural resources on Indian land.

Utah Gov. Scott Matheson told the panel that he supported Watt as "unqualifiedly" capable of balancing the energy demands and delicate environmental questions that are plaguing his state. And James W. O'Meara of the National Water Resources Association promised that Watt "will not, I assure this committee, turn lose the bulldozers to ravage public lands."

Rex Resler, executive director of the American Forestry Association, said he was "convinced that Watt's role will change from advocate for the few to advocate for the many." He continued, "We do not have privilege of choosing between the environment and the economy. We have got to have them both and we will if we are smart."

In what appeared to be a further concession to opponents' criticisms, committee chairman Sen. James A. McClure (R-Idaho) and ranking minority member Sen. Henry M. Jackson (D-Wash.) jointly announced that Watt had agreed that he would not, as interior secretary, participate in cases brought by the Mountain States Legal Foundation involving Interior Department matters. On Wednesday, Watt had reserved the option to participate because, he said, the foundation might be correct in some matters.

Sen. Malcolm Wallop (R-Wyo.) surprised Nelson at the start of his testimony by suggesting that Senate rules might prohibit Nelson's testimony because of his status as a former member. Nelson, who helped write the Senate ethics regulations, insisted that committee testimony is "not lobbying by any definition." Wallop responded that he thought the rules were being violated but would not press the matter.

Later, Nelson brushed off the skirmish as "child's play," but Wilderness Society environmental director Charles Clusen said Wallop "did that to embarrass us and embarrass our position."

The Energy Committee released tax forms and financial disclosure statements showing that the foundation paid Watt $29,000 in 1977, its first year of existence, and now pays him $73,500.

Watt's nomination is expected to win easy approval by the committee next week.