Caught for months in a lobbying crossfire between powerful energy interests, House negotiators yesterday unveiled an agreement that would require cleaner-burning gasoline by 1994 in the nation's most polluted cities.

The compromise, part of the clean air bill to be voted on by the House this week, calls for the use of "reformulated gasoline" -- conventional gas made less polluting by mixing additives such as ethanol, an alcohol made mainly from corn. The oil industry, threatened with the loss of its historical monopoly on gasoline sales, has spent more than $1 million in national advertisements in recent weeks attacking this mixture, which it refers to as "government gas."

The fierce and costly lobbying fight is a classic example of how an industry with virtually unlimited resources tries to protect its interests from other competitors, in this case a coalition of environmentalists and Midwestern farmers who support the use of ethanol. Although it is a small part of a complex bill, the so-called "alternative fuels" provision offers such potential profits for energy producers that one oil company executive refers to it as the "Business Opportunity Act of 1990."

"Despite Big Oil's opposition, we've reached an agreement on my initiative that will not only clean up the nation's air but give credibility to the growing ethanol industry," said Rep. Bill Richardson (D-N.M.), the main sponsor of the provi- sion.

Under the amendment, ethanol, now sold mainly in the Midwest, could more than double its market as a result of the requirement that reformulated gas be sold in the nine smoggiest cities -- 22 percent of the nation's gasoline market -- and in 44 cities with excessive levels of carbon monoxide in the winter months.

While the oil industry stands to lose a share of the $100 billion-a-year gasoline business if the provision becomes law, its lobbyists were able to stave off costlier threats by defining the terms of the debate even before it began.

Last summer the oil companies seized on reformulated gas as an answer to a more ominous threat -- methanol, another alternative fuel, derived from natural gas, that received strong support from President Bush. With little capacity to produce and distribute methanol, the industry decided to advocate the use of a new gasoline with additives that make it less polluting -- but still gasoline.

By enlisting the support of the auto industry and powerful backers in Congress, oil lobbyists managed last fall to eliminate methanol from consideration as an alternative fuel required in polluted cities. They then began working to block any attempt to force them to use ethanol in the new, cleaner gas.

"They've come full circle," said Charles Gray, head of the Environmental Protection Agency's fuels lab and strong advocate of alternative fuels. "They originally put out reformulated gas to sidetrack the idea of alternative fuels. Now they're attacking the very fuel they proposed."

The industry's position is that Congress should set standards for making fuel cleaner, but not specify a recipe for gas. Its position that, as one radio ad put it, "politicians shouldn't write formulas for fuel," is based on the estimated cost it will have to bear if it has to follow a congressional mandate. Under the Richardson amendment, at least 15 percent of the new, cleaner gasoline would have to consist of ethanol- or methanol-derived ethers or lesser amounts of pure ethanol or methanol.

If the House approves the agreement announced yesterday, the oil industry plans to oppose it in conference with the Senate, which passed a similar provision in March, according to William O'Keefe, vice president of the American Petroleum Institute.

"A specific recipe for gas is something we're not going to support," said O'Keefe.

The attempt to include a provision for alternative fuels in this year's clean air legislation marks the first time the oil companies have been targeted in a major way by a clean air bill. Although auto pollution is caused by burning gasoline, Congress has always attempted to regulate the car, rather than its fuel, in an effort to control the three dangerous tailpipe emissions: carbon monoxide and the two ingredients of smog -- hydrocarbons and nitrogen oxides.

Bush broke from that tradition in the clean air package he proposed last June, shifting the burden to oil companies, and noting that automakers already had squeezed out almost all they could from tailpipe emissions.

By calling for "clean fuels" to be used in cars in the nine cities with the worst smog, administration officials said they would be able to eliminate up to half the remaining smog-forming emissions caused by autos by 1995 and up to 90 percent by 2000. The president also suggested that some cars using clean fuels be manufactured -- at least 1 million a year by 1997 -- to make the mass production of the cars and the fuel to serve them cost-effective for both industries.

It was this potentially costly burden on Detroit that enabled the oil industry to enlist the Big Three automakers on its side. At a meeting last July in Detroit, the two industries agreed on a joint research project to study clean fuels. For the present they advocated developing "reformulated gasoline" that would require no methanol and therefore no changes in car design.

"Reformulated gas" is specially constituted to cut both ozone-forming and toxic emissions. The pollutants are reduced by replacing aromatics -- the chemicals used to boost octane in gasoline -- with cleaner alcohols such as ethanol or methanol.

Launching a national advertising campaign, the oil industry attacked methanol as being unsafe, with Mobil Oil in one ad taunting the fuel's biggest booster in the Bush administration, White House counsel C. Boyden Gray.

The administration, which originally described its clean-fuels initiative as the cornerstone of its clean air package, retreated in its first legislative test last fall under pressure from pro-auto and pro-oil members of the House Energy and Commerce Committee.

In a measure drafted by committee Chairman John D. Dingell (D-Mich.) and sponsored by two Texans -- Reps. Ralph M. Hall (D) and Jack Fields (R) -- a subcommittee deleted the auto production mandate. It also diluted the fuels standard from a level only obtainable by methanol to one that could be met by reformulated gas.

With methanol effectively eliminated, supporters of ethanol saw their opportunity in the Senate.

Ethanol enjoys the support of Midwestern lawmakers because its main feedstock is corn, and has a powerful backer in Dwayne Andreas, whose Archer-Daniels-Midland, an Illinois-based agribusiness giant, dominates the industry. For years the industry has received what amounts to a $500 million-a-year subsidy in the form of reduced federal gasoline taxes on ethanol sold at the pump.

The first test was an amendment that included a provision drafted by the staffs of Sen. Thomas A. Daschle (D-S.D.) and Sen. Tom Harkin (D-Iowa), that sought to reduce emissions of ozone by increasing the amount of oxygen in gasoline sold in the 101 most polluted cities. This could have been achieved by adding ethanol and would have meant an additional 1 billion bushels of corn sales each year -- a strong inducement for farm state sena- tors.

The measure failed 52 to 46, with a split among the farm state votes, including Senate Minority Leader Robert J. Dole (R-Kan.), who opposed the amendment because he was serving as the administration's point man in protecting the compromise clean air bill painfully worked out with Senate leaders.

Within a week, Dole was a co-sponsor of a new, scaled-back version of Daschle's pro-ethanol amendment for nine cities. Oil lobbyists opposed it because the industry would have to make expensive changes in refineries to produce the new, cleaner gas on a quick schedule. They felt they had the administration's support.

The vote was scheduled for March 29, a day when most of the attention on the Senate floor was focused on the major confrontation between the administration and Sen. Robert C. Byrd (D-W.Va.) over his proposed aid to coal min- ers displaced by acid rain con- trols.

But after the Byrd amendment was defeated by one vote with the help of Dole, the White House dropped its opposition to the pro-ethanol amendment.

"Dole delivered key votes against Byrd," one administration official explained. "He was obviously carrying a lot of water for the administration. It was hard for us to cut down something he was partially sponsoring."

The Farm Belt interests strengthened themselves significantly by joining forces with environmentalists in favor of clean fuels -- an unlikely alliance given the usual clash between the two groups over pesticides and land use.

Without active administration opposition, the farmer-environmentalist alliance steamrolled the few oil state senators who put up a floor fight. The vote was 69 to 30.

Just before the Senate vote, Dingell's House committee rejected a similar provision that dictated a recipe for gasoline, including a specific oxygen content. Like the Senate amendment, the measure sponsored by Richardson attracted the support of lawmakers sympathetic to farm and environmental interests who were joined by Rep. Henry A. Waxman (D-Calif.), Dingell's chief rival.

But unlike the Senate bill, it had to contend with Dingell, a longtime champion of auto interests, who forced a vote before his committee could be influenced by the Senate vote. This time, the Farm Belt and pro-environment coalition failed by one vote, 22 to 21.

The agreement announced yesterday was approved by Dingell, Waxman and Reps. Edward R. Madigan (R-Ill.) and Terry L. Bruce (D-Ill.), ethanol sponsors from one of the nation's top corn-producing states. The broad support ensures easy passage in the House.

Watching all this from the sidelines are representatives of the methanol lobby, who only a year ago were reveling in Bush's original clean air proposal, characterized at the time as a "methanol mandate."

"It's frustrating," said Ray Lewis, president of the American Methanol Institute. "Because we have no big block of votes, we're getting squeezed out."