The Senate yesterday approved a bitterly contested proposal to block the administration from increasing royalties on oil and gas from federal lands, marking the latest in a string of defeats for pro-environment forces in Congress this year.

Denounced by critics as a license for "Big Oil" to continue shortchanging the government and defended by supporters as essential to protect a financially strained industry, the legislation would continue a moratorium against any changes in royalty rules for another year.

The industry now basically sets its own payments. The Interior Department has contended that oil companies pay less than they should, by as much as $68 million a year, and proposed a new formula that would peg the payments to the market price. The industry has fought the change, which Congress blocked last year.

Oil companies that underpay are engaged in "out and out thievery" of money that would otherwise go to environmental protection and education, charged Sen. Barbara Boxer (D-Calif.), who led the fight for higher payments.

But Sen. Kay Bailey Hutchison (R-Tex.), who led the fight for the moratorium, countered that if companies are forced to pay more in royalties, it would invite "higher prices at pump for every working American."

A weeks-long impasse over the issue was broken early yesterday when the Senate voted 60 to 39 to end a Democratic-led filibuster against the proposal, which was supported by oil-state senators of both parties. All Republicans and five Democrats voted to limit debate and force action.

With 60 votes required to cut off debate, the proposal's backers had to wait until Sen. John McCain (R-Ariz.), a presidential candidate who was on a national book-signing tour, returned to supply the 60th vote and ensure its approval.

Later, the proposal itself was approved 51 to 47, with seven Republicans opposing it and five Democrats supporting it. It was then included in a $14 billion funding bill for Interior, which was approved, 89 to 10.

The bill now goes to conference with the House, which is seen as likely to accept the moratorium even though it has not voted for it. But the bill faces a likely presidential veto because of the royalty provision and several others.

The royalty proposal was one of several dozen amendments aimed at limiting environmental regulations that are being attached to appropriations bills as they move through Congress. Other initiatives would pave the way for more logging, mining and road-building in national forests, relax restrictions on dumping of mining debris on public lands, shelve environmental restrictions on grazing, make it easier to develop wetlands, bar stricter fuel-efficiency standards to reduce pollution from sport-utility vehicles and prohibit issuance of new regulations to carry out the 1997 global warming agreement.

Last year, President Clinton was able to scuttle many such proposals in negotiations but had to accept others as the price for getting a deal on spending bills.