The ethanol provision was authored by Senate Majority Leader Tom Daschle and endorsed by other farm state lawmakers.

The U.S. now produces 1.8 billion gallons of ethanol, mostly made from corn. The provision would require use of 2.3 billion gallons of ethanol by 2004 and 5 billion gallons by 2012, based on a new mandatory renewable fuels standard (RFS).

"This vote was about the future of the country and taking real steps to become energy independent," NCGA president Tim Hume said in a statement.

"This is a huge win for corn growers and the coalition of agriculture, oil, ethanol and environmental groups that came together to forge this historic RFS agreement," he said.

The Bush Administration also supports the ethanol measure.

But Democrats Dianne Feinstein of California and Charles Schumer of New York fought the plan, saying it would trigger gasoline shortages and higher prices because of the difficulty in shipping enough ethanol to refiners on the West and East coasts from the Midwest Corn Belt states.

Their effort to kill the ethanol measure failed when the Senate voted 61 to 36 to set aside their amendment.

"Our opponents talked a great deal about what could not be done," Hume said. "What they have failed to recognize is the determination of U.S. farmers to play a role in this nation's energy future."

Ethanol has long enjoyed generous tax breaks to encourage production. It is an alternative to MTBE, a gasoline additive now banned in some states due to groundwater contamination.