"Builders and farmers may be forced out of business and into bankruptcy," Assemblyman Alex DeCroce, R-Morris, said to thunderous applause by construction industry supporters who filled much of the room.

Speaking directly to the boisterous builders, Sen. Bob Smith, D-Middlesex, chairman of the Senate environment committee, countered: "We won't have a housing industry in New Jersey if we don't have a clean water supply."

The bill, S-1/A-2635, called the Highlands Water Protection and Planning Act, would restrict major development on environmentally sensitive lands near reservoirs and feeder streams in the Highlands. The region stretches from Mahwah in Bergen County through large portions of Passaic, Morris, Somerset, Sussex, Warren, and Hunterdon counties.

Supporters of the bill, including leaders of statewide and local environmental groups, called for quick action on legislation that was drafted on the basis of reports by the recent task force, two earlier state commissions, and two U.S. Forest Service studies of the region. Governor McGreevey is pressing legislators to pass a bill for his signature by July 1.

But by the end of the sixth contentious public hearing on this bill in a month, political accommodation was whittling away at the original goal of sweeping action to conserve nearly half of the Highlands.

"Both builders and environmentalists have to compromise," said Assemblyman John E. Rooney, R-Bergen, who holds a key vote on the Democratic-led Assembly environment committee. Rooney noted that a provision he favored, which would have granted the state the right of first refusal in buying land up for sale, was cut to mollify angry farmers.

Agriculture Secretary Charles Kuperus testified that many changes in the bill would benefit farmers, but he argued that more needs to be done to ensure that farmers are paid a fair price if the state buys development rights to their lands.

Rooney and another key Republican, Sen. Henry McNamara, R-Wyckoff, insisted on a provision ensuring state aid payments to municipalities that lose potential tax-generating ratables when land is bought for conservation.

"I want to support this bill, but there are too many questions," said Rooney. He proposed a ballot question asking voters if they would approve a small tax on tap water supplied from the Highlands.

Setting the stage for maneuvering on funding and other issues was a decision by Smith and John McKeon, D-Essex, chairman of the Assembly environment committee, to postpone a vote on the bill to May 10. It was originally set for Thursday to mark Earth Day.

Legislators said they needed more time to review 80 pages of amendments added to the 101-page bill. The amendments address complaints by farmers that they wouldn't be able to farm and by homeowners that they wouldn't be allowed to improve their properties under the proposed regulations.

The amendments also increase the number of local officials and residents who would sit on a Highlands regional planning council and address municipal concerns about losing tax ratables on land in the proposed preservation area.

Another contentious issue is what exemptions should be made for proposed housing projects in various stages of the municipal approval and state permitting process.

"We need to know the total on that and the impact" on the proposed goal to preserve 145,000 acres of privately owned and municipal tracts, said Assemblyman Louis Manzo, D-Jersey City.

Speaking on behalf of the real estate industry, Jarrod Grasso of the New Jersey Association of Realtors argued that the legislators should "take the time to ensure this law not only preserves our drinking water, but also provides for responsible growth and affordable housing opportunities."

Sen. Robert Martin, R-Morris, a co-sponsor of the bill whose district is in the Highlands, said the environment committees did a remarkable job holding a series of hearings in Trenton and Highlands communities and drafting a bill that is still a work in progress.

"Some people don't want this bill, period," Martin said. "I've seen the bill develop over time. We are working on a stable source of funding. There is more work to be done."