WASHINGTON, May 27— As Congress reviews the Endangered Species Act, the most important debate at the moment is not between the law's defenders and its critics, but among conservatives of different stripes quarreling over how much to revise it.
One group, led by Senator Slade Gorton of Washington, has worked closely with representatives of large industries like the timber and paper companies to devise an approach that would make regulations under the law more flexible and ease the way for companies to exploit natural resources. It would leave considerable power in the hands of the Secretary of the Interior, whose agency would continue to control conservation plans for protected species using Government regulations.
But in the House, another approach is evolving, one that would practically do away with Federal regulations and rely instead on financial incentives to encourage landowners to preserve and enhance vanishing habitat voluntarily. The faction pressing this approach is appealing to advocates for the rights of small property owners and has gained the support of some prominent conservative natural resource economists.
Supporters of the more ambitious approach said that the law's most vociferous critics were on their side. But Senator Gorton said he believed his approach, which has been strongly condemned by liberals, will gain appeal if a more extreme alternative emerges on the right.
"The national environmental organizations exhausted their entire supply of adjectives in cussing out my bill, and they aren't going to have any left when they see a really radical proposal," he said. "Before the battle is over, mine will look pretty much middle of the road, which is what it is supposed to be."
As the struggle among conservatives plays out, one person to watch for clues to the outcome could be Speaker Newt Gingrich. Although he is likely to let Representative Don Young, an Alaska Republican who is chairman of the Resources Committee, steer the bill forward in the House, Mr. Gingrich was a sponsor of the existing law and professes a deep interest in conservation policies.
"I am very committed to bringing through the House a bill that is economically rational, biologically correct and respects the property rights of individuals," Mr. Gingrich said at a hearing on the bill this week. "That is a very tough, very high standard, and it is going to take a lot of work to get there."
Although he emphasized his sympathy for property owners who object to the law's strictures, he reminded the committee: "On the other hand, we also have to recognize that there are enormous interests that we have as human beings in maintaining biological diversity."
But Representative John Shadegg, an Arizona Republican who is helping to draft a bill that would end mandatory conservation regulations, said he believed species could be protected in new and imaginative ways, including as little regulation as possible.
"There is the typical, think inside the box, regulatory approach," he said, referring to Senator Gorton's bill. "The other school is thinking outside the box, recognizing to a slightly greater degree the interests other than the big interest groups that have already signed on to the Gorton bill."
Mr. Shadegg supports a statement of principles issued earlier this month by a coalition of small property-rights groups.
Among other things, these groups want the new law to include the following changes:
*The primary responsibility for conservation of animals and plants would be reserved to the states.
*Federal conservation efforts would rely entirely on voluntary, incentive-based programs to enlist the cooperation of America's landowners.
*Federal conservation efforts would encourage conservation through commerce, including the private propagation of animals and plants.
The Competitive Enterprise Institute, an influential conservative policy group that favors deregulation, has endorsed this approach. Calling the existing law "fundamentally flawed," Ike C. Sugg, the group's land use policy fellow, testified that "no amount of tinkering around the margins will solve its intrinsic problems."
"I don't agree with that," Senator Gorton said. "There is clearly a place for Government regulation in connection with values that are not easily reduced to dollars."
Representative Richard W. Pombo, a California Republican who is heading a task force on endangered species, said he thought that when the group presented a bill to the House Resources Committee this summer it would probably recommend "more of a fundamental change in the act," along the lines of the voluntary approach that Mr. Shadegg has proposed.
"Say that a rancher enters into a management agreement on his property, to benefit a species," said Mr. Pombo, himself a fourth-generation rancher and an ardent foe of the species protection law. "One of the incentives that could be placed out there is that the inheritance tax on passing the ranch from him to his child could be delayed as long as the property remains in a habitat conservation plan."
The advocates of a nonregulatory approach concede that it might cost a lot of money, but say they hope to pay for it by selling federally owned land to ranchers and the timber industry. And they point out that it would protect the rights of property owners without triggering another form of compensation favored by anti-regulatory conservatives -- the payment for the perceived loss of value, or "takings," of private land.
Of course, both of the two conservative camps are producing proposals that are abhorrent to environmentalists and their allies in the Clinton Administration, which has argued that the Endangered Species Act needs little change at all, beyond administrative changes to improve its use of scientific research and to encourage cooperation from private landowners.
Interior Secretary Bruce Babbitt, said when Senator Gorton introduced his bill that it "can be summed up in seven words: it will repeal the Endangered Species Act."
Mr. Gorton, for his part, says that many of the administrative improvements that the Clinton Administration favors are compatible with the legislation he has drafted.
But with Republicans determined to change the law and with many conservative Democrats joining the effort, the voices of the Administration and the environmental groups are largely drowned out for the time being.