BRASILIA, May 22 (Reuters) - Brazil's Senate has

approved legislation to loosen environmental licensing, despite

criticism from climate policy groups and figures inside

President Luiz Inacio Lula da Silva's government.

The bill, which was approved in the Senate by 54 votes to 13

late on Wednesday, would allow projects considered to have a

small or mid-sized impact, such as dams and basic sanitation, to

be built without the approval of environmental agencies.

The legislation, which still requires approval from Brazil's

lower house of Congress, enjoys widespread support from the

powerful agribusiness caucus, as well as high-ranking figures in

Lula's government such as his chief of staff Rui Costa.

The bill highlights government divisions on environmental

policy as Lula tries to burnish his green credentials before the

country hosts the United Nations climate summit known as COP30

in the Amazonian city of Belem in November.

The approval is a blow to Environment Minister Marina Silva,

who had said the bill would be a major setback that "dismantles"

licensing in the country.

The government's role in negotiating the bill was limited by

its internal divisions, sources told Reuters. It engaged in

"harm reduction" by backing a version of the bill considered to

have less impact on existing environmental law, they said.

Greenpeace and Brazil's Climate Observatory, a collective of

environmental organizations, have criticized the proposal saying

it deprives vulnerable populations such as Brazil's Indigenous

of a say in projects that could affect their communities.

The bill was put to a vote as Brazil's environmental agency

Ibama faces intense scrutiny for licensing delays, including a

drilling request by state-run oil firm Petrobras

hoping to explore for oil off the coast of the Amazonian state

of Amapa.

Senate President Davi Alcolumbre, an important backer of the

bill, hails from Amapa and has been pushing for the development

of the oil industry in the region.