A method and apparatus for magnetic field measurements to determine the proximity of a nearby target incorporating electrically conductive material includes a drill string (54) having multiple drill pipe sections (56, 57, 58, 59) connected end-to-end, with at least one of the drill pipe sections (57) being electrically conductive and isolated to provide an electrode section. A nonmagnetic drill pipe section (84) is connected in the drill string below the electrode section (57), and a hydraulic motor (62) having a rotatable drill bit sub (70) carrying a magnetic field sensing instrument package (102) is connected to a lowermost end of the drill string. A power supply provides a time-varying current to the drill pipe electrode section (57) to produce a corresponding target current magnetic field to be detected at the drill bit instrument (10)2, and a communication instrument package (94) is locatable within the nonmagnetic drill pipe section (84) to receive magnetic field data from the magnetic field sensing instrument package (102) on the drill bit (70).