We present a spectral sequence for free isometric Lie algebra actions (and consequently locally free isometric Lie group actions) which relates the de Rham cohomology of the manifold with the Lie algebra cohomology and basic cohomology (intuitively the cohomology of the orbit space). In the process of developing this sequence we introduce a new description of the de Rham cohomology of manifolds with such actions which appears to be well suited to this and similar problems. Finally, we provide some simple applications generalizing the Wang long exact sequence to Lie algebra actions of low codimension.