Progress on highway bill but Keystone unresolved: senator

Senator Barbara Boxer (R-CA) speaks to the media after voting on a bill allowing a rise in the debt ceiling on Capitol Hill in Washington August 2, 2011.

WASHINGTON (Reuters) - Lawmakers on a U.S. Senate-House committee are making progress on finalizing a transportation spending bill, Senator Barbara Boxer said on Wednesday, although a provision that would fast-track the Keystone XL crude pipeline is still unresolved.

The committee's starting point is a two-year, $106 billion bill to fund road, bridge and rail projects passed by the Senate in March.

Republicans have insisted that the legislation include approval of the Canada-to-Texas Keystone oil pipeline, which President Barack Obama put on hold earlier this year after environmentalists raised concerns.

In a weekly update on the closed-door negotiations on how to advance the bill, Boxer, the Democratic chairman of the Senate-House panel, said she was more optimistic than ever that a deal could be reached by a June deadline after discussing the bill with Republican House Speaker John Boehner on Tuesday evening.

"He (Boehner) is working to make sure we get this done, and that is the best news I have heard in a long time," Boxer said, without addressing specifics of the thorny points of the talks.

"Our conversation was really good. Nobody brought up any quote-unquote 'sticking points.'"

In a statement, Boehner said Keystone remains a priority.

"I'm hopeful that the negotiators can complete work on a conference agreement that includes Keystone and other energy measures to address high gas prices and create jobs," Boehner said.

Boxer added that she was determined to push through a bill that would pass Congress and be acceptable to Obama, who has said he would veto a bill that overturned his decision on TransCanada Corp's project, which he has said needs more environmental review before it can proceed.

"I've said from the start: I'm not going to produce a bill that's going to be vetoed, and I'm not going to produce a bill that's going to be a controversy, because it won't go through," Boxer, a Democrat,

If lawmakers cannot agree on the bill, they could craft another short-term extension of funding. But a trust fund that helps pay for highway repairs will run out of money in the fiscal year that begins October 1.

Boxer said a symbolic vote held on Friday in the House of Representatives, which is controlled by Republicans, showed there was not a two-thirds majority in the House needed to overturn a presidential veto on the Keystone issue.

The non-binding vote, which passed 261-152, urged the panel to include Keystone in the highway bill. Twenty-six Democrats voted in favor of the motion, while 151 Democrats opposed it.

"I thought it was good that they had (the vote) actually, so that we can see there wasn't enough to override a veto. So it was instructional," Boxer said.

(Editing by Paul Simao)