Clock ticks for US Congress over transport, student loans

Sat Jun 23, 2012 6:15pm EDT

* Deal could link passage of highway funding, loans

* Compromise possible on regulations for coal ash

* Still unresolved: Keystone pipeline approval

By Roberta Rampton

WASHINGTON, June 23 (Reuters) - With only a week to go until funding expires for federal highway construction and student loan rates soar, negotiators in Congress are working to cut a deal that would defuse two political time bombs ahead of the November general election.

"All I can confirm is that work continues through the weekend, the goal being a final agreement that can get wrapped up next week," a House of Representatives Republican aide said on Saturday.

Failure would have a direct impact on the economy ahead of the Nov. 6 vote. About 3 million road, rail and transit jobs hinge on the transportation funding bill.

Without a deal, interest rates for federal student loans are set to double on July 1 to 6.8 percent.

Combining the programs into one package could increase the political stakes, making it harder for lawmakers to vote no on issues that resonate with many voters across the country.

There were signs that Democratic negotiators had offered concessions on Republican demands to streamline environmental reviews for certain types of road projects to speed construction, said aides from both parties.

Also in play was a possible compromise to ease proposed environmental regulations for coal ash, a byproduct of coal-fired power plants used to lower the cost of cement and other construction materials.

But the battle over the Keystone XL crude oil pipeline from Canada to Texas continues to loom over the talks.

The crux of the matter is how to make a two-year, $109 billion transportation bill passed by the Democratic-controlled Senate palatable to Republicans who control the House.

House Republicans want quick approval of the pipeline as part of the transportation bill, which has put Democrats in a tough spot.

President Barack Obama put the project on hold this year, pending further environmental reviews, and has threatened to veto legislation that would override his decision.

A majority of lawmakers on the negotiating committee will have to agree to any package, which would then need to get a majority of votes in the House and Senate next week. Then the bill would go to the White House for Obama's signature.

"There's no excuse for inaction," Obama said in his weekly address on Saturday. "Right now, we are seven days away from thousands of American workers having to walk off the job because Congress hasn't passed a transportation bill.

"We are eight days away from nearly seven and a half million students seeing their loan rates double because Congress hasn't acted to stop it. This makes no sense."

Before the weekend push, many lawmakers and analysts had written off chances for an agreement, expecting instead a shorter-term, stopgap highway funding measure lasting three or six months. That still could happen.

Lawmakers have said a short-term extension of highway funding would not likely include approval of Keystone.

House Republicans have already been exploring alternatives for attaching the Keystone fast-track provision to other crucial legislation this year. (Additional reporting by David Lawder, Thomas Ferraro, Richard Cowan, Alina Selyukh; Editing by Xavier Briand)