UPDATE 2-US Senate Committee OKs highway law extension

(Adds Finance Committee, Transportation secretary, reaction, byline)

By Lisa Lambert

WASHINGTON, July 15 (Reuters) - A key U.S. Senate committee approved on Wednesday part of President Barack Obama's plan to keep road and highway programs operating as the fund for construction and repairs comes close to zero.

The Environment and Public Works Committee voted to extend the current transportation law, which expires on Sept. 30, by 18 months.

The measure will be combined with one currently under consideration by the Senate Finance Committee to transfer $20 billion into the fund that provides money for highway projects, and then sent to the full chamber for a vote.

"Right now, with the Highway Trust Fund running out of funds even as we speak, the most important thing is predictability," said Environment and Public Works Committee Chairman Barbara Boxer.

The Department of Transportation has said the fund, which is supported by revenues from an 18.4 cent tax levied on each gallon of gas sold in the United States, will be empty by the end of August.

There is no corresponding extension in the House of Representatives, reflecting both Democrats' and Republicans' opposition to Obama's plan. House members prefer passing a new multi-year transportation bill.

Representative John Mica, a leading House Republican on transportation matters, called the Senate committee's vote a "prelude to a national disaster."

"This action has the unintended consequences of closing down nearly every major national infrastructure project for two years and at a time when the unemployed are crying out for the opportunity to work," he said in a statement.

But Boxer said an extension would give states certainty on funding for projects as Congress works on that bill, which includes a complete reform of how the country organizes its transportation programs.

Boxer said it would also give Congress time to find additional funding sources for highways.

In order to support the House's plan, the federal government would have to double the gas tax, Boxer said, increasing the burden on drivers during a long recession.

"Let's get real," she said.

Transportation Secretary Ray LaHood said on Wednesday an extension will permit lawmakers and the administration to craft a bill "that reflects the values of what Congress wants to do and find a way to pay for it."

Obama said the $20 billion will be transferred from the general fund and he will work with Congress to find sources for repaying the amount. LaHood told reporters the administration has yet to name potential sources.