2. TRANSPORTATION:

Coal ash, Keystone XL out of negotiated bill as deal appears close

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Provisions that would restrict U.S. EPA regulation of coal ash as a hazardous substance and expedite approval of the Keystone XL pipeline appear to be out of a transportation funding compromise as negotiations on Capitol Hill continue at a furious pace today.

The likely removal of those two House provisions comes as the Senate gave ground on language on environmental streamlining, bicycle and pedestrian funding, and $1.4 billion for the Land and Water Conservation Fund over two years.

With a goal of getting a bill written today and on the House and Senate floor this week, congressional staff members and conferees are working overtime to finalize a deal, according to top aides. House Speaker John Boehner said this morning that the House was nearing an agreement on the transportation bill, which he said would be paired with a one-year fix on the student loan rate increase.

"A lot of work has gone into this," the Ohio Republican said. "It's not finished yet."

Although aides say that work is continuing and that no deal will be final until everything is agreed upon, staff members say the goal is to vote on a bill before funding expires Saturday. That could set up a potential Saturday morning vote, but it's also possible the chambers will advance a short-term extension to keep funding going past Saturday to allow time to move the bill.

Sen. Max Baucus (D-Mont.) had been working yesterday to strike a deal that would preserve the LWCF funding in exchange for a modified version of the coal ash language. However, several sources with knowledge of the discussions indicated this morning that both provisions are out of a final bill.

A person close to the negotiations, who requested anonymity as the discussions continue, said finding money for the LWCF has been "one of the hardest challenges for its supporters."

"There just isn't an extra $1.5 billion floating around up for grabs," the source added.

The final bill will preserve a Gulf Coast oil spill recovery fund for affected states, according to sources familiar with the discussions.

Environmentalists say they are anxiously awaiting a final bill to see how environmental streamlining and reforms to the National Environmental Policy Act fared. Sources familiar with the negotiations indicate that lead Senate negotiator Barbara Boxer (D-Calif.) may have bent on the streamlining language, specifically saying that language may have tipped toward the stronger House language on issues such as review deadlines and categorical exclusions for certain projects.

Because streamlining was one of the few areas where both the House and Senate had policy language, observers say they expected to see largely new language in a final deal. Although congressional staff members indicate that was a section of the legislation that saw some negotiation, there are no details about how the final language will look.

There are still negotiations pending about bill length and funding levels. Hitching the transportation bill to the student loans bill would allow the two bills to share a pay-for on pension smoothing, which sources say would allow negotiators to write a transportation bill that could extend past fiscal 2013.

The Senate-passed bill would have funded programs only through September 2013.

The House is also set to consider this week two motions to instruct conferees, including one from Rep. Janice Hahn (D-Calif.) that would push House conferees to agree to Senate-passed language governing freight policy.

Reporters Phil Taylor, Paul Quinlan and Manuel Quinones contributed.