This story was updated at 5:15 p.m.

The Interior Department today announced it will be revising a controversial draft rule to regulate hydraulic fracturing, the oil and gas production technique used at 90 percent of wells drilled on public lands.

Interior's Bureau of Land Management next week will send the changes to the White House for review and will later release a new proposal for public comment in the first quarter of 2013.

The changes indicate that the rule that drew widespread concern from oil and gas groups, Western governors, and Republican lawmakers after it was released last May is continuing to evolve and will likely not be finalized for several more months.

Interior Secretary Ken Salazar early next week is scheduled to hold a closed-door meeting with officials from major oil and gas companies -- including Apache Corp., ConocoPhillips Co., Anadarko Petroleum Corp., Williams Cos. and Statoil ASA -- to discuss federal regulatory issues, a source said.

It is unclear what changes are being proposed, but Interior said the new rule will still require disclosure of the chemicals companies inject underground, in addition to beefed-up standards ensuring wells do not leak and that wastewater is properly managed.

"As we continue to offer millions of acres of America's public lands for oil and gas development, it is important that the public have full confidence that the right safety and environmental protections are in place," Interior spokesman Blake Androff said. "The BLM is making improvements to the draft proposal in order to maximize flexibility, facilitate coordination with state practices and ensure that operators on public lands implement best practices."

News that Interior was considering changes to its fracturing rule was praised by Jack Gerard, president of the American Petroleum Institute.

"We welcome the administration's decision to reconsider the rules, which we requested, as a positive first step," Gerard said in a statement this afternoon. "However, the real test will be in the substance of the re-proposal. We hope the administration will recognize the strong oversight provided by existing state and federal regulations and take sufficient time to review the many thoughtful comments provided by the oil and natural gas industry and others."

Oil and gas groups complained that the rule would increase the cost of drilling on public lands, gum up the permitting process and duplicate regulations already overseen by states.

But environmentalists, including many Democrats in Congress, have insisted BLM's rules had not been updated since the 1980s, even as the use of fracturing for shale gas and oil rapidly expanded.

"There is consensus that the oil and gas industry should have to comply with the same environmental laws as other industries, that our clean air and clean water should be protected, and that enforcement should be tough," Amy Mall, senior policy analyst with New York-based Natural Resources Defense Council, wrote in a blog post last week, citing polls showing a majority of the public supports tough fracturing regulations.

BLM's draft rule last May would have required companies to disclose the chemicals they use within a month of a fracturing job, rather than before the well is stimulated as proposed by environmentalists (Greenwire, May 4, 2012).

BLM estimated the initial rule would cost operators $11,833 per well, a small portion of the overall cost to drill, though an industry-commissioned report by John Dunham & Associates argued the rule would cost drillers about 25 times that much.

BLM said its new revisions to the rule were informed by the more than 170,000 comments it received on the proposal.

Hydraulic fracturing, in which up to millions of gallons of water are injected at high pressures underground to create new seams for oil and gas, is credited with spurring production booms in North Dakota, Pennsylvania and Texas and helping reduce imports of foreign crude.

WILLIAMSBURG, Va. -- House Republican Conference Chairwoman Cathy McMorris Rodgers (R-Wash.) announced at the close of her party's retreat here today that she plans to offer legislation next week that would tie a three-month extension of the debt ceiling to the passage of a federal budget.

As extra motivation, McMorris Rodgers' bill would suspend members' salaries if their chamber fails to pass a budget resolution.

House GOP leaders began hinting yesterday that they were considering a short-term deal that would stave off a looming default by the federal government and allow time for broader negotiations between the White House and Congress to succeed.

Without a debt ceiling increase, experts say, the country could default on its bills between Feb. 15 and March 1. That would put the United States in line for a credit downgrade.

In discussing the legislation this afternoon, a GOP leadership aide said leaders decided to tie the budget issue to the debt ceiling because passing a budget resolution represents "a necessary first step" toward dealing with the country's long-term debt and deficit.

"American families have to budget, especially in difficult times, and it is time for Washington to be put on a budget that cuts out-of-control spending," McMorris Rodgers said.

The chairwoman noted that while the House has passed budgets in recent years with deep cuts, the Senate has been unable to move a budget.

"The United States Senate is approaching four years without having passed a budget, and that must end because the Democratic majority in Washington is shortchanging the American people," she said.

Currently both chambers are required by law to pass a budget resolution by April 15. The GOP aide said that by tying the budget deadline to members' pay, McMorris Rodgers' legislation simply provides enforcement for current law.

Under the bill, if one chamber passes a budget and the other doesn't, only the members of the chamber that passed a budget would get paid.

The White House responded with a statement this afternoon: "The President has made clear that Congress has only two options: pay the bills they have racked up, or fail to do so and put our nation into default. We are encouraged that there are signs that Congressional Republicans may back off their insistence on holding our economy hostage to extract drastic cuts in Medicare, education and programs middle class families depend on. Congress must pay its bills and pass a clean debt limit increase without further delay. And as he has said, the President remains committed to further reducing the deficit in a balanced way."

The California Public Utilities Commission budget is packed with errors and the agency's practices are flawed, an audit from the state Department of Finance has found.

The analysis discovered "significant weaknesses within CPUC's budget operations which compromise its ability to prepare and present reliable and accurate budget information."

They include ineffective management over budgeting functions, problematic budget forecasting methodologies and failure to comply with rules of the CPUC's consumer protection arm, the Division of Ratepayer Advocates.

The audit found discrepancies of more than $1 million in seven of 14 funds that the CPUC administers. For the past seven budget cycles, CPUC's forecasting models have produced results differing greatly from the revenues, reimbursements and expenditures published in the governor's budget.

Variances were as much as 73 percent and $189 million in revenues, and as much as 99 percent and $212 million in expenditures, it said.

"The Governor, Legislature, Finance and CPUC's management and commissioners rely on the information generated to make budgeting decisions," the report said. "Inaccurate forecasts diminish the confidence in CPUC's budgeting information, and prevent stakeholders from knowing the actual performance of CPUC's funds and programs."

The CPUC's Budget Office is insufficiently staffed, it said, with one employee responsible for managing the budget responsibilities for 14 funds.

"CPUC's organizational structure does not facilitate centralized, cohesive budgeting practices," it added. "We observed general confusion and lack of knowledge by the Budget Office, program staff and management regarding the responsible parties for certain budget tasks."

The report said the director of CPUC's Administrative Services Division has "acknowledged weaknesses exist in its budget operations and displayed a general willingness to improve operations."

"The CPUC Budget Office has begun reviewing and questioning operating practices and is working to improve communication and transparency between program and budget staff," it added.

The Department of Finance undertook the review because of problems in other state department budgets. Last year California discovered that a surplus of nearly $54 million had grown in the Parks Department coffers over 12 years without anyone reporting it. That triggered a review of accounts holding more than a quarter of the state's budget (Greenwire, July 23, 2012).

U.S. EPA Deputy Administrator Bob Perciasepe told mayors meeting in Washington, D.C., today that the agency wants to work with cities on a wide range of projects -- from preparing for extreme weather to putting brownfields back on the tax rolls.

"The more we can make sure that we're working in sync with the goals and objectives that mayors have, the more important and the better the partnership can be," said Perciasepe, who will become acting agency chief when Administrator Lisa Jackson steps down later this month.

In a round table with mayors at the U.S. Conference of Mayors, Perciasepe played up federal-municipal partnerships aimed at promoting green infrastructure, improving wastewater management and cleaning up industrial brownfields.

"Working with the states and the local governments is just something that we just need to make a high priority in the coming year," he said.

EPA is also working with mayors on addressing stormwater overflows, an expensive proposition (Greenwire, Jan. 18).

Perciasepe spoke less about regulation than about EPA's assistance to cities, though he acknowledged that EPA regulatory activities affect city governments.

Afterward, Perciasepe fielded questions from mayors, many of whom said nice things about his pledges of cooperation.

Jon Mitchell, mayor of New Bedford, Mass., which has a large marine brownfield cleanup, said EPA could sometimes be inflexible and insensitive to cost when dealing with city governments.

"We want to make sure that whoever EPA assigns to integrated planning is someone who thinks like you," he said.

In a move that will advance a project decades in the making, Transportation Secretary Ray LaHood today awarded a $25 million federal grant to a light rail system in downtown Detroit.

An additional $6.5 million will go to a rapid bus transportation system in the city.

"Detroit is the only large region in the country that doesn't have a regional transportation authority," LaHood said today during the U.S. Conference of Mayors in Washington, D.C. "When they asked us to fund the light rail, one of our stipulations was for the people and region of Detroit [to implement one]. They deserve a regional transportation authority, [and their] Legislature passed a bill establishing that."

LaHood said the system will help people get around to find better jobs, education and medical care as well as save money on gas.

Detroit's M-1 light rail project is a culmination of 40 years of effort. The $140 million project will bring a 3-mile streetcar line with 11 stations to the city's downtown area.

The grant was awarded through the Department of Transportation's TIGER program, which has doled out billions of dollars since 2009 for projects not funded under regular legislation.

LaHood praised Detroit's local government for its efforts securing the grant. And he encouraged the other mayors to apply for funding through a DOT program that provides low-interest loans for construction and infrastructure projects. He also urged the mayors to ask Congress for more funding for transportation programs.

"I think we need your help over the next two years. Congress is going to debate a transportation bill," LaHood said. "The debate is not going to be about what you need in your communities. ... The debate is going to be about how do we pay to be No. 1 again in infrastructure in America?"

What's next for LaHood?

LaHood today remained mum about whether he plans to stay on as Transportation secretary for President Obama's second term.

The former congressman initially agreed to take the position through Obama's first term, and there has been a flurry of speculation over when he will step down.

But LaHood would not discuss his plans when asked today.

It's been rumored that LaHood could be replaced by Los Angeles Mayor Antonio Villaraigosa or former Pennsylvania Gov. Ed Rendell (D). Women whose names have been mentioned for the post include New York City Transportation Department Commissioner Janette Sadik-Khan, DOT Undersecretary Polly Ellen Trottenberg and former Washington Gov. Christine Gregoire (D). Gregoire is also likely under consideration for the Interior secretary and U.S. EPA administrator openings.