"Keystone is out," said the aide, who asked not to be identified. The aide added that while House-Senate negotiators are close to an overall deal on the transportation bill, they have not yet wrapped it up.
The House of Representatives and the Senate aim to pass the bill by Friday to fund road, bridge and mass transit funding projects.
If a deal falls through, lawmakers were expected to pass a short-term extension for current transportation funding levels.
"A lot of work that's gone into this, it's not finished yet. But it is clear that there are significant reforms in this bill," House of Representatives Speaker John Boehner told reporters earlier on Wednesday.
The package is also expected to include a one-year, $6 billion fix to prevent a doubling of interest rates for about 7.4 million students with Stafford loans to help pay their college costs.
"I'm cautiously optimistic that we can end this week tomorrow even, with a little bit of luck - but we may not be able to," said Harry Reid, the Senate Democratic leader.
"We have to see what happens in the next 24 hours, which will be key," Reid said.
KEYSTONE WAS MAJOR HURDLE
The subject of TransCanada's Keystone XL pipeline was one of the thorniest issues before negotiators during weeks of talks - but was one of the very last topics to be tackled.
President Barack Obama ruled earlier this year that more environmental reviews were needed for all but the southernmost tip of the 1,700-mile-long (2,736 km) pipeline, which would carry crude from Canada's oilsands to Texas.
The White House has said Obama would veto a bill that overrides his decision.
Republicans have championed the pipeline's cause ahead of the November presidential and congressional elections, arguing that it would create much-needed construction jobs and panning Obama for stalling it.
The Keystone measure has passed in the House four times, but narrowly failed a Senate vote in March.
Republicans pushed hard for other concessions in the transportation funding bill, which is based on a two-year, $109 billion package passed by the Senate.
Boehner told reporters the deal would include "significant reforms" to streamline environmental reviews for certain highway projects, and reduce the number of programs in the highway bill, focusing spending on core transportation projects rather than directing money toward roadside landscaping and other ancillary programs.
The deal will include provisions to ensure that 80 percent of fines imposed on BP after the Gulf of Mexico oil spill will go to Gulf coast communities, Democratic Senator Bill Nelson of Florida, who was on the negotiating panel, said in a tweet.
There was also a last-minute push to include a compromise to ease proposed Environmental Protection Agency regulations for coal ash, a byproduct used in cement, an industry source said.
U.S. Grants a Keystone Pipeline Permit
“We continue to believe that we will be in a position to begin construction later this summer and are working with the Corps and others to secure the approvals and permits we require,” the company said in a statement. “Once the gulf coast project is completed, it will help move both Canadian and American oil to refineries on the gulf coast, where it is critically needed.”
For the complete interview, read the transcript, download the podcast, and for information on Democracy Now! and more reports on the Keystone XL pipeline, visit http://www.democracynow.org/