updated 6/5/2008 3:50:52 AM ET 2008-06-05T07:50:52

President Bush threatened on Wednesday to veto a bill that would continue payments to rural counties hurt by federal cutbacks in logging by recovering lost oil royalties.

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Rep. Peter DeFazio, D-Ore., sponsored the bill, which would extend the Secure Rural Schools and Community Self-Determination Act for four years. The law provides hundreds of millions of dollars to Oregon, Idaho, and other states, mostly in the West, that once depended on federal timber sales to pay for schools, libraries and other services.

Bush said Wednesday he supports the program but wants the bill to include certain spending cuts and to require a phase-out of the payments. DeFazio's bill does not meet those conditions, Bush said.

The veto threat came as lawmakers wrangled over how to pay for extending the timber program.

Rep. Greg Walden, R-Ore., criticized DeFazio's plan to collect back royalties from oil companies that were lost due to a government error on drilling leases in the late 1990s.

DeFazio said the plan merely closes a loophole created when the Clinton administration failed to include a threshold requiring oil companies drilling in the Gulf of Mexico to pay royalties when market prices reach a certain level. Recovering money lost from the flawed 1998-1999 leases has been a priority of lawmakers from both parties for years.

"I think it's only reasonable that massively profitable oil companies pay a royalty or fee similar to all the other royalties" the federal government charges for lease of federal lands, DeFazio said.

Securing a timber program
But Walden said the plan would face a likely court challenge and could violate terms of federal contracts with oil and gas companies. It also faces near certain defeat in the Senate, where lawmakers have repeatedly rejected attempts to "fix" the 1998-99 leases.

After a fierce, partisan debate on the House floor Wednesday, lawmakers agreed to delay a vote on the bill.

Lawmakers from both parties have tried for several years to secure a long-term commitment for the timber program, which helps pay for schools, roads and public safety in 700 rural counties in 39 states. Most of the money goes to six Western states — Oregon, Idaho, California, Washington Montana and Alaska — although Mississippi, Arkansas and other Southern states also receive substantial payments.

Hundreds of teachers in rural districts throughout the country could lose their jobs if the law is not extended, lawmakers said.

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