Update (11:57 a.m.)Prolonging the payroll tax debate into next year, the Senate approved a 2-month payroll tax break extension on Saturday, reports The New York Times. "In the unusual Saturday vote, the Senate approved a $30 billion package to extend unemployment benefits, a payroll tax holiday for millions of American workers and avoided cuts in payments to doctors who accept Medicare through February, when Congress will once again be locked in battle over whether and how to further extend those provisions." The bill included a measure to fast-track the construction of the Keystone XL pipeline but stipulates a short window for the pipeline's approval process, which could allow President Obama to kill the project. "Democratic aides said this concession would have the effect of killing the project because the Obama administration has said it would not grant approval on a truncated timeline."

The passage of a $1 trillion spending bill in the House Friday has paved the way for a bitter payroll tax debate cutting into Congress's Christmas break.

Today's spending bill easily-passed in the House, by a 296-121 vote, with 35 Democratic and 86 Republicans voting against it. President Obama and Senate Majority Leader Harry Reid had wanted to tie the omnibus spending bill to the extension of a payroll tax holiday, which expires on Dec. 31. But House Speaker Boehner refused to consider both measures together, assailing Democrats for holding the spending bill hostage. Since the Democrats backed down in wake of a Friday government shutdown, Boehner is now emboldened to push through his payroll tax bill, which includes fast-tracking the Keystone XL oil pipeline, a measure the president deeply opposes. 

Even the idea of a two-month extension of the payroll tax, to delay the Keystone debate, has been opposed by Boehner. "These rumors that are floating around here about a two-month extension," he told reporters today. "I’ll just say this: If that bill comes over to us, we will make changes to it, and I will guarantee you that the Keystone pipeline will be in there when it goes back to the United States Senate.” As Politico's Jake Sherman and Manu Raju explain "Several House Republicans were cool on the two-month extension ... They are afraid of extending the debate into 2012, when Obama is in campaign mode. Top Republican aides said flatly Friday morning that a two-month extension will not pass the House." The question now is, will President Obama back down on his opposition to Keystone XL even if it means the loss of a payroll tax extension? As the Senate works through the weekend to pass the omnibus spending bill, it's clear negotiations on the payroll tax will extend into next week. Whether or not Democrats and Republicans can agree on a compromise is yet to be seen. Update: While many pitfalls remain, the details of a tentative deal to extend the payroll tax break for 11 months is beginning to emerge in the Senate, reports National Journal. Apparently, Democrats are willing to bend on the oil sands pipeline:

 

Democratic leadership aides said they will accept a House-passed provision requiring a White House decision within 60 days on whether to allow the controversial Keystone XL pipeline, but that the final deal will not include a provision that would delay regulations on industrial boilers—the so called Boiler MACT rule issued by the Environmental Protection Agency. President Obama last week said he would not accept the Keystone provision, but Democrats said they will argue, as Republicans have, that the language in the provision does not bind the White House, allowing them to put off the project by declaring it is not in the national interest.