By Roberta Rampton

Obama denied TransCanada's application for the oil pipeline on January 18 because he said there was not enough time for the State Department to review an alternate route that would avoid a sensitive aquifer in Nebraska within a 60-day window set by Congress.

TransCanada has reapplied for a permit, and Republicans are working on legislation to try to speed its approval for the $7 billion project, which would carry crude from Canada's oil sands to Texas refineries.

One bill, proposed by Representative Lee Terry of Nebraska, would give the authority to approve the project to the Federal Energy Regulatory Commission (FERC), an energy regulator.

But the State Department official charged with reviewing the Keystone plan said the authority for the pipeline should stay with the administration because of the foreign policy and complex economic, environmental and safety issues involved.

Terry's bill "just imposes narrow time constraints and creates automatic mandates that prevent an informed decision" on the pipeline, said Kerri-Ann Jones, an assistant Secretary of State for the Bureau of Oceans and International Environmental and Scientific Affairs.

"We don't even have a complete route for this pipeline," Jones told lawmakers.

The pipeline would help lower gasoline prices, strengthen U.S. energy security, and create "tens of thousands of jobs," said Fred Upton, chairman of the House Energy and Commerce Committee.

'REFEREES' GIVE GOP RED FLAGS

The hearing got off to a fiery start, with Democratic members accusing Republicans of taking direction on the issue from oil companies and other corporate donors.

"The legislation we're considering today is an earmark that benefits just one project," said Henry Waxman, the top Democrat on the committee.

Six environmental protesters dressed as referees sat in the front row, lifting red flags each time Republicans talked about the thousands of jobs that would be created by the project - jobs numbers that environmental groups dispute.

Environmental groups are trying to stop the pipeline because of concerns about greenhouse gas emissions from processing Canada's oil sands in crude.

Republicans in both the House and Senate have not finalized their strategy on Keystone, which has become an issue for the 2012 presidential election campaign. But getting a Keystone bill approved faces hurdles in the Democratic-controlled Senate, and also ultimately would need to be signed by Obama to become law.

The nonpartisan Congressional Research Service found in a legal analysis released last week that Congress has the constitutional right to legislate permits for cross-border oil pipelines like Keystone.

A senior official with the Federal Energy Regulatory Commission said the agency did not have a position on Terry's bill, and would implement the law if Congress passes it.

But Jeff Wright, director of FERC's Office of Energy Projects, listed several technical issues the agency would have in implementing the bill as it is currently written, and said the agency would need more than the 30 days in the bill to make a determination on the project.

(Editing by Philip Barbara)