UPDATE 1-US Senate Democrat offers ban on Keystone oil for highway bill

Wed Mar 7, 2012 6:07pm EST

By Roberta Rampton

WASHINGTON, March 7 (Reuters) - A Democratic U.S. senator offered a proposal to ban exports of oil from the Keystone XL crude pipeline from Canada and require American iron and steel be used to build it, part of an effort to derail a Republican plan that would fast-track the project.

Senator Ron Wyden filed the draft amendment to the Senate's highway funding bill to counter a Republican amendment that would see Congress approve TransCanada's $7 billion pipeline.

President Barack Obama has delayed the pipeline, insisting it needs more environmental review.

If the dueling amendments get time on the Senate floor - something which is not yet guaranteed - both of them would have a difficult time attracting enough votes to pass.

But the measures would give Republicans a new chance to highlight how Obama delayed a plan to bring more Canadian oil to the United States while gasoline prices are surging - and give Democrats an opportunity to highlight why they don't believe the pipeline would make a difference to U.S. energy security.

A similar proposal for a ban on oil exports failed in the House, where Republicans have already passed a bill that would grant the pipeline a permit.

In the meantime, TransCanada Corp has said it will split the $7 billion project in two and build the southern leg between the Cushing, Oklahoma storage hub and Texas refineries.

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