* Proposed pipeline would transport 510,000 bpd of crude
* Project would undermine climate change agenda-Waxman
* TransCanada says blocking project hurts energy security
(Recasts, adds comments from TransCanada, oil and environmental groups)
By Ayesha Rascoe and Scott Haggett
WASHINGTON, July 6 (Reuters) - A key U.S. lawmaker has called on the government to block a TransCanada (TRP.TO) pipeline designed to supply U.S. refineries with Canada's oil sands crude, arguing the "dirtiest" fuel undermined efforts to battle global warming.
Henry Waxman, chairman of the House Energy and Commerce committee, urged the State Department to block TransCanada's planned Keystone XL pipeline.
"This pipeline is a multibillion-dollar investment to expand our reliance on the dirtiest source of transportation fuel currently available," Waxman said in a letter to the department.
Canada's oil sands, the largest source of crude outside the Middle East, are developed using open pit mines and processing plants that spew carbon.
Since Waxman heads an influential committee, the Obama administration must pay attention to his stance.
"His letter is very significant and represents a major change in that the Obama administration now has to declare in a more public way whether it's going to begin taking steps now to break our oil addiction," said Kenny Bruno, U.S. coordinator of the No Tar Sands Oil campaign.
Despite a pledge to lower greenhouse gas emissions, the administration has not yet taken steps to crack down on oil sands imports, a stable fuel source from a friendly neighbor.
Last year, the administration approved a similar pipeline project transporting oil sands by Enbridge Inc (ENB.TO).
The proposed $7 billion Keystone XL pipeline would greatly increase U.S. imports of oil sands crude, raising the carbon intensity of the nation's transportation fuels, Waxman said.
Oil sands proponents note the Canadian crude is replacing declining volumes of Mexican and Venezuelan heavy oil.
"Waxman probably doesn't recognize that the oil coming from Canada is coming in to fill a void that's left by similar heavy oil," said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers. "It's just going into existing refineries that were using similar oil."
Keystone XL would carry 510,000 barrels a day of crude from Hardisty, Alberta to the Gulf Coast refining hub. Construction of the line is expected to be completed in 2013.
TransCanada said the pipeline project had already been vetted, and blocking it would deprive the United States of oil that would still be developed for sale elsewhere.
"Denying the Keystone XL pipeline project won't stop oil sands development," Terry Cunha, a company spokesman said in an email. "It will only deprive the U.S. of the energy security benefits and send oil sands production to other markets."
Last month, a letter signed by around 50 other House lawmakers raised concerns with the State Department about the pipeline. Bruno said congressional scrutiny will ensure the administration can't make a "quiet" decision as it did with Enbridge's Alberta Clipper line.
Waxman also raised concerns the department is not adequately assessing the climate change impact of the Keystone XL and the decision-making process is not transparent enough. (Reporting by Ayesha Rascoe; Editing by David Gregorio)