Keystone could be part of Senate highway debate: Thune

WASHINGTON (Reuters) - The contentious Keystone XL oil pipeline could become part of the debate on the Senate floor over highway funding legislation, an influential Republican senator said on Wednesday.

Republicans in Congress want to grant a permit to TransCanada's $7 billion project, cutting out President Barack Obama, who last month said the pipeline's route needed more study before his administration could approve it.

But to fast-track the stalled Canada-to-Texas pipeline, Republicans need to first try to attach the issue to must-pass legislation and gather enough support in the Democratic-controlled Senate.

John Thune, a senator from South Dakota who is the chairman of the Senate Republican Conference, told reporters the issue could rise again as the full Senate discusses the highway bill.

"My guess is that there will be an effort to amend the highway bill to include the Keystone provision and if there is, I'll support it," Thune told reporters.

"I think anything we can do to advance the Keystone pipeline, we should do."

The pipeline has become an election issue, used by Republicans to criticize Obama's jobs record. Environmental groups oppose it because of the type of oil it will carry.

The Senate Finance Committee briefly discussed a proposal to link Keystone to the highway bill on Tuesday. The provision was withdrawn after Max Baucus, the panel's Democratic chairman, argued it "would take down the bill."

Baucus, who is from Montana, said he strongly supports the pipeline.

Debate by the full Senate on the highway bill is set to begin as early as Thursday.

The House of Representatives is also weighing whether to attach Keystone legislation to its highway and infrastructure package.

(Writing by Roberta Rampton; Editing by Lisa Shumaker)