Are the extra line due to paragraph settings, or an extra paragraph or two?
If the first, I would look at is the Format Bibliography Layout (which you can get to from the word document, X6 ribbon and click in on the little dropdown doohickey, which opens the dialog box) and then looking at Layout tab. There you can set Single spacing and space after, as well as hanging indent or paragraph indentation.
If it is a real extra paragraph, You should also look at the outputstyle layout settings. See if there is a “paragraph” return in the start of end each reference there (which will not be overridden, I don’t think, by the approach above). At the bottom of that one, you can also set indent settings, so it is always applied (which is a setting you can also specify in the output style’s layout, an option at the very bottom of the options).