Supporters of a proposed oil pipeline that would stretch from Canada to Texas are inflating the number of potential U.S. jobs associated with the project, according to a new study from Cornell University.

TransCanada and its backers are overestimating the number of possible jobs in the United States that would be created from Keystone XL by at least half, said Sean Sweeney, director of Cornell's Global Labor Institute, which released the briefing paper. Prior studies releasing projected job numbers inflated the amount of money available for the project, skewing job estimates in the process, he said.

The pipeline actually could lead to a net loss of jobs because of higher gas prices in the Midwest and environmental problems associated with such a large project, he said. TransCanada has estimated that the 1,700-mile pipeline would create at least 119,000 total U.S. jobs, while the number is actually 59,000 jobs or less, Sweeney said.

"The problem is that this is being depicted as an economic game changer, as a get-America-back-to-work project that has an almost miraculous capacity to fight our employment problem," said Sweeney. "That is untrue."

He said unnamed "environmental foundations," some of which are opposed to Keystone XL, paid for the study.

Supporters see 17 'construction waves'

TransCanada and the American Petroleum Institute slammed the conclusions, and said they stood by previous job estimates.

TransCanada spokesman Terry Cunha said that Keystone XL would create 13,000 construction jobs alone, according to conversations yesterday with the company's construction team.

If built, the pipeline would involve 17 construction waves involving 500 construction workers each, he said. Additionally, the company would need to build pumping stations employing 3,000 workers each, he said.

The war over job numbers is the latest wrinkle in the debate about Keystone XL, which is awaiting a decision from the State Department by the end of the year about whether it will receive a final cross-border permit. Supporters say it is a critical piece of weaning the United States off of Middle Eastern oil.

Environmentalists, on the other hand, say it would worsen climate change at a time when the world can least afford it. Keystone XL would carry a type of Canadian crude that releases more carbon dioxide in the production process than does traditional oil drilling. It would roughly double the amount of Canadian crude coming into the United States.

In recent months, more than 1,000 environmentalists were arrested at the White House and at the Canadian House of Commons. In addition to their climate concerns, they said the project would increase the risk of oil spills in delicate areas such as Nebraska's Ogallala Aquifer.

To reach his conclusions about job numbers, Sweeney criticized a study commissioned by TransCanada known as the Perryman study. That report did not include sufficient input data from TransCanada and failed to properly define the overall cost of the project, he said. The modeling should be available for independent public review, he said.

Opponents see a 'lack of transparency'

"The main problem [with the Perryman study] is a lack of transparency," he said. "Where does the 120,000 jobs figure come from?"

He said other job claims made by Keystone XL supporters are problematic because they make job estimates based on the overall $7 billion cost of the project.

The problem with that, he said, is that the amount that will have a bearing on U.S. job figures is closer to $4 billion. A quarter of the total $7 billion will be spent in Canada, and some of the money already has been invested, he said.

Data supplied to the State Department by TransCanada placed the temporary construction job number between 2,500 and 4,650, he said in response to larger estimates from TransCanada. There is also an issue with who would fill U.S. jobs, he said.

Sweeney said "there is strong evidence to suggest" that almost half of the primary material for Keystone XL -- steel -- would not be produced in the United States. TransCanada disputes that, but Sweeney pointed to deals with Indian companies as evidence that many of the jobs will head overseas.

Additionally, he said pipeline supporters are not considering negative factors that could kill jobs, such as the effect of Keystone XL on oil prices.

Rising health costs and gas price increases?

He said the project could raise gas prices by diverting oil from the Midwest, where oil is currently sold at a discount. Some analysts believe that the diverted oil will raise prices once there is a lower supply of oil in the region. That, along with environmental challenges, could also hurt job creation, he said.

"Rising carbon emissions and other pollutants from the heavy crude transported by Keystone XL will also incur increased health care costs," the report says.

But Rayola Dougher, a senior economic adviser at the American Petroleum Institute, said that every dollar purchased from Canada by Americans resulted in a similar amount being bought back by Canadians. "There are huge trade benefits" of Keystone XL, she said.

The issue is not so much the number of jobs, but the fact that jobs will be created at all during a recession, she said. It's hard to conceive how anyone could term the project a job killer, she said.

She discounted the argument that the project would raise gas prices. "The market will correct itself," she said, about Keystone XL's potential to divert oil away from Midwestern markets.

Separately, the author of the study commissioned by TransCanada released a lengthy rebuttal to the Cornell report. He said he believed Cornell had a preordained conclusion.

"This approach is the very antithesis of proper scholarship and violates the intellectual principles that should be fostered by a university of this quality," said Ray Perryman, an economist and president of the Texas-based Perryman Group.