By Kristen Hays

PORT ARTHUR, Texas (Reuters) - Supporters outnumbered critics at a government-sponsored hearing on the proposed TransCanada Corp's Keystone XL pipeline that would ship oil from Canada to the Texas Gulf Coast.

Monday's hearing in Port Arthur was the first of several public hearings to be held regarding the pipeline, which has already raised large protests in Canada and the United States.

Opponents say the $7 billion project will threaten an important U.S. water supply, while supporters say it will bring needed jobs and lessen reliance on foreign oil.

Monday's hearing was in Port Arthur, Texas, and supporters easily outnumbered opponents as nearly 500 people crammed into a community building after many stood outside in the heat.

Port Arthur and the surrounding area is energy-friendly, home to three major oil refineries, natural gas processing plants and other energy infrastructure. Comments at Monday's meeting echoed those of supporters beforehand, touting job creation in hard times.

"The world looks to us for support, well, this is the time to take care of ourselves," said Craig McNair, the top official in nearby Liberty County, and one of a string of supporters.

Following an extensive review that suggested the line posed little environmental risk, the U.S. State Department started the hearings, which may be one of the last chances for opponents to voice objections to a project that has already experienced several delays.

Critics, which have included celebrities like actors Daryl Hannah and Margot Kidder, say the line will encourage more production of carbon-intensive oil sands and will threaten a major aquifer along the route to the U.S. Gulf Coast.

"We don't view these hearings as a formality and absolutely do not see this as a done deal," said Danielle Droitsch, senior advisor to the international program of the Natural Resources Defense Council.

More than 1,200 people were arrested in August and September at the White House protesting the pipeline.

The protests spilled over into Canada on Monday, as about 400 opponents gathered for a peaceful demonstration on Parliament Hill in Ottawa, with more than 100 arrested. At that event, protesters help up two giant black syringes emblazoned with slogans like "Oil junkies" and "Tar sands -- Canada's carbon bomb".

Alex Pourbaix, president of energy and oil pipelines for TransCanada, said at a pre-hearing press conference in Port Arthur that the pipeline will be built to standards above what is required by current regulations.

"This will be the safest crude oil pipeline ever built," he said.

LET 'EM WORK

The U.S. State Department, which must approve the project because it originates in a foreign country, is expected to issue its final decision by the end of the year. TransCanada hopes the line will be built by 2013, about a year later than it initially planned.

In addition to Monday's hearings in Port Arthur and another in Topeka, Kansas, others will be held in states along the line's proposed route, which include Montana, South Dakota, Nebraska and Oklahoma.

"This is what we've done all our lives, we bring the oil to these refineries," said Buddy Frank, a journeyman with Pipeliners Union 798 in southeast Texas. "Let 'em work. That's what we need right now is work."

Joe Deshotel, 59, a Democratic Texas state representative whose district includes Port Arthur, on Monday beseeched TransCanada to meet with him and commit to hiring welders, pipefitters and other laborers from Texas to build the Texas leg of the pipeline.

Kat Herrera, 24, a Sierra Club intern, countered that most jobs generated by the pipeline will end when it is built, while jobs in the alternative energy sector will be less transient.

"It is important to focus on jobs, but also the economic damage that may and probably will come from this," Herrera said. "The American worker needs more than a temporary, dirty job."

While Herrera's comments generated some cheers, boos from pipeline supporters soon drowned them out.

The toughest response may come in Nebraska, where several politicians have asked President Barack Obama to block the project. The farm state is home to 65 percent of the massive Ogallala aquifer, the most important source of fresh water to the agriculture-heavy central U.S.

In a letter in August, Nebraska Governor Dave Heineman asked Obama to block the pipeline, but said he could support the project if the route avoided the aquifer.

The pipeline will pump more than half a million barrels of oil per day to refineries in Port Arthur and Houston from Alberta's vast tar sands.

Reno Hammond, business manager for the Laborers' International Union of North America's Southwest Laborer's District Council, said on Monday that 85,000 construction workers have been jobless in Texas alone since 2008. Some could be recaptured with the project, he said.

Analysts and the oil and gas industry also say it will relieve a crude glut at the Cushing, Oklahoma delivery point for the U.S. oil futures contract on the New York Mercantile Exchange. That glut has depressed U.S. oil futures relative to oil in the Gulf Coast of Europe.

Canada's government promotes the project, saying the line is the safest way to bolster U.S. energy security while linking Canadian oil producers to a huge market.

"Scientists objectively looked at it and they concluded that because of the conditions that were imposed on TransCanada, this pipeline would be safer than other domestic pipelines," Canadian Natural Resources Minister Joe Oliver said in Toronto.

But opponents remain firm.

"This seems very haphazard and rushed," Sarah Slamen, 26, said at the hearing.

(Additional reporting by Jeffrey Jones in Calgary, David Ljunggren in Ottawa and Julie Gordon in Toronto)

(Editing by Andea Evans and Bob Burgdorfer)