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Oil sands country: Remote region at the heart of the Keystone controversy

The Keystone pipeline, a project to transport heavy crude from Canada to the Gulf Coast, is expected to provide thousands of temporary construction jobs in the U.S., but critics say the oil it carries comes at a terrible cost. NBC's Anne Thompson reports.

While the possible construction of the Keystone XL pipeline has made for contentious disagreements from the halls of Congress to ranches in Nebraska, the real environmental debate begins in a place most Americans have never heard of.

Nearly 700 miles north of the U.S.-Canada border sits Fort McMurray, Alberta, the unofficial capital of oil sands country, and the heart of the Keystone controversy.

Canada's oil reserves rank third largest in the world and sit beneath the vast Alberta forest. Oil mining companies like Shell, Syncrude and Suncor surround the town. They are big industrial operations in an even bigger forest.

Oil here is not the liquid black gold you think of in Texas or Oklahoma or the Gulf of Mexico.  It is a tar-like substance called bitumen.  It is excavated by mining or steam assisted drilling, where it is literally melted a quarter mile beneath the earth.  This oil is so heavy it must be upgraded or diluted before it can transported.

At Shell's Jackpine Mine in the oil sands, the company digs 24 hours a day, 365 days a year. Twenty-eight trucks burning 45 gallons of diesel fuel an hour transport the goods once lifted from the ground.

The whole operation is a carbon intensive process sending more global warming gases into the atmosphere. How much depends on your point of view. The oil industry downplays the impact, but opponents claim it is up to 37 percent more carbon intensive to produce a barrel of crude from oil sands.

The State Department, in its review of Keystone, says the oil from this area produces 17 percent more greenhouse gasses than conventional crude.  Those emissions are the heart of the environmental debate in Alberta, and a big reason why opponents call this "dirty oil."

Jeff Mcintosh / AP file

This Sept. 19, 2011 aerial photo shows an oil sands mine facility near Fort McMurray, in Alberta, Canada.

The oil sands industry here plans to more than double its production by 2030. Shell Vice President Tom Purves explains, "We have a massive resource here that's oil from a country that's very stable, it's a democratic country. We're able to transport this oil on pipelines safely to the US and other parts of the world, other parts of North America. And I think we'll be using fossil fuels for a long time - this will be an important part of it."

Opponents say this is not about stopping development. They realize this is a natural resource crucial to Canada's future. For them, it's about the pace, the scale and how it adds to Canada's carbon footprint. They worry approval of the Keystone pipeline will turbo-charge growth.

Eriel Deranger of the Athabasca Chipewyan First Nation understands the booming industry brings modern conveniences. It also brings, she says, modern problems threatening the forest and wildlife that are still part of the First Nations culture and have been for centuries.

"There has to be a balance, and respect for human - fundamental human rights and the rights to human subsistence and survivals. What we're seeing is that balance is out of whack here in Alberta. I think we're seeing development take precedence over the preservation of peoples and people's basic right to human survival," she said.

At the Pembina Institute, an environmental think tank, the focus is about carbon dioxide.  If things continue the way they are, says Jennifer Grant, Pembina's Oil Sands director, Canada will not meet its goals to reduce greenhouse gas emissions.

"Right now between 2005 and 2020, we're expecting 67 million tons of reductions from other sectors in Canada's economy.  During that same timeframe we're expected to see 72 million tons oil sands greenhouse gas emissions growth," Grant said.

Todd Korol / REUTERS file

Oil, steam and natural gas pipelines run through the forest at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, in a July 9, 2012, photo.

Aware of the concerns in Canada and in the U.S. about climate change, the industry is quick to point out it has reduced carbon emissions intensity – that is, the emissions created per barrel – 26 percent from 1990 to 2009. But overall emissions are still growing because of increases in production. Shell hopes to have the ability to capture some of the carbon emissions at one of its facilities by 2015.

But there is no perfect way to extract oil. Cenovus, a Canadian company which drills for oil, uses natural gas to make steam. Al Reid, vice president of Cenovus' Christina Lake operation, says reducing the amount of natural gas it burns shrinks the carbon footprint and helps the bottom line. But he admits there's only so much they can do.

"With today's technology, we will not get emissions down to zero. Can we continue to decrease them? I think that's very possible and that's something that we work on every single day," he said. "And over time there may be a technology that allows us to do that but we don't have that technology today."

There's no question the debate in the U.S. over Keystone is having an impact in Canada. This month, Alberta's government floated the idea of raising its price on carbon to force the industry to do more to reduce emissions. Will that be enough to convince President Barack Obama to approve a pipeline that carries oil with a bigger carbon footprint?

It's not just the environment. There are issues of energy security and economic impact. The State Department says the extension would provide 3,900 construction jobs over a  1 to 2 year period  and another 38,200 positions associated with the construction over the same time frame. Once built it says the pipeline would create 35 permanent jobs and 15 temporary ones, according to the government study released last month. It is multifaceted issue that will dominate discussion for months to come.