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WASHINGTON (Reuters) - Congressional lawmakers launched efforts on Tuesday to forge a compromise on transportation spending, an uphill journey made even tougher by Republican efforts to include a provision in the bill to speed approval of the Keystone oil pipeline.
The 47 lawmakers on the Senate-House conference committee met for the first time on Tuesday to try to find enough compromise to pass a bill that would create or save as many as three million jobs while helping to repair the nation's crumbling and unsafe roads and bridges.
"We cannot let our hard heads get in the way of hard hats," said Nick Rahall, the top Democrat on the House transportation committee, pleading for quick bipartisan consensus.
But the inclusion of the pipeline on the agenda shows how difficult agreement will be.
President Barack Obama has put all but a small portion of the 1,661 mile pipeline on hold pending further environmental reviews, and has threatened to veto any bill overriding his decision on the project.
Republicans have sought to highlight the construction jobs put in limbo by Obama's delay in the run-up to November presidential elections.
Republican Fred Upton, head of the House Energy and Commerce Committee, insisted Keystone was the "ultimate jobs and infrastructure project."
But Senate Democratic Leader Dick Durbin criticized Republicans for adding "baggage to this train" with the Keystone provision.
The panel is aiming to finish its work by early June in order to pass legislation through the House and Senate by the time current funding expires on June 30.
Their starting point is a two-year, $106 billion bill to fund road, bridge and rail projects passed by the Senate in March.
The House of Representatives struggled to find enough support for a proposed five-year, $260 billion package, and instead passed a short-term extension of the current law, attaching approval of the Keystone pipeline, a $7.6 billion project that has been a political football for the Obama administration.
Fourteen senators and 33 representatives were named to a conference panel to try to hammer out the differences.
Compromise will be a tall order leading up to the election, said Chris Krueger, senior policy analyst with Guggenheim Partners, in a note to clients.
"The road has far too many bumps ... and the process is entirely political," said Krueger, who expects lawmakers will craft another short-term extension of the funding to either the end of September or until after the election.
A trust fund that helps pay for highways will run out of money in the fiscal year that begins October 1, meaning lawmakers will be forced to come to an agreement sometime this year, Krueger said.
But Democratic Senator Barbara Boxer, the chairman of the conference panel, maintained optimism.
"Many pundits and experts have predicted gloom and doom when it comes to this bill. They were wrong in the past, and they are wrong now," Boxer said.
TransCanada Corp first applied for permission in 2008 for the Keystone XL to cross the U.S. border and run south to Texas refineries.
Environmental groups made blocking the pipeline a top priority because of concerns about spills and about greenhouse gas emissions from the Canadian oil sands.
Obama rejected the line earlier this year because of concerns about risks for a Nebraska aquifer, although he said a portion of the line from Oklahoma to Texas can go ahead.
The company has reapplied for a permit with a new route, and hopes the government will approve it early next year.
Republicans have said all but the Nebraska portion of the line should go ahead as quickly as possible, creating thousands of jobs and eventually reducing U.S. dependence on oil from the Middle East and Venezuela.
Eleven Democratic senators voted in March in favor of fast-tracking the pipeline, a plan that fell four votes short of passing.
It would take only two of the Democratic senators on the conference committee to join Republican negotiators for the project to advance.
Max Baucus, the only Democratic senator on the conference panel to publicly favor the pipeline, did not mention it during his opening remarks, instead stressing the need to move forward on the bill passed by the Senate.
Editing by Jackie Frank