WASHINGTON - The U.S. State Department wants TransCanada to explore rerouting its proposed Keystone XL pipeline, a decision that will delay the controversial $7-billion project for more than a year, and threatens to kill it outright.

"The department has determined it needs to undertake an in-depth assessment of potential alternative routes in Nebraska," State officials said in a news release Thursday.

The review could be completed "as early as the first quarter of 2013," the statement added — several months after next November's presidential election.

The pipeline would carry millions of barrels of Alberta oilsands crude a week through six U.S. states to Gulf Coast refineries. Its current proposed route traverses the Sand Hills area of Nebraska, the location of the Ogallala aquifer, a crucial source of drinking water http://thetyee.ca/Blogs/TheHook/Environment/2011/11/07/Thousands-surround-the-White-House-to-protest-TransCanada/ to millions on the Great Plains.

"Taken together with the national concern about the pipeline's route, the department has determined it is necessary to examine in-depth alternative routes that would avoid the Sand Hills in Nebraska in order to move forward with a national interest determination for the presidential permit," the release said.

Obama praised the State Department's decision, saying it's necessary because a final decision "could affect the health and safety of the American people as well as the environment."

"The final decision should be guided by an open, transparent process that is informed by the best available science and the voices of the American people," Obama said in a statement.

The decision represents a stunning victory for the North American environmental movement. For months, Keystone XL has been the target of angry protests on both sides of the Canada-U.S. border and a major source of consternation for Obama.

Of particular concern to environmentalists was the aquifer. Nebraska state legislators have been pushing ahead with their own legislation aimed at forcing TransCanada to reroute the pipeline.

But Keystone XL has also become a flashpoint of fierce debate about renewable sources of energy versus fossil fuels and America's ongoing dependency on foreign oil, sparking ever-larger and louder protests in the United States.

The State Department decision effectively means Obama can dodge a political bullet since he won't have to decide whether to approve the project until after next November's presidential election.

A lobbyist for TransCanada expressed dismay about the decision, saying it stemmed from "a couple of senior advisers" in the White House.

"It's breathtaking; the White House's political operation gave in to the protesters, going completely outside the national interest and the three-year permit process that's been a painstaking one," the lobbyist, who asked not to be identified, told The Canadian Press.

"The ballsier thing would have been to either approve it or deny it, but to kick the can again is actually more difficult for the president politically. There's 20,000 jobs on the table and they did this to save one — Barack Obama's."

Indeed, the White House was reportedly becoming increasingly concerned that the Canadian pipeline would cost Obama much-needed votes in the election. Environmentalists within his liberal base had vowed to stay home if he gave Keystone XL the green light.

TransCanada, however, has long been opposed to changing the route. In an interview this week with The Canadian Press, a senior company executive said Keystone XL could be delayed for years if the route has to be changed.

Such a route change would force Keystone XL to go through environmental and wildlife studies all over again, said Alex Pourbaix, president of energy and oil pipelines for TransCanada Corp. (TSX:TRP).

So far, the environmental review process has taken more than three years.

"There's no doubt that if we were asked to do that, I think it would a minimum of a one- to two-year delay," he said.

Most studies can only take place during the summer, further prolonging the process.