The State Department delayed a decision yesterday over a controversial oil pipeline until after the 2012 elections, handing environmentalists a victory even as industry groups accused the Obama administration of basing its national security policy on politics.

After a week of speculation, the department officially announced it needed to conduct further investigation of the impact of TransCanada's Keystone XL on the Sandhills region of Nebraska, a process that could not be completed until at least the first quarter of 2013. Originally, State said it expected a decision by the end of the year.

The delay could kill the oil project entirely, depending on the reaction of oil companies in existing agreements with TransCanada. It also raised questions about how oil-sands producers in Canada would get their product to market in the next decade, considering opposition to alternative pipeline routes.

Bill McKibben, leader of 350.org, was among 1,200 demonstrators arrested at the White House in August. The event may have influenced the administration's view of the Keystone XL Pipeline.

Keystone XL would run 1,700 miles from Canada to Texas' Gulf Coast if built, and carry a type of oil from Alberta, Canada, that is more carbon-intensive to produce than other forms.

The move was the culmination of months of mudslinging and advertising campaigns between environmental groups that claimed the project would worsen climate change and pipeline supporters who said it would create thousands of jobs and wean the United States off of Middle Eastern oil.

Yesterday, environmental groups that engaged in sit-ins and rallies at the White House this summer and this fall cheered widely, but also vowed to not turn their attention away from the issue.

Temporary triumph for McKibben

"If this pipeline proposal re emerges from the review process intact, we will use every form of nonviolent civil disobedience to keep it from ever being built," said Bill McKibben, a pipeline opponent and the founder of 350.org.

A week after appearing to take ownership of the pipeline decision via public comments about reviewing a decision, President Obama took a deferential stance yesterday.

"I support the State Department's announcement," Obama said. "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."

The announcement prompted immediate attacks from lawmakers like Rep. John Boehner (R-Ohio) and industry groups that the president was sacrificing national security to avoid addressing the issue during next year's elections. Jack Gerard, CEO of the American Petroleum Institute, said it sent a "chilling effect to the entire industry" that the legal process could not be trusted.

"This is clearly a political decision and everyone knows it," added U.S. Chamber of Commerce President Thomas Donahue.

State Department official Kerri-Ann Jones adamantly denied those accusations on a conference call with reporters, saying "the White House did not have anything to do with this decision." State consulted with the White House near the end, she said, but the White House did not seek to influence State's review process.

The decision resulted from public concerns about the pipeline's proposed path over Nebraska's Ogallala Aquifer, a drinking water and irrigation source, she said. At public hearings this summer, opponents repeatedly hammered the administration about the possibility of oil spills in the aquifer, a concern heightened this week after a spill of oil-sands crude on an existing pipeline.

A Nebraska-related problem?

The current environmental impact statement -- which will now have to be revisited-- did not look at alternatives around the aquifer while still keeping the project in Nebraska, she said. Instead, the department looked only at alternatives running far west in other states, she said. The state of Nebraska also does not have a definitive framework in place to address the issue, making additional analysis necessary, she said.

The administration made the best decision in what was largely a lose-lose situation, several analysts said.

If Obama or the State Department had killed the pipeline outright, they would have handed Republican presidential candidates a large stick with which to beat Obama in the campaign, said Kenneth Green, an analyst at the American Enterprise Institute. Most of the candidates for the GOP nomination have made energy supplies a key part of their platforms, he said.

On the other hand, the Obama administration had to give environmentalists a victory in the wake of a string of decisions viewed as anti-environment, including the death of major climate legislation, said Green.

If State had moved ahead with the pipeline this year, rather than delaying it, it would have threatened Obama's election chances in key states because of environmental anger, said Barry Rabe, a public policy professor at the University of Michigan.

The chances that this decision will be on the public's radar this time next year is very low, he said, so Obama had little to lose with the punt. Environmental issues such as oil drilling could gain more public attention in the campaign when it comes to the environment, he said.

"Nebraska was a long shot at best, so he has little to worry about there," said Rabe.

The decision fits into historical patterns with administrations delaying regulatory decisions on the environment during presidential campaigns, he said, He noted that President Carter, a Democrat, signed major legislation on the Superfund program in 1980 after he lost to President Ronald Reagan, a Republican, that year.

President Obama.

The bigger question could be how Canadian industry responds, and how much impetus the current delay gives to alternative proposals to carry Canadian oil.

Enbridge has a tentative proposal -- known as Enbridge Gateway -- to carry oil across Canada to a port in Kitimat, British Columbia, where it could feed thirsty Chinese markets. But the pipeline has faced opposition from First Nation groups and could be a decade away from approval. Other pipeline proposals -- both to carry oil-sands crude across Canada and to extend existing capacity in the Midwest -- also are years away from construction.

Canadians may explore China connection

Yesterday, TransCanada CEO Russ Girling said that he remained confident that Keystone XL would ultimately be approved.

"This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed," he said. He raised warning bells about Keystone XL's prospects, though, saying that supplies of heavy crude from Venezuela and Mexico to U.S. refineries will soon end. Refineries may have to look for other ways of getting the oil they need, he said.

Alberta Premier Alison Redford said she hoped the decision was made on science and evidence and not rhetoric and hyperbole from well-organized interest groups. "I will seek immediate answers from U.S. officials to determine why this decision was made," she said.

The most immediate impact will be on where Albertan officials spend their lobbying time and money, according to Jason Clemens, director of research at the Canadian Macdonald-Laurier Institute. They have provided much of the voice to U.S. policymakers, he said.

Until now, Albertan officials have been focusing their energy on Keystone XL, a dynamic that has halted progress on other pipeline proposals, he said. They could now choose to make fewer visits to the United States, and speed up regulatory paperwork for Enbridge Gateway, he said.

"I think the question now is, does Gateway become the No. 1 priority and Keystone gets diminished?" he said.

The key thing is that the Albertan government will not stop pressing for a way to move the oil, considering that amount of money at stake, he said.

Alberta is supplying significant resources to fund the country's national social programs, said Green. The Albertan government also collects roughly $3 billion in royalties -- or about 10 percent of its budget -- from oil-sands projects.

The opposition from First Nation groups worried about pipelines crossing their lands is significant, but Canadians have a way of resolving issues once the provincial governments are focused on it, said Clemens.

In a statement last night, the Canadian Association of Petroleum Producers said Canadian oil-sands production would not be affected in the "near term," but added that the delay would motivate exploration of "other markets."

As for U.S.-Canadian relations, there will be a setback, but probably not a significant one, several analysts said. Privately, at the diplomatic level, officials will complain loudly, but they will not engage in public retaliation, considering there was not an outright rejection of the pipeline, the analysts said.