President Obama formally rejected an oil pipeline extending from Canada yesterday that has divided the Democratic Party for months, raising new questions about the political dynamic in an election year and the ultimate fate of the Keystone XL project.

More than a month ahead of the required deadline for a decision, the State Department denied a permit application for TransCanada's Keystone XL because of what it said was inadequate time to determine whether the project was in the national interest "in its current state." Last month, Congress required the Obama administration to make a decision within 60 days on the $7 billion project, while State said it needed until 2013 to study alternative pipeline routes around Nebraska's ecologically sensitive Sandhills region.

House Speaker John Boehner (R-Ohio) says the fight over the Keystone XL pipeline is far from over.

Meanwhile, TransCanada said it would immediately reapply for a new permit for the 1,700-mile Keystone XL and said it hoped a new application would be processed in an "expedited manner," leading to an in-service date for the pipeline by late 2014.

Opponents of the pipeline raised the prospect of lawsuits, while environmentalists praised the president for listening to their protests about the pipeline, which would stretch from Canada to Texas refineries and carry a form of oil that releases more carbon dioxide emissions than traditional types. The back-and-forth signaled that the lobbying battle over Keystone XL could continue indefinitely for the next year.

"This isn't over," said Rep. Lee Terry (R-Neb), who has floated legislation to put the Keystone XL decision in the hands of the Federal Energy Regulatory Commission.

In a statement, Obama agreed with State's rejection of a permit but left open the door for potential development of an oil pipeline from Cushing, Okla., to the Gulf of Mexico. That same pipeline pathway has been discussed by the oil industry as a way to ease a bottleneck of Canadian oil-sands crude in the Midwest.

"This announcement is not a judgment on the merits of the pipeline, but pertains more to the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people," Obama said.

Administration says jobs claims are 'inflated'

In an official report to Congress released with yesterday's decision, the State Department further addressed attacks that the pipeline would have dramatic economic impacts, saying that "the project would not have a significant impact on long-term employment in the United States" and would create approximately 5,000 to 6,000 construction jobs that would last two years. The department said that claims of 100,000 jobs were "inflated."

TransCanada's announcement of a reapplication prompted some analysts to say that Obama essentially put the project back on his desired timetable -- until right after the election.

"In a sense, it's back to where it was last year," said Patrick Parenteau, a professor at Vermont law School.

Under existing law, a new application from the company would start a new review process from the State Department, but that process also could build on some of the environmental analysis performed previously and, in theory, speed up a new review significantly. In its statement, TransCanada said it hopes that a renewed application will "make use of the exhaustive record compiled over the past three plus years."

At the same time, Assistant Secretary of State Kerri-Ann Jones told reporters that "we cannot state that anything would be expedited."

"It would have to go through all the requirements," she said of TransCanada's plans to reapply for a new permit.

Neb. ponders rerouting

Another wild card is Nebraska, where the Department of Environmental Quality has been awaiting a proposal from TransCanada on a reroute around the Ogallala Aquifer, a drinking-water reservoir in the region. Yesterday, TransCanada said it expected the Nebraska reroute process to be completed by September or October.

A spokeswoman for Nebraska Gov. Dave Heineman (R), however, said she would not comment on the process until further review of State's announcement.

Environmentalists who engaged in civil disobedience at the White House last year pledged to fight the idea that Nebraska state taxpayer money could still be used to study a rejected pipeline. They also disregarded TransCanada's pledge for a new application. "We stopped the first pipe, we'll stop the next," said Jamie Henn, communications director for 350.org on Twitter.

What is clear is that congressional Republicans intend to hammer Obama on the issue and push legislation in coming days to undo Obama's decision.

"Republicans on Capitol Hill will continue to do everything we can to make this a positive decision for our country," House Speaker John Boehner (R-Ohio) said yesterday.

The prospect of Republicans succeeding in undoing Obama's decision via legislation is unlikely considering the current stalemate in Congress, said Parenteau. If they did, there would be legal questions under the Constitution about whether they have the authority to take the Keystone XL decision away from the president, he said.

On the campaign trail, GOP presidential contender Mitt Romney took a hit at Obama, saying "he seems to have confused the national interest with his own interest in pleasing the environmentalists in his political base."

But it's not clear that this decision will affect Obama's political prospects much in the end, said Barry Rabe, a public policy professor at the University of Michigan. An oil pipeline is not the type of issue that tips an election, and likely will be off the public's radar in favor of jobs and the economy by November, he said.

A variety of other options under scrutiny

In an analysis yesterday, ClearView Energy Partners made a similar point, noting that Obama may have shored up enough support from labor unions -- big backers of the pipeline -- with recess appointments to the National Labor Relations Board last month. Obama's early timing on the Keystone XL decision was a way out of "unappealing choice," the note said, considering that it allowed Obama to avoid speaking about the issue in his State of the Union address next week.

The decision spurred chatter about the most likely alternatives to Keystone XL. Obama's mention of a Cushing, Okla., to Gulf Coast line echoed discussions about the possibility of TransCanada building the southern part of Keystone XL without the need for a cross-border permit. One analyst familiar with the company said TransCanada could legally do so, but has hesitated because of the "prospect of lawsuits."

There currently is enough pipeline capacity to keep oil flowing from the oil-sands region of Canada to the United States for perhaps a decade, but at some point, Alberta will not be able to increase oil production levels without new routes.

Yesterday, Alberta Premier Alison Redford said the province would focus on the Asia-Pacific region, as well as pipeline proposals to eastern Canada in the wake of the Keystone decision. She would make a trip to Washington, D.C., soon, she said.

"What it means is this: America will continue to import oil from jurisdictions with much weaker environmental policies and who do not share the same values as Canadians and Americans," Redford said.

Since the debate over Keystone XL, there has been increased attention on Enbridge Northern Gateway, a proposed pipeline that would run from Alberta to Kitimat, British Columbia, and could provide oil to thirsty Chinese markets. There also are other pipeline proposals, including one from Kinder Morgan to expand capacity on an existing route from Alberta's oil-sands region to Vancouver, British Columbia.

But one environmentalist said the most viable alternative could be a proposal from Enbridge, informally called Trailbreaker, that would involve reversing the flow of oil from an existing pipeline running from Portland, Maine, to Montreal. It could then potentially carry oil-sands crude.

Because Trailbreaker is an existing pipeline, it would avoid some of the existing permitting problems associated with Keystone XL, said the environmentalist, who asked not to be identified because his organization does not have a position on the pipeline.

"The other pipelines have serious issues, such as opposition from First Nations leaders in Canada and the need for new permits," he said. "Trailbreaker is what we are watching."

Reporter Lacey Johnson contributed.