A $7 billion Canada-to-U.S. oil pipeline heavily promoted by senior Republicans and the oil industry faces a grim future today after the Obama administration put off a decision on the project until after the 2012 elections, handing a major victory to environmentalists.

The official announcement of a delay in ruling on the Keystone XL pipeline came from the State Department, which had shepherded the project's controversial environmental review process, but President Obama lent his personal backing in a statement released hours after members of Congress and advocates on both sides of the pipeline fight began openly discussing State's decision.

Obama cited the "number of concerns" that emerged during public hearings on the pipeline -- particularly in Nebraska, where its route through the ecologically sensitive soil of the Sandhills prompted a groundswell of public skepticism -- and added: "[W]e should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood."

Coming two months after Obama's postponement of a planned stronger ozone standard devastated green groups, both that Obama imprimatur and a mention of "climate change" as one of the factors driving a final decision on the pipeline drew cheers from most conservationists. The larger emissions footprint of Canadian oil-sands crude, which would flow through the XL line at a rate of 830,000 barrels daily, was a leading factor driving green opposition to the project.

"A done deal has come spectacularly undone," 350.org founder and climate activist Bill McKibben, who had led organizing against the pipeline, said in a statement, adding that environmentalists "take courage" from the apparent effectiveness of their two White House sit-ins aimed at forcing Obama's hand.

Natural Resources Defense Council President Frances Beinecke hailed the delay as "a significant step in the fight against climate change," while League of Conservation Voters President Gene Karpinski termed it a "big win."

What remained far from clear this afternoon, however, is what State's delay until at least early 2013 -- in order to conduct a supplemental environmental review of potential XL routes that avoid the Sandhills -- would mean for the pipeline. Its sponsor, Alberta-based TransCanada Corp., has long said that any analysis of new Nebraska routes would effectively derail the project, but company President Russ Girling did not speak definitively on the project's future today (E&ENews PM, Nov. 1).

"We remain confident Keystone XL will ultimately be approved," Girling said through a spokesman. "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."

TransCanada plans to enter talks with State on next steps in the coming days, the company added, referencing "potential negative ramifications" from the administration's announcement in terms of deals it had struck with shippers and refineries expecting to receive fuel from the pipeline.

Nebraska Sen. Mike Johanns (R), who joined his state's GOP governor and fellow Sen. Ben Nelson (D) in opposing the Sandhills route but not the pipeline itself, dismissed the notion that an extra routing review would effectively kill the project.

"I never really bought into this idea that this puts us back to square one," Johanns said, reiterating previous statements that TransCanada was long aware "that this route was going to be a very serious problem."

Johanns also warned the administration against letting politics color its new review. "If it's ... a genuine effort to find the right route, than I applaud that," he said. "If this is about delaying this until after the next election, that's not right."

To the oil industry, the delay in a Keystone XL decision that has already faced several postponements smacked fully of election-year politics -- particularly given threats by McKibben and other environmentalists to withhold their full-fledged support from Obama's re-election campaign.

"There's only one job being focused on here, and it's not the 20,000 jobs this pipeline will create," American Petroleum Institute President Jack Gerard told reporters, adding that "it makes us a little suspicious to know [the delay] happens to be a little over a year," pushing the pipeline's future past Election Day 2012.

Not every environmental advocate disputed Gerard's conclusion that the administration had chosen its timeline based on re-election concerns. Center for Biological Diversity Endangered Species Director Noah Greenwald lamented in a statement that "rather than make the tough choice to reject this pipeline, President Obama has punted," while green activist Glenn Hurowitz offered a starker conclusion.

"As amazing as this progress is, however, let's not delude ourselves: President Obama is just kicking the climate can down the road to a point when he may not even be in a position to decide its fate," Hurowitz wrote in an op-ed today. "In the not-unlikely scenario that he loses re-election, approving the tar sands pipeline will be an easy way for President [Mitt] Romney to give Big Oil a huge thank you gift for all the help they provide him during the 2012 election."

Click here to read the State Department's Keystone XL announcement.

Reporter Jeremy P. Jacobs contributed.