The controversial Keystone XL oil pipeline cleared a key hurdle Tuesday after the governor of the US state of Nebraska approved a new route that avoids an environmentally sensitive area.

But the fate of the proposed $7 billion Canada-to-Texas pipeline, which many environmentalists fear could be damaging, still awaits a determination by the US State Department.

That process comes just a day after President Barack Obama's inaugural address pledge to pursue aggressive climate change mitigation policies in his second term.

The State Department said there would be no final decision on the pipeline before the end of the first quarter of 2013, which ends March 31.

The Canadian government welcomed Nebraska Governor Dave Heineman's "positive decision" to permit routing the pipeline through his state, pointing to the "thousands" of jobs the project is expected to create.

"Our desire is to work with the Obama Administration in achieving final approval," Natural Resources Minister Joe Oliver said in a statement.

"We believe Keystone XL will enhance the future economic prosperity and security of both Canada and the United States."

Alberta Premier Alison Redford, whose oil-producing province hosts the start of the proposed route, said "we respect and understand that approval of the pipeline is a US domestic matter and that this is just one step in the process that will ultimately be decided by the president."

Obama denied approval for the pipeline last year citing environmental concerns, in part because of criticism in Nebraska.

Critics in the state objected to an initial plan whereby the Keystone pipeline would have traversed the Sand Hills area of Nebraska, which includes a high concentration of sensitive wetlands and extensive areas of shallow groundwater.

The revised pipeline route avoids Sand Hills, but still traverses the High Plains Aquifer. Any impact from an oil spill would be "localized" and Keystone's operator TransCanada would be responsible for any cleanup, according to the Nebraska review.

Heineman, a Republican, noted in a letter to Obama that construction of the pipeline would bring his state $418.1 million in economic benefits and result in $11 to $13 million a year in additional property taxes.

The pipeline operator will also be responsible for taking out $200 million in liability insurance to cover its financial responsibilities in case of a spill, Heineman noted.

"Construction and operation of the proposed Keystone XL pipeline, with the mitigations and commitments from Keystone, would have minimal environmental impacts on Nebraska," Heineman wrote.

While the newly revised project puts to rest Nebraska's concerns, environmentalists continue to attack the project because the oil in question is known as a heavy, carbon-intensive fuel that boosts emissions of the gases that cause global warming.

"In a world where the climate threat is taken seriously, it's inconceivable to see the approval of Keystone XL," said Anthony Swift, a staff attorney for the Natural Resources Defense Council.

Swift said a decision by the Obama administration to greenlight the pipeline would run counter to the spirit of the president's promise Monday to address climate change.

But TransCanada, the operator of the project, said the pipeline would boost energy security and create jobs.

"The need for Keystone XL continues to grow stronger as North American oil production increases and having the right infrastructure in place is critical to meet the goal of reducing dependence on foreign oil," said TransCanada chief executive Russ Girling.

"It remains in America's national interests to approve a pipeline that will have a minimal impact on the environment."

Republican House Speaker John Boehner urged Obama to approve Keystone and not "delay this project any further."

"I recognize all the political pressure the president faces, but with our energy security at stake and many jobs in limbo, he should find a way to say yes," Boehner said.

State Department spokeswoman Victoria Nuland said the department would take Nebraska's views into consideration.

"Obviously, if the state had been opposed to this or unwilling to see it proceed, that would have had an effect on our process," Nuland said. "But given that the state has now given it a green light, we're operating within that more positive parameter."