State Department: Keystone pipeline needs further review

The announcement came as welcome news for environmentalists, who have mounted a campaign against the project, noting that oil sands production emits high levels of greenhouse gas emissions and raising the specter of future oil spills.

"This is a victory for the public given the many concerns that have been voiced regarding the environmental, health and safety impacts of the pipeline," said Liz Barratt-Brown, a senior attorney at the Natural Resources Defense Council, in a statement. "The State Department should be using this opportunity to address additional issues identified by EPA, members of Congress and the public."

The oil industry, on the other hand, said it's time for the administration to approve the project.

“This much-studied and much-needed pipeline would provide a critical link to our largest energy supplier, Canada, and its vast resources of nearby and available crude oil,” API President Jack Gerard said in a statement Tuesday. “It is past time for the administration to approve this important infrastructure investment.”

Oil-sands production results in higher greenhouse gas emissions than conventional oil production, but the exact emissions are an issue of dispute between environmentalists and the oil industry.

The State Department is heading up an Obama administration review of the project.