In a move many are calling politically motivated, the U.S. State Department delayed a decision on TransCanada Corp.’s Keystone XL pipeline to study alternative routes. The pipeline, planned to carry oil from Alberta, Canada through the heart of cattle country to Texas, has spurred a growing controversy between environmental groups and oil industry supporters.

The study of alternative routes could take 12 – 18 months, which would push the final decision on the pipeline until after President Barack Obama’s re-election bid in November 2012. In a release issued Thursday, the State Department said the study “could be completed as early as the first quarter of 2013.”

The delay is called a victory for environmentalists who oppose the pipeline and a setback for TransCanada Corp., whose $7 billion Keystone XL project is seen as the most important North American oil pipeline plan for decades.

If the administration explores a new route, “it’s a huge victory, and it would probably be the biggest environmental gift that President Barack Obama has given us,” Tony Iallonardo, a spokesman at the National Wildlife Federation told Reuters.

Many of Obama’s supporters have strongly opposed the project and delaying the decision could allow Obama to avoid antagonizing environmentalists disillusioned with his progress on climate change. Republicans are likely to argue that any delay in the pipeline project will slow job growth.

At the center of the controversy is the Sandhills region of Nebraska, which the 1,700-mile pipeline would dissect from north to south. Below the Sandhills is the Ogallala Aquifer, which pipeline opponents believe would be greatly damaged should an oil spill from the pipeline occur.

Jobs or the environment? Keystone XL pipeline project delayedOpposition to the Keystone XL project is also fueling debate in Lincoln, the Nebraska capital where the state legislature opened a special session this week to consider changes that would give the state more control over the pipeline and other major oil lines. TransCanada says it will file court challenges if Nebraska tries to intervene, saying the decision is a federal issue.

Robert Jones, TransCanada’s vice president for pipelines, told the Legislature’s Natural Resources Committee that attempts to block the project were “fundamentally unfair,” given his company’s cooperation with state and federal authorities.

A bill by Sen. Ken Haar of Malcolm, Neb., would create “exclusion zones” where pipes larger than 8 inches in diameter could not run. If approved, the measure would prevent the Keystone XL pipeline from running through the Sandhills, certain cold water streams, or other regions where the groundwater is near the surface.

Supporters of Haar’s bill say it would help protect the state’s natural resources, including economic and agricultural interests.

The proposed pipeline would run through Montana, South Dakota, Kansas, Nebraska, Oklahoma and Texas. The objective is to carry oil derived from tar sands in Alberta to refineries on Texas’ Gulf Coast. The new pipeline would double the capacity of an existing pipeline that opened last year.

Supporters of the project believe it would create U.S. construction jobs, help lower gas prices and reduce America’s dependence on Middle Eastern oil.