The governor of Nebraska says he will allow TransCanada’s Keystone XL pipeline to go through his state via an amended route, removing another potential roadblock for the controversial project.

In a letter to U.S. President Barack Obama, Gov. Dave Heineman said he has given the pipeline his approval now that its new route partly avoids an area that environmental groups worried would be irreparably damaged.

Environmental and homeowner groups fiercely oppose the project over concerns it will harm the Sandhills region, an area of grassy sand dunes, and contaminate the Ogallala aquifer, a groundwater supply.

Obama had cited the fierce opposition to the route in Nebraska as one of his reasons for initially vetoing the project.

Heineman’s move puts the pipeline’s fate back in the hands of the U.S. State Department and the president himself.

The $7 billion pipeline would carry bitumen from Alberta’s oilsands to refineries on the U.S. Gulf Coast.

On Tuesday, the State Department said it had received Heineman’s letter, but cautioned that its own review of the project would carry on at least through the first quarter of this year.

“We will obviously take that letter and the Nebraska environmental report into consideration as we continue our federal review process,” State Department spokesperson Victoria Nuland told reporters.

The project has been mired in controversy as environmental groups and landowners warn of spills, while the company touts the pipeline’s economic benefits, as well as the potential reduction in the dependence on overseas oil.

Natural Resources Minister Joe Oliver said Tuesday the Canadian government welcomes Heineman’s “positive decision.”

“We support the Keystone XL project because it benefits jobs and the economic growth of both Canada and the United States. This important project is expected to create thousands of jobs and generate revenue to governments to support our critical social programs, including health care and education,” Oliver said. “Our desire is to work with the Obama Administration in achieving final approval.”

TransCanada also hailed the Nebraska governor's decision, saying in a statement that the project will allow put the United States closer to "enhanced energy security."

“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," TransCanada president and CEO Russ Girling said in a statement.

"Keystone XL is the most studied cross-border pipeline ever proposed, and it remains in America's national interests to approve a pipeline that will have a minimal impact on the environment."

While the new route skirts the Sandhills, the 320-kilometre pipeline will still cross a part of the aquifer. In his letter, Heineman said any spills would be contained and TransCanada would have to lead clean-up efforts.

Keith Stewart, climate and energy co-ordinator for Greenpeace, called Heineman’s decision “disappointing, but not unexpected.”

Stewart said his organization remains hopeful that Obama, a second-term president who no longer has to worry about re-election, will use his executive powers to kill the pipeline project for good.

“(Obama) was very clear in his inaugural speech (about) the threat posed by climate change and how we need to start putting our investments and our research and our best minds into renewable energy technologies, rather than the carbon-intensive technologies like pipelines from the tarsands,” Stewart told CTV’s Power Play.

Stewart noted that Obama said in his speech that he would do everything a president can do to act on climate change, and “one of the few things the president can do on his own is say no to this pipeline.”

TransCanada board member and former ambassador to the United States Derek Burney said the project’s approval remains far from a sure thing.

“We’re not there yet, but it’s certainly a good step in the right direction because getting the governor on side with the new route through Nebraska was the major objective,” Burney told Power Play.

Burney said Obama’s push for meaningful action on climate change in his inaugural address means Canadian and U.S. officials are going to have to work closely together on energy projects, including Keystone.

“As a Canadian, my concern has always been that we should be doing this together with the Americans,” Burney said. “We should not get out in front, we don’t want them getting out in front, because the proper remedy to climate change is to do things that are not going to be detrimental to the economy of either country, so we march together on it.”

With files from The Associated Press