The State Department is ordering the developer of a pipeline that would carry oil from western Canada to Texas to reroute the project away from environmentally sensitive areas of Nebraska.
That decision could delay a final U.S. decision on the project until after the 2012 election.
The decision will require an environmental review -- and that could take at least a year.
TransCanada Corp. is seeking to build the $7 billion pipeline. Part of the 1,700-mile pipeline would pass through Nebraska's Sandhills region and an aquifer that supplies water to eight states
Two senior State Department officials who are familiar with the project described the decision to The Associated Press. The officials spoke on condition of anonymity because they weren't authorized to discuss the decision before an official announcement.