WASHINGTON -- The Obama administration said Thursday it is delaying a decision on a massive oil pipeline until it can study new potential routes that avoid environmentally sensitive areas of Nebraska, a move that likely puts off final action on the pipeline until after the 2012 election.

The announcement by the State Department means Calgary-based TransCanada Corp. will have to figure out a way to move the proposed Keystone XL pipeline around the Nebraska Sandhills region and Ogallala aquifer, which supplies water to eight states.

The State Department said it will require an environmental review of the new section, which is expected to be completed in early 2013.

President Barack Obama said the 1,700-mile pipeline could affect the health and safety of the American people as well as the environment.

"We should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood," Obama said.

The decision on whether to approve the $7 billion pipeline "should be guided by an open, transparent process that is informed by the best available science and the voices of the American people," Obama said.

TransCanada is seeking to build a 36-inch pipeline to carry oil derived from tar sands in Alberta, Canada, to refineries on the Texas Gulf Coast. The pipeline would travel through Montana, South Dakota, Nebraska, Kansas and Oklahoma before reaching Texas.

The heavily contested project has become a political trap for Obama, who risks angering environmental supporters if he approves the pipeline, and could face criticism from labor and business groups for thwarting job creation if he rejects it.

Some liberal donors have threatened to cut off contributions to Obama's re-election campaign if he approves the pipeline. The project has become a focal point for environmental groups, which say it would bring "dirty oil" that requires huge amounts of energy to extract.