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State Department's Keystone Pipeline Decision Delayed Until After March

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* Nebraska: TransCanada will adhere to 57 safety conditions

* US State Dept says will not decide before end of March

* Obama admin. expected to rule on Keystone this year

By Timothy Gardner and Andrew Quinn

WASHINGTON, Jan 22 (Reuters) - The Obama administration has delayed a decision on TransCanada Corp's rerouted Keystone XL oil pipeline until after March, even though Nebraska's governor said on Tuesday he approved a plan for a section of the line.

"We don't anticipate being able to conclude our own review before the end of the first quarter of this year," said Victoria Nuland, a spokeswoman at the State Department, which had previously said it would make a decision before the end of March.

The State Department will rule on a final permit for the $5.3 billion northern section of the line being planned by TransCanada because it would cross the national border.

Work has already begun on the Texas to Oklahoma section of the pipeline that TransCanada has rebranded the Gulf Coast Project. President Barack Obama threw his support behind that section of the line, which would help drain a glut of crude in the nation's midsection resulting from new oil drilling in North Dakota.

The State Department expects to issue a draft environmental assessment of the pipeline project in the near future and before the end of March, a second official at the department said. That report will have a public comment period before it is finalized and the department can make a final decision on the line.


NEBRASKA APPROVES PIPELINE SECTION

Nuland's comments came shortly after Nebraska's governor approved a revised route in his state for the Keystone XL pipeline that would link production from Canadian oil sands to refineries in Texas.

Gov. Dave Heineman, a Republican, sent a letter to President Obama that said TransCanada would adhere to 57 safety conditions. Those include rigorous pipeline design, testing, and the reporting of leaks on the line.

TransCanada had submitted a new route for the northern pipeline, expected to transport 830,000 barrels per day of oil, after the Obama administration had rejected an initial plan after environmentalists had complained it would cross ecologically sensitive regions in Nebraska.

Heineman approved the line even though his state's environmental regulator said it would still cross a section of the massive Ogallala aquifer, an important source of irrigation and fresh water to the Great Plains states.

Environmentalists have also opposed the line because oil sands crude is carbon-intensive to produce. But the State Department said in a previous environmental review that the line would not result in additional emissions because the oil would find its way to market if Keystone was not built.

Earlier this month Nebraska's environmental regulator said in a report that the line would avoid the sensitive Sandhills region. The report also said TransCanada would pay for cleaning up any leaks.

Nuland said the State Department would consider Heineman's approval. "Our processes move in parallel," she told reporters. But had Nebraska changed the route or done something else that certainly would have been complicating ... we obviously want to take the Nebraska environmental study, we want to compare it with the work that we've done."

Heineman said in the letter that TransCanada would provide evidence that it is carrying $200 million in third party insurances to cover any cleanup costs from leaks.

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