Canadian energy company TransCanada will change the route of a U.S.-bound oil pipeline due to environmental concerns, company officials announced at the U.S. Nebraska Capitol Monday night.

The announcement came after the U.S. State Department's decision last Thursday to delay the permit for the project, whose route was planned to go through the environmentally sensitive sandhills area in the United States.

The department said it would not give the green light until the company finds alternative routes that will not threaten sensitive lands and underground water supplies.

The Keystone Pipeline System is a 3,456-km-long pipeline system to transport synthetic crude oil and diluted bitumen from the Athabasca Oil Sands in northeastern Alberta, Canada, to refineries in the U.S. states of Illinois and Oklahoma, and further to the U.S. Gulf Coast. The U.S. section is 2,219-km-long.

The system consists of the operational "Keystone Pipeline" and proposed Keystone XL (Keystone Expansion) pipeline, which is expected to be completed by 2012-2013.

The Keystone XL pipeline has faced lawsuits from oil refineries and criticism from environmentalists and some members of the U.S. Congress over concerns of greenhouse gas emissions and possible oil spills.

Environmentalists and some Nebraska landowners feared the pipeline would ruin the region's soil, harm wildlife, and contaminate the aquifer.

Business and labor groups which support the project argued that the project would create construction jobs.

As for U.S. President Barack Obama, who is seeking reelection in 2012, the project has become an issue of how to balance environment protection and economic and energy supply concerns.

"Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood," Obama said earlier in a statement.