Nebraska Gov. Dave Heineman notified the Obama administration Tuesday that he has approved the controversial Keystone XL Pipeline to traverse his state, marking a significant step toward reviving the project after President Obama and Secretary of State Hillary Clinton sidelined it.

The Republican governor approved a revised route for the Canada-to-Texas pipeline which his office said would avoid environmentally sensitive areas.

"Construction and operation of the proposed Keystone XL Pipeline, with the mitigation and commitments from Keystone would have minimal environmental impacts in Nebraska," he wrote in a letter to Obama and Clinton.

The decision on final approval now rests with the Obama administration. The State Department is expected to decide within the next several months whether to permit the project to go forward -- Heineman's approval puts Obama in a difficult political spot.

The president had previously cited the Nebraska's concerns about the pipeline as a key obstacle to approving the pipeline. At the same time, the president was able assuage the concerns of major environmental groups who not only voiced concern about the potential impact of a spill but also the emissions created by extracting and refining oil from what are known as oil sands in Canada.

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After Obama in his inaugural address pledged to take action on climate change, the Sierra Club said it was "heartened" by Obama's remarks and again urged the administration to reject "the dangerous tar sands pipeline."

But supporters -- including some in the president's own party -- have downplayed the environment impact and stressed the economic benefits the pipeline could bring. The pipeline is backed by the unions, and has been heavily promoted by Canadian officials. In Heineman's letter, the governor said construction in Nebraska would yield $418 million in economic benefits.

Asked about the Nebraska governor's decision Tuesday, White House Press Secretary Jay Carney noted the State Department was still reviewing the issue.

"There are stages in this process. ... I don't want to get ahead of that process," Carney said.

State Department spokeswoman Victoria Nuland later said the Nebraska decision would "inform" the department's review.

There are other hurdles beyond the federal government's approval -- needed because the pipeline crosses the U.S.-Canada border. A state court case has challenged the law that gives Heineman the power to approve such plans.

The American Petroleum Institute hailed the Nebraska decision Tuesday as a major step.

"Another major hurdle has been cleared," API Executive Vice President Marty Durbin said. "With the approval from Nebraska in hand, the president can be confident that the remaining environmental concerns have been addressed."

Russ Girling, CEO of pipeline developer TransCanada, urged the Obama administration to green-light the project, as did House Speaker John Boehner.

"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," Girling said in a statement.

The governor said the new route would avoid the sensitive Sand Hills region, though would "cross" a vital aquifer. The governor expressed confidence that enough protections were in place to allow the project to go forward.