The U.S. State Department has extended the review process for a controversial pipeline expansion that would ship oil-sands crude from Canada to Texas, thereby delaying decision on a project that's been in the works for years.

Bowing to pressure from a variety of government agencies assessing the environmental and economic effects of TransCanada Corp.'s (TRP, TRP.T) Keystone XL pipeline expansion, the State Department has agreed to give them an additional 90 days to review the project after final environmental study is complete.

As a result of the change, TransCanada "may not get a decision now until early 2011, which means that our construction schedule is being impacted by six weeks to 45 days," TransCanada spokesman Terry Cunha said.

Several environmental groups and at least one federal agency are critical of the Keystone XL project, which would expand TransCanada's existing Keystone pipeline, enabling it to ship an extra 900,000 barrels of crude a day from Canada's oil-sands region by the time it's complete in 2013. Environmentalists object to oil sands because it emits more greenhouse gases during production than conventional oil.

Last week, the Environmental Protection Agency said more study of the greenhouse-gas emissions created by Canada's oil-sands industry was needed before the expansion should be approved.

By delaying the project, environmental groups say the State Department is acknowledging the controversy surrounding it.

The State Department's delay "is procedural, but it's a big deal," said Susan Casey-Lefkowitz, director of the Natural Resources Defense Council's international program. "When you're making a national interest determination, you have to take the environmental impact into account."

A spokeswoman for the State Department wasn't available for comment.

Alberta-based TransCanada Corp. proposed the 1,700-mile pipeline in 2008, hoping to use it to transfer oil extracted from oil sands in Canada to refineries in Houston, which are set up to process heavy crude oil. The first phase of the Keystone system is complete and began shipping 435,00 barrels a day to refineries in Illinois this month.

The expansion of the project has been under review by the State Department, which is in charge of issuing permits to pipelines that cross the U.S. border, based on whether the projects serve U.S. interests.

The State Department had initially tried to pursue two review processes simultaneously, seeking input from other federal agencies while also conducting an environmental-impact review. With this new procedure, the State Department will finish its environmental-impact review before seeking input from other agencies.

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