TransCanada agreed on Monday to reroute its Keystone XL oil pipeline around the Sandhills region of Nebraska, in a strategic move that divided the coalition of locals and environmentalists that had formed to oppose the project.

The move came on the heels of President Obama's decision last week, in response to thousands of protesters rallying outside the White House, to send the pipeline project back to the State Department for a re-review of whether it is in the country's best interest. The State Department is responsible for approving the project because it comes out of Canada.

That decision threw a wrench in TransCanada's plans, as the company had banked on approval by the end of 2011. Opponents all but declared victory, saying the re-review would effectively kill the project. But TransCanada turned the tables on Monday by addressing one concern about the pipeline -- the threat it posed to the Sandhills and the Ogallala aquifer in Nebraska -- in an effort to reduce opposition to the project as a whole.

Proponents say the $7 billion pipeline, which would carry 700,000 barrels of crude oil a day from the tar sands of Alberta, Canada, to refineries in Texas, would reduce the United States' dependence on oil from the Middle East and Venezuela. But the planned route went over the Ogallala aquifer, which provides 80 percent of Nebraska's drinking and irrigation water, and residents worried about the effects of an oil spill.

New Route: Through Aquifer, But Not Sandhills

The new route TransCanada has proposed would still go over the aquifer, but not through the Sandhills, where there would have been only a thin, fragile sand barrier between the pipeline and the aquifer. Shifting the route farther east means there will be a 200-foot barrier of clay soil to prevent contamination of the aquifer.

For Nebraskans who have opposed the route through the Sandhills from the start, this is welcome news and a huge victory, Jane Kleeb, the executive director of Bold Nebraska, said in a statement. But she added that Nebraskans still have a lot of serious, important questions about this pipeline and will be watching [TransCanada] like a hawk to ensure our land and water are protected.

While many locals were thrilled with the move, it did not satisfy opponents concerned with the environmental impact of the pipeline beyond Nebraska.

We're awfully happy that the Ogallala aquifer is going to be safe, and the Sandhills, and that only leaves the entire atmosphere of the planet to worry about, Bill McKibben, an organizer for Tar Sands Action, one of the groups opposing the pipeline project, said in a statement.

Unlike local farmers and ranchers, whose opposition had been based mainly on protecting the aquifer and their own livelihoods, Tar Sands Action and other groups that have been protesting the project at the national level oppose the pipeline in any location because extracting oil from tar sands releases more carbon dioxide into the atmosphere than traditional oil extraction.

These opponents argue that the pipeline will not reduce dependence on foreign oil because most of the oil it transports will be exported to Europe and Latin America, according to presentations TransCanada has made to investors. They also argue that it will not create as many jobs as advertised.

Two major unions, the Amalgamated Transit Union and the Transport Workers Union, also oppose the project on that basis. We need jobs, but not ones based on increasing our reliance on tar sands oil, they said in a statement in August.

TransCanada Expects New Route OK

But TransCanada officials said they believed the reroute would clear the way for approval and urged the State Department to finish its review quickly.

As I understand the concern of the State Department ... they indicated that the reason for the delay was the concern that was raised by Nebraskans with respect to the route, and particularly the Sandhills, Alex Pourbaix, the president of Trans Canada's energy and oil pipelines division, told the Los Angeles Times. I would hope this would give the State Department reason to consider shortening that time frame.

TransCanada cannot afford a drawn-out review process. It has already spent $1.9 billion on the Keystone XL project, and the Calgary Herald reported that each day the project is delayed costs an additional $1 million.

The company tried very hard to avoid the delay it is now facing, insisting that it had already examined all possible routes and chosen the one with the least overall environmental impact, and that it was too late to choose a different route now. But President Obama's decision to send the project back to the State Department left TransCanada with few options other than a reroute.

The company's share price dropped 30 cents on the Toronto Stock Exchange on Monday, closing at $40.51. Paul Lechem, an analyst for CIBC World Markets, said the share price would probably fall 89 cents if the pipeline were rerouted and $2.48 if the project were canceled altogether.