Officials unveiled a new preferred route Thursday for the Nebraska portion of the stalled Keystone XL oil pipeline that avoids the state's groundwater-rich Sandhills region.

The proposed route would veer east around the the Sandhills before looping back to the original route. Developer TransCanada has said the reroute adds about 161 kilometres to the original 2,736-kilometre project that would carry oil from Canada to the Gulf Coast.

The company submitted the proposal after Gov. Dave Heineman allowed state officials to proceed with an environmental review. The review stalled in January when the Obama administration rejected a federal permit for the pipeline.

Administration officials said they didn't have time to review the project before a congressional deadline and cited uncertainty about the Nebraska route.

The full $7-billion pipeline would travel from Canada through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

TransCanada wants to build the 91-centimetre diameter pipeline to carry oil from oilsands in Alberta to refineries on the Texas Gulf Coast.

Nebraska became a pivotal battleground for the project last year, pitting environmentalists and some landowners against unions and the oil industry.

TransCanada agreed to reroute pipeline

Heineman called a special session to address concerns over the pipeline's proposed path, and TransCanada executives eventually agreed to route the pipeline away from Nebraska's groundwater-rich Sandhills.

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Republican Senator John Cornyn from Texas shows his enthusiasm for the Keystone XL pipeline on his lapel during a news conference in Washington in March. (Charles Dharapak/Associated Press)

Nebraska lawmakers passed a bill earlier this month authorizes the state Department of Environmental Quality to review possible routes through the state and hold at least one public hearing on its evaluation. Its findings would then be added to a federal environmental review, if the company reapplies for a project permit.

Environmentalists say the pipeline still threatens Nebraska's water and wildlife, and they dispute company claims that it will create tens of thousands of U.S. jobs and reduce the nation's dependence on oil from hostile foreign nations.

The review is expected to cost as much as $2 million. The state has spent roughly $153,000 since November but stopped the analysis after the permit was denied.

'Back in the hands of Nebraskans'

Jane Kleeb, executive director of the group Bold Nebraska, said the proposed corridors still cross the Sandhills and the Ogallala aquifer, a groundwater supply that lies beneath Nebraska and smaller parts of seven other states.

"All of the routes are unacceptable and show once again we cannot trust TransCanada," Kleeb said.

TransCanada spokesman Shawn Howard said the new corridor proposals avoid the Sandhills, as they were identified by the state.   

"Once again, this process is back in the hands of Nebraskans, who overwhelmingly support the safe construction and operation of this critical North American energy infrastructure project," he said.

Opponents say the project should be reviewed by the state's Public Service Commission, an independently elected group that regulates utilities.