The long-delayed Keystone XL oil pipeline from Canada moved a significant step toward completion Friday as the State Department raised no major environmental objections to its construction. The finding is likely to be welcomed by Republicans and some oil- and gas-producing states but is sure to further rankle environmentalists already at odds with President Barack Obama over his energy policy. The department report stops short of recommending approval of the $7 billion pipeline, which has become a major symbol of the political debate over climate change. But the review gives Obama political cover if he chooses to endorse the pipeline in spite of opposition from many Democrats and environmental groups. Foes say the pipeline would carry "dirty oil" that contributes to global warming. They also worry about a spill.

Part of TransCanada's Keystone XL pipeline under construction in Atoka, Oklahoma. Daniel Acker | Bloomberg | Getty Images

Republicans and business and labor groups have urged Obama to approve the pipeline to create thousands of jobs and move toward North American energy independence. The pipeline is also strongly supported by Democrats in oil and gas-producing states, including Sens. Mary Landrieu of Louisiana, Mark Begich of Alaska and Mark Pryor of Arkansas. All face re-election this year and could be politically damaged by rejection of the pipeline. Republican Mitt Romney carried all three states in the 2012 presidential election.

The 1,179-mile pipeline would travel through the heart of the United States, carrying oil derived from tar sands in western Canada to a hub in Nebraska, where it would connect with existing pipelines to carry more than 800,000 barrels of crude oil a day to refineries in Texas.

A State Department official said Canadian tar sands are likely to be developed regardless of U.S. action on the pipeline, adding that other options to get the oil from Canada to Gulf Coast refineries—including rail, trucks and barges— would be worse for climate change. A news conference was set for later Friday. (Read more: Big Oil blues as US gushes oil, gas) State Department approval is needed because the pipeline crosses a U.S. border. The Environmental Protection Agency and other departments will have 90 days to comment before State makes a recommendation to Obama on whether the project is in the national interest. A final decision by the government is not expected before summer. The new report comes only days after Obama's State of the Union address, in which he reiterated his support for an "all-of-the-above" energy strategy that embraces a wide range of sources, from oil and natural gas to renewables such as wind and solar power. The remarks were a rebuff to some of his environmental allies who argued that Obama's support of expanded oil and gas production doesn't make sense for a president who wants to reduce pollution linked to global warming.