The decision to approve a pipeline that would bring Canadian oil across America via pipeline to refineries in Texas has fallen to the State Department, which finds itself in a battle among states as it weighs the environmental impact against jobs and cheaper, friendlier oil.

TransCanada says its $13 billion project is a win-win for both countries and earned some stateside cheerleaders last week after it finalized deals to let U.S. producers in North Dakota and Montana use part of its proposed pipeline. 

Under the agreement, about 65,000 barrels a day worth of their tar sands oil would glide from Alberta, Canada, through the Canadian firm's pipeline en route to facilities in Cushing, Okla. The so-called Keystone XL line is part of a broader pipeline system projected to eventually carry more than 1 million barrels a day across the two countries.

But objections have been building over the past several months in the wake of the BP oil spill last April in the Gulf of Mexico. The Sierra Club complained that the pipeline would indirectly contribute to global warming, and a Nebraska Republican senator complained it would cross a vital aquifer. And U.S. property owners have challenged Canadian firm TransCanada's attempts to build on their land. 

The State Department, which has the authority to issue or deny a permit because it deals with a project crossing international borders, now faces the task of addressing these concerns as it determines whether to grant a permit to TransCanada, and how many hoops the company might have to jump through to get it. 

A department official told FoxNews.com the administration plans to complete its review in early 2011. 

After posting what's known as an environmental impact statement last spring, the department has received "thousands of comments," the official said. The State Department will next decide whether to order an additional environmental study and, finally, whether it deems the proposed pipeline "in the national interest." 

TransCanada claims the overall project will reduce the United States' dependence on oil from the Middle East and Venezuela, and create 20,000 U.S. jobs in the process. 

"The American people want oil from friendlier sources and from a trading partner such as Canada," TransCanada spokesman Shawn Howard told FoxNews.com. 

U.S. officials who had been lobbying for the pipeline access hailed the announcement for North Dakota and Montana. Sen. John Hoeven, R-N.D., called the progress a "big step forward" in creating jobs and boosting domestic oil production. 

Montana Gov. Brian Schweitzer said the link will give local producers "the infrastructure to efficiently get our oil to domestic refineries," calling it a "tremendous opportunity" for Montana. 

But other interests are lining up against the project. 

The Sierra Club has expressed concern that the extraction of tar sands oil releases three times the amount of greenhouse gas emissions than in conventional methods, calling it "one of the most destructive projects on earth." 

Rep. Henry Waxman, D-Calif., voiced similar concerns last summer in a letter to Secretary of State Hillary Clinton. He warned that the environmental studies failed to address the global warming aspect, which he called "the most significant environmental problem associated with the project." 

Both the Sierra Club and Natural Resources Defense Council penned a memo last month calling for a "supplemental environmental impact statement" addressing a host of other concerns. The groups asked for further study on greenhouse gas emissions, pipeline accident risks, the possibility of the project "adversely" affecting the endangered American burying beetle and the impact on migratory birds, among other topics. 

Aside from broad environmental concerns, local interests have also started to speak up. Sen. Mike Johanns, R-Neb., wrote to Clinton last fall noting the department had conducted "little examination" on alternatives to a pipeline path that would traverse the Ogallala Aquifer, "an irreplaceable natural resource." 

Oklahoma land owners are mounting a court fight against the Canadian firm. According to a recent Los Angeles Times article, environmentalists and landowners alike are teaming up in Texas to voice concern about the 1,700-mile pipeline cutting through their property. 

TransCanada claims it has the capacity to respond to any spill and is devoted to minimizing the impact on the environment. 

Asked about the climate change concerns, Howard said TransCanada is merely transporting the oil, a process he suggested would have minimal environmental impact. 

"We need to put ... some of the claims out there into perspective. This is a pipeline transporting oil to meet consumer demand," he said. "There's going to be next to no emissions associated with the actual operation of this line." 

Howard said he hopes the State Department issues a permit "as soon as possible," though he added the firm could furnish more information if necessary.