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The controversial Keystone XL oil pipeline to bring heavy crude from Canada to US refineries cleared a critical hurdle on Monday as state regulators in Nebraska approved the project, but it still faces challenges before construction can start.

Nebraska’s Public Service Commission voted by three votes to two to allow the pipeline to pass through the state but insisted on an alternative route to the one proposed by TransCanada, the company leading the $8bn project.

TransCanada first filed for federal government approval of Keystone XL in 2008. It was eventually rejected by President Barack Obama in 2015, but that decision was reversed by President Donald Trump in March.

The Nebraska decision was the last significant regulatory approval needed for Keystone XL, which has secured all the other permits it needs from state and federal governments. However there are continuing legal challenges to the project, and the change of route in Nebraska could add further complications.

Karen Harbert, president of the Global Energy Institute of the US Chamber of Commerce, welcomed Nebraska’s decision, but said the project had “unfortunately become the poster child for the need to reform our permitting process”.

TransCanada has not yet confirmed it has all the customers it needs to go ahead with construction of the 1,200-mile pipeline, but told analysts earlier this month that it expected support for the project to be “substantially similar” to what it was when it first sought approval almost a decade ago.

Russell Girling, chief executive, said in a statement on Monday that the company would “conduct a careful review of the Public Service Commission’s ruling while assessing how the decision would impact the cost and schedule of the project”.

He told analysts earlier this month that “production of Canadian heavy oil continues to grow, and the need for new pipeline transportation capacity remains high”.

Zachary Rogers of Wood Mackenzie, the research firm, said the biggest winners from the project would be oil producers in western Canada, who would gain a new export route for their crude with a capacity of up to 830,000 barrels per day.

Western Canadian Select crude currently trades at a price about $17 per barrel below US benchmark West Texas Intermediate. That gap is expected to close if Keystone XL is built.

The pipeline became a lightning rod for environmental campaigners because production from Canada’s oil sands is responsible for higher greenhouse gas emissions than some other forms of crude.

Tom Steyer, the billionaire environmental campaigner, said in a statement: “The American people have made it clear that they do not want this pipeline, and we will not stop making our voices heard until this project is dead.”

Mr Obama blocked Keystone XL in the run-up to the Paris climate talks in 2015, on the grounds that approving such a significant piece of oil infrastructure would have undercut US attempts to encourage global agreement on addressing the threat of global warming.

During last year’s election campaign Mr Trump talked about his support for the project but suggested there would be conditions attached, saying: “I want it built, but I want a piece of the profits.”

Signing an order to advance Keystone XL in his first week in office, Mr Trump also talked about plans to “renegotiate some of the terms” of the pipeline, but no further details have emerged.

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