Nebraska lawmakers vote to reroute oil pipeline

Demonstrators call for the cancellation of the Keystone XL pipeline during a rally in front of the White House in Washington November 6, 2011.

LINCOLN, Neb (Reuters) - The Nebraska legislature on Wednesday voted unanimously to advance a proposed law that would reroute the controversial TransCanada Keystone XL pipeline to avoid the sensitive Sandhills and Ogallala aquifer.

Nebraska and TransCanada Corp agreed Monday to find a new route for the stalled pipeline.

Under pressure from green groups, the U.S. State Department last week ordered the company to find a new route for the line in a decision that set back the timing of the $7 billion, Canada-to-Texas pipeline by more than a year.

The pipeline would carry crude oil from Canada's oilsands area to Texas refineries.

Nebraska Gov. Dave Heineman would have final state approval on any proposed route.

Under the bill, the state would pay for a new environmental study for the new route. Lawmakers on Wednesday also approved paying up to $2 million for the study.

In the Nebraska legislature, bills must be voted on three times. The environmental study legislation will be voted on again on Friday, and if necessary again on Tuesday.

"It's a necessary expenditure," said State Sen. Bill Avery. "We need to make sure this is something we control."

Nebraska has forged ahead with pipeline legislation despite the U.S. State Department's decision last week to put off giving TransCanada a permit for the Keystone XL line until 2013.

Gov. Heineman said Tuesday that he hoped action by Nebraska would expedite the federal permitting process for the Keystone pipeline.

"We support the pipeline, but we were opposed to the route through the Sandhills," Heineman said. "The State Department heard our concerns and TransCanada has heard us."

Speaker of the Legislature Mike Flood said Nebraska, because of its geographic location and energy infrastructure, will remain a "prime target" for the country's energy decisions.

"This is setting up a process that will help Nebraska in the future," he said.

In addition to the Keystone pipeline legislation, lawmakers also are working on a separate bill that will give future pipeline siting authority to the publicly elected Public Service Commission. That measure will not affect the Keystone project.

(Editing by Mary Wisniewski, Greg McCune and Bob Burgdorfer)