The State Department was required to conduct a new environmental analysis after the pipeline's operator, Calgary-based TransCanada, changed the project's route though Nebraska. The Obama administration blocked the project last year because of concerns that the original route would have jeopardized environmentally sensitive land in the Sand Hills region.
The administration later approved a southern section of the pipeline, from Cushing, Okla., to the Texas coast, as part of what President Barack Obama has called an "all of the above" energy policy that embraces a wide range of sources, from oil and gas to renewables such as wind and solar.
The pipeline plan has become a flashpoint in the U.S. debate over climate change. Republicans and business and labor groups have urged the Obama administration to approve the pipeline as a source of much-needed jobs and a step toward North American energy independence.
Environmental groups have been pressuring the president to reject the pipeline, saying it would carry "dirty oil" that contributes to global warming. They also worry about a spill.
Industry groups and Republicans hailed the report, saying the Obama administration was moving closer to approving Keystone XL, which has been under consideration since 2008.
"No matter how many times KXL is reviewed, the result is the same: no significant environmental impact," said Marty Durbin, executive vice president of the American Petroleum Institute, the largest lobbying group for the oil and gas industry.
The report "puts this important, job-creating project one step closer to reality," Durbin said.
Environmentalists blasted the report.
"This analysis fails in its review of climate impacts, threats to endangered wildlife like whooping cranes and woodland caribou, and the concerns of tribal communities," said Jim Lyon, vice president of the National Wildlife Federation.