A federal ruling blocking the Trump administration’s approval of the Keystone XL pipeline further clouds the future of a project that has faced a decade of delays due to fevered opposition from environmentalists, landowners and Native American groups.
U.S. District Judge Brian M. Morris ruled Thursday night that President Trump’s 2017 cross-border permit of the pipeline expansion by TransCanada Corp . TRP -1.87% hadn’t considered all impacts as required by federal law, and that construction couldn’t move forward until a supplemental environmental review is completed.
The decision means the pipeline expansion to carry oil from Alberta to Nebraska is certain to face at least some additional delays, as the ruling is either appealed to a higher court, or government officials complete the extra analysis.
Mr. Trump criticized the ruling. “Well, it was a political decision made by a judge,” he said to reporters outside the White House Friday before heading to France. “I think it’s a disgrace.”
A TransCanada spokesman said the company is reviewing Thursday’s ruling and reiterated the company’s support for the project.
“We remain committed to building this important energy infrastructure project,” the spokesman said.
The U.S. State Department, which issued the presidential permit and was the other defendant in the case, said Friday it was reviewing the decision and didn’t have further comment at this time.
Keystone XL has already faced numerous legal and political hurdles, and has become a rallying cry for environmentalists who want to keep fossil fuels in the ground. Mr. Trump revived the pipeline after it had been blocked by former President Obama, but the project has continued to face challenges.
TransCanada said earlier this year that it has sufficient support from customers to move forward with the project, now expected to cost around $8 billion, and that work could begin next year. But it has yet to make a final decision on whether to complete construction.
Chris Cox, a Toronto-based energy analyst with Raymond James Ltd., said the new ruling could delay construction into 2020 and possibly turn the pipeline into an issue in the next U.S. presidential election, increasing uncertainty.
“Is TransCanada willing to bet $8 billion on getting another approval from Trump?” he said.
If completed as planned, Keystone XL would carry up to 830,000 barrels of oil a day, mostly from Canada’s oil sands, more than 1,000 miles to Steele City, Neb., where it would link to existing pipelines to Gulf Coast refineries. The proposed route would cross through Montana, South Dakota and Nebraska.
The new ruling by Judge Morris, who was nominated by Mr. Obama, requires the federal government to update a prior 2014 environmental review of Keystone XL to weigh several additional factors. They include the impact of lower oil prices on the project’s viability, its related greenhouse-gas emissions and modeling of potential oil spills it could cause.
The State Department was already in the process of drafting a supplemental environmental review of the pipeline’s potential impact in Nebraska, but that analysis is unlikely to be sufficient, said Matthew Taylor, an analyst for energy investment bank Tudor Pickering Holt & Co.
If a second supplemental review is required, it is unlikely TransCanada would be able to move forward with Keystone XL until late 2019 at the earliest, he said, putting the project’s future in doubt.
“At what point does the incremental work stop?” Mr. Taylor said.
Zachary Rogers, an analyst for energy consultancy Wood Mackenzie, predicted the project would continue to move forward, but said the delays were a problem for Canadian oil-sands producers struggling to move their crude to market. “While definitely a major setback in terms of timing, this is unlikely to be the nail in the coffin for Keystone XL,” he said.
Canadian pipelines have had a string of setbacks in the past year. TransCanada canceled its Energy East project last year after the Canadian government said it would widen the scope of an environmental review of the pipeline.
In May, Kinder Morgan Inc. bailed out on its planned expansion of the Trans Mountain pipeline between the provinces of Alberta and British Columbia, in the face of vocal opposition and several delays. Canada’s government bought the pipeline for 4.5 billion Canadian dollars ($3.41 billion) to ensure construction, only to see an appeals court declare in August that the project had been wrongly approved and must be reviewed, delaying construction indefinitely.
The lack of pipeline construction has hit Canadian oil producers, which are having trouble getting their oil out to refiners in the U.S. Western Canadian Select crude has been trading at a steep discount to the West Texas Intermediate crude in the U.S., largely because of producers’ inability to get their oil to market.
The oil price discount hit a record $51 last month, although it has since retreated as crude prices have fallen. Heavy Canadian crude was trading for $43 a barrel below U.S. benchmark prices Friday, according to Tudor Pickering Holt.
—Timothy Puko contributed to this article.