The report, released on March 1, takes into account the revised application Calgary-based TransCanada submitted last May for the 875-mile segment from the Canadian border, near Morgan, Mont., to Steele City, Neb. The new plan avoids Nebraska's environmentally sensitive Sand Hills region.

While the $3.3-billion Montana-Nebraska section probably would not result in significant adverse effects, the Canadian tar-sands development could have an impact on climate change, the report concludes. Still to come is a U.S. decision on whether to grant the project a permit.

Michael Brune, Sierra Club executive director, said he was "mystified" how the State Dept. could acknowledge Canadian tar sands' increased climate impacts yet claim there would be little significant environmental impact. Other groups, such as the AFL-CIO Building and Construction Trades Dept., back the pipeline, saying it would create thousands of jobs.