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By Valerie Volcovici and Timothy Gardner WASHINGTON (Reuters) - The U.S. State Department plans to approve on Friday the permit needed to proceed with construction of the Canada-to-United States Keystone XL oil pipeline, a project blocked by former President Barack Obama, according to two government sources familiar with the process. White House spokesman Sean Spicer said the administration would provide an update on Keystone on Friday but did not offer any details. Two government sources, who declined to be identified, said on Thursday that the pipeline approval would be announced by the White House. One of the sources said the State Department was working to get the approval completed before Monday, the end of the 60-day timeline under Trump's January executive order for the construction of Keystone and the Dakota Access pipelines. The move would mark the beginning of a process that could be lengthy. Approvals are needed from state regulators, and the project could face legal challenges. But Republican President Donald Trump supports Keystone and, days after he took office in January, ordered its construction. That could mean the project, proposed in 2008, will eventually be completed. The State Department's undersecretary for political affairs, Tom Shannon, is expected approve the cross-border permit for TransCanada Corp's pipeline since Secretary of State Rex Tillerson, the former CEO of ExxonMobil, recused himself from the matter. The multi-billion dollar Keystone pipeline would bring more than 800,000 barrels-per-day of heavy crude from Canada's oil sands to U.S. refineries and ports along the Gulf of Mexico, via an existing pipeline network in Nebraska. Obama had rejected the pipeline saying it would do nothing to reduce fuel prices for U.S. motorists and would contribute emissions linked to global warming. TransCanada resubmitted its permit application after Trump's executive order. Spokesman Terry Cunha said the company was working closely with the State Department. "Monday is the deadline, so that's what we're working towards," Cunha said. Conservatives said they supported quick approval. Nick Loris, an energy and environment researcher at the Heritage Foundation, said approval would "reestablish some certainty and sanity to a permitting process that was hijacked by political pandering." Environmental groups said they had been prepared for the approval and vowed Thursday to fight the pipeline at every turn with petitions, political pressure and mass protests. "The same communities who defeated this pipeline before - indigenous leaders, landowners, farmers and grassroots activists - are ready to fight again," said May Boeve, director of activist group 350.org. Diana Best, a Greenpeace climate campaign specialist said, "We will resist these projects with our allies across the country and across borders." FURTHER HURDLES A stretch of Keystone XL also awaits approval from Nebraska regulators. Transcanada has to file its pipeline route plans with the state's Public Service Commission, which is required to hold public hearings on the proposal. Keystone's construction costs could be higher than the $7 billion estimated after it was first proposed, said Michael Wojciechowski, vice president of Americas oil and refining markets research at Wood Mackenzie. "Final costs are still to be determined, but they have done nothing but go up over time," he said. Still, there could also be some savings on labor given recent layoffs due to the recent oil price drop, he said. (Reporting By Valerie Volcovici and Timothy Gardner in Washington, and Ethan Lou in Calgary; Editing by Marguerita Choy and Cynthia Osterman)