However, press secretary Jay Carney says officials have left the door open to a future project.

"Concerns were raised about environmental impacts on air and water quality in Nebraska by among others, the governor of Nebraska, a Republican. A decision was made that an alternate route be sought, and that therefore the process had to be delayed."

Calgary-based Trans Canada corporation says it will re-submit a Keystone XL pipeline proposal that will carry oil from Alberta to the U.S. gulf coast.

U.S. president Obama called Prime Minister Harper to explain the decision wasn't based on the merits of the $7 billion project. Keystone has become a political football, and today's move means the White House regained control of the process of approving the pipeline.

However Harper says his government is disappointed with the decision, but Alberta's premier says it's entirely possible the pipeline can still get the go-ahead.

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