There are also concerns about carbon emissions from oil sands production in Alberta, a western Canadian province.
Bill McKibben, founder of 350.org, a group that has protested the Keystone XL project, praised President Obama for taking a stand against the “fossil fuel lobby”.
“This isn’t just the right call, it’s the brave call,” Mr McKibben said in a statement.
The legislature of Nebraska passed a measure requiring state approval of any route before TransCanada could start construction.
The pipeline would also pass through the US states of Montana, South Dakota, Nebraska, Kansas and Oklahoma.
The White House had tried to postpone a final decision on the project until after the 2012 presidential election.
But during a congressional impasse on a payroll tax holiday in December, Republicans forced the Obama administration to agree to make a decision on the pipeline within two months.
Greenpeace (amongst many others) is now asking Canadians to help them stop the next threatening pipeline the Northern Gateway pipeline.