Secretary of State John Kerry concluded the controversial project is not in the country's national security interest, and Obama announced from the White House that he agreed.
"America is now a global leader when it comes to taking serious action to fight climate change, and frankly, approving this project would have undercut that leadership," Obama said.
The massive project has been a seven-year political football during presidential and congressional elections that has pitted oil companies and Republicans against environmentalists and liberal activists. The State Department has been reviewing the project for much of Obama's time in the White House.
The proposed pipeline would span nearly 1,200 miles across six U.S. states, moving more than 800,000 barrels of carbon-heavy petroleum daily from Canadian oil sands through Nebraska to refineries in the Gulf Coast.
Obama's move comes as the White House continues to promote its environmental agenda and efforts to fight climate change. The Environmental Protection Agency this summer put forward new regulations limiting greenhouse gas emissions
from power plants. And next month, Obama will attend the Paris climate talks run by the United Nations, he announced Friday. The White House is hoping to broker an international agreement committing every country to reduce carbon dioxide emissions and enact other policies to curb global warming.
The President has also stepped up his rhetoric on the need to address global warming, pushing back against Republicans and climate skeptics fighting his agenda.
"We know that human activity is changing the climate," Obama said during a visit to Alaska in late summer. "We know that human ingenuity can do something about it. We're even starting to see that we might actually have the political will to succeed. So the time to heed the critics and cynics is past. The time to plead ignorance is surely past. The deniers are increasingly alone, on their own shrinking island."
In a statement Friday, Kerry said the climate impact was the key factor. "The critical factor in my determination was this: moving forward with this project would significantly undermine our ability to continue leading the world in combatting climate change," he said.
Liberals and environmentalists, including top donors such as California's Tom Steyer, who has committed tens of millions of dollars to fighting pro-pipeline political candidates, protested Keystone and made it a cause celebre among Democrats.
The project was a major issue during the 2012 presidential campaign, when GOP candidate Mitt Romney said he would approve the pipeline. Republican candidates in the 2016 race have also pledged to let the project go forward.
House Speaker Paul Ryan didn't mince words in criticizing Obama's action. "This decision isn't surprising, but it is sickening," Ryan said in a statement.
"So sad that Obama rejected Keystone Pipeline," GOP presidential front-runner Donald Trump tweeted
. "Thousands of jobs, good for the environment, no downside!"
In his speech, Obama said that he believed Keystone has had an "over-inflated role in our political discourse, and said the project's potential to create jobs and the potential environmental threats were exaggerated.
"All of this obscured the fact that this pipeline would neither be the silver bullet to the U.S. economy proclaimed by some, or the death knell to climate proclaimed by others," Obama said.
Obama also cited falling gasoline prices as another argument against the project.
"While our politics have been consumed by a debate about whether or not this pipeline would create jobs or lower gas prices, we've gone ahead and created jobs and lowered gas prices."
The average price of regular gasoline hit $3.94 per gallon in April 2012 and stayed well above $3 for the rest of that election year. But this year, prices have been steadily below $3 per gallon.
Former Secretary of State Hillary Clinton has also been caught up in Keystone politics. In October 2010, Clinton indicated she was "inclined" to approve the project but has since backed away from that stance, and in September said she opposes it
. Fellow Democratic presidential candidates Bernie Sanders and Martin O'Malley also oppose the pipeline, and Clinton faced criticism from the left for not taking a firm stance.
Sanders noted his long-standing opposition to the project in a statement Friday. "It is insane for anyone to be supporting the excavation and transportation of some of the dirtiest fuel on earth," he said. "As someone who has led the opposition to the Keystone pipeline from Day 1, I strongly applaud the President's decision to kill this project once and for all."
Friday afternoon, Clinton tweeted her approval.
"The right call. Now it's time to make America a clean energy superpower. -H," she tweeted.
Canadian PM Trudeau 'disappointed'
New Canadian Prime Minister Justin Trudeau said he is "disappointed by the decision" but said he is looking forward to building his relationship with Obama.
"The Canada-U.S. relationship is much bigger than any one project and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and cooperation," Trudeau said in a statement. "We know that Canadians want a government that they can trust to protect the environment and grow the economy. The Government of Canada will work hand-in-hand with provinces, territories and like-minded countries to combat climate change, adapt to its impacts, and create the clean jobs of tomorrow."
The lobbying fight over Keystone has been expensive, with all sides spending millions of dollars in an attempt to influence the White House and Congress. The Canadian and Alberta governments in particular have pushed Obama to approve the project, and Obama and Kerry noted the sensitivity of their decision. The President spoke with Trudeau before the White House made the verdict public.
Kerry, in his official determination rejecting the project
, said the U.S. government understands the impact it would have.
"As Secretary of State, I fully recognize the importance of this project to Canada, one of our closest strategic allies and energy trading partners," Kerry wrote. "We consulted with our Canadian friends and I spoke with Foreign Minister Dion today regarding this decision. While we understand the impact of this decision on Canada, I am confident that our close and long-standing relationship with Canada will continue to grow stronger in the years ahead."
TransCanada to re-apply?
, the firm behind the $8 billion project, said it will "review all of its options" in light of Obama's decision. "Those options include filing a new application to receive a Presidential Permit for a cross border crude oil pipeline from Canada to the United States," the company's statement said.
"Today, misplaced symbolism was chosen over merit and science - rhetoric won out over reason," company president and CEO Russ Girling said. "TransCanada is reviewing the decision and its rationale. We believe KXL is in the best interest of the United States and Canada."
Earlier this week, Kerry rejected a request by
the company to halt its review of the pipeline as it awaits a separate process at the state level. TransCanada said it could take up to 12 months for the Nebraska process to be completed, adding further delay to the already lengthy approval process. But such a move would have pushed the final decision on Keystone past 2016 and left it to Obama's successor.
On Tuesday, White House Press Secretary Josh Earnest said "there may be politics at play" in TransCanada's request, suggesting it was an attempt to orchestrate such a scenario.
TransCanada, which has spent at least $2.5 billion on the project thus far, first applied for a permit to build the pipeline in 2008.
Obama vetoed legislation
green-lighting the construction of the pipeline in February. At the time, the White House said it opposed the bill because it would have usurped the President's authority to approve or deny the creation of the pipeline and short-circuit the State Department analysis.
Republican candidate reaction
Proponents of the project, including Republican presidential candidates
, say the pipeline would advance energy independence in North America and construction of it will create jobs. Reaction condemning Obama's decision came swiftly on Friday, with many accusing Obama of catering to the green lobby and political left.
New Jersey Gov. Chris Christie called the decision "predictable."
"I wish he just would have been honest with everybody and done it a long time ago," Christie said in Concord, New Hampshire. "Why did he lie to the American people for so long that he was considering it? Did anybody with any common sense believe that Barack Obama was ever really seriously considering the Keystone pipeline?"
"When I'm president, Keystone will be approved, and President Obama's backward energy policies will come to an end," Florida Sen. Marco Rubio said in a statement.
"The Obama Admin's politically motivated rejection of the Keystone XL Pipeline is a self-inflicted attack on the U.S. economy and jobs," former Florida Gov. Jeb Bush tweeted
"President Obama is bowing to radical environmentalists and snubbing thousands of high quality, high paying energy sector jobs," Louisiana Gov. Bobby Jindal tweeted
"Obama's rejection of #KeystoneXL will flush American jobs down the drain... all to appease the agenda of science denying radicals," Jindal said in another tweet
Keystone also split a key Democratic constituency -- organized labor.
Terry O'Sullivan, the general president of the Laborers' International Union of North America, blasted the decision. "After a seven-year circus of cowardly delay, the President's decision to kill the Keystone XL Pipeline is just one more indication of an utter disdain and disregard for salt-of-the-earth, middle-class working Americans," O'Sullivan said.