Prime Minister Justin Trudeau doesn't like the U.S. decision to reject the Keystone XL pipeline, but says it will not hurt the strong bond between the two countries.

"We are disappointed by the decision but respect the right of the United States to make the decision," he said in a statement.

"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 co-operation."

"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."

U.S. President Barack Obama personally delivered the news to Trudeau in a phone call this morning.

"While he expressed his disappointment, given Canada's position on this issue, we both agreed that our close friendship on a whole range of issues — including energy and climate change — should provide the basis for an even closer co-ordination between our countries going forward," Obama said.

Liberal government disappointed with President Barack Obama's decision on pipeline project 4:44

One of Trudeau's cabinet subcommittees will focus on Canada-U.S. relations. Chaired by Minister of International Trade Chrystia Freeland, its mandate is to consider issues "concerning the fostering of strong relations between Canada and the United States and the advancement of mutual interests."

Interim Conservative Leader Rona Ambrose urged Trudeau to open new talks with Obama to voice Canada's position that building the pipeline is environmentally sustainable and will create jobs.

Obama 'succumbed to pressure'

"We are extremely disappointed that President Obama succumbed to domestic political pressure and rejected the Keystone XL pipeline. It has been clear for some time that — despite the facts, economic benefits and environmental safeguards — the White House's decision was a fait accompli."

Former Conservative finance minister Joe Oliver said the Keystone pipeline became a politically charged "symbol" for the environmental movement.

"We've lost sight of the facts, and when you get into symbolism and you get into politics, you lose sight of what really is important both for the environment and for the economy," he told CBC News Network.

Former finance minister says U.S. rejection of pipeline means Canada needs to diversify its oil export markets 7:16

NDP House leader Peter Julian welcomed the decision and urged Trudeau to ensure a "rigorous" environmental assessment process for other projects.

"The Keystone XL pipeline would have shipped quality, middle-class Canadian jobs across the border. It was a bad deal for Canadians, bad for both the environment and the economy. Conservatives and Liberals lobbied hard for Keystone XL, but President Barack Obama is standing with progressives across North America by rejecting it."

Premier Rachel Notley says the White House rejection of the Keystone XL pipeline show Alberta has to improve its climate change policy. (CBC )

Alberta Premier Rachel Notley said the decision underscores the necessity for the province to work with the industry in reducing greenhouse gas emissions. Asked about the president's description of "dirty" oil, she said it isn't necessary to be so critical in language.

"We anticipate in the future where pipeline infrastructure is discussed on its merits," she said in a news conference. "We need to be able to have careful, drama-free conversations about the economics of our energy infrastructure."

Calgary Mayor Naheed Nenshi also weighed in with a statement.

"I am very disappointed that one pipe, nearly a metre wide, is being asked to bear all the sins of the carbon economy," he said. "Nonetheless, Canadian energy must have access to markets, and I will continue to partner with industry and other orders of government to advocate for other alternatives, of which there remain many viable options."

Decision about U.S. 'domestic politics'

Saskatchewan Premier Brad Wall said pipelines are safer than rail for transporting oil, and called the decision "very disappointing" for the energy sector and for the signal it sends about Canada-U.S. relations.

Saskatchewan Premier Brad Wall says the U.S. decision to reject the Keystone XL pipeline could harm the energy sector and Canada-U.S. relations (Liam Richards/Canadian Press)

"Given the facts of the project as canvassed by the U.S. State Department, this decision is more about U.S. domestic politics than it is about good environmental policy," he said in a statement. "This decision makes approval of [TransCanada's proposed] Energy East [pipeline] even more crucial, and it will be one of Saskatchewan's top priorities as we begin our work with the new federal government."

Obama's decision comes just weeks before world leaders gather in Paris for a United Nations conference on climate change.

Adam Scott of the Environmental Defence advocacy group urged the new Liberal government to take a lesson from the U.S. decision and rethink Canada's economic strategy. Instead of focusing on the export of fossil fuels, Canada should invest on a transition to a clean-energy system that creates jobs and wealth, he said.

"Obama's rejection of Keystone XL demonstrates historic leadership by saying no to new fossil fuel infrastructure. For the first time, a pipeline has been rejected because it puts our climate at risk — a litmus test that the new Canadian government should adopt," he said.

"This rejection sets an important new precedent in the run-up to the Paris climate summit. We have hope that the prime minister will accept that we cannot protect the climate and approve new pipelines at the same time. Doing so is a contradiction."

Mike Hudema, of Greenpeace Canada, said the decision is a victory for advocacy groups who protested against the pipeline.

"Five years ago it was said to be a done deal and it was only because of the tremendous pressure from citizens groups, from First Nations communities, from young people and from people across the U.S and Canada that really put the pressure that made today's decision possible," Hudema said.