President Obama upped the ante with Republicans Wednesday, saying their “rushed and arbitrary” 60-day deadline for finding whether TransCanada’s controversial Keystone XL pipeline is in the public interest was too short, and telling Secretary of State Hillary Clinton to reject the project.

Obama specified his decision was not made on the merits of the 1,700-mile pipeline from Alberta, Canada to a Nebraska terminal and then on to the Gulf of Mexico. The State Department said, “The Department’s denial of the permit application does not preclude any subsequent permit application or applications for similar projects.”

The president acted well ahead of the Feb. 21 deadline Congress stuck into the December payroll tax extension bill, basing his decision on Clinton’s finding that more information was needed about environmental impacts of a Nebraska section of the route before a decision could be made. Clinton originally made that finding in November and projected a final decision couldn’t come till 2013, after the election.

Congressional Republicans immediately expressed outrage, with Rep. Fred Upton (R-Mich.) saying he would call Clinton before his Energy & Commerce Committee as soon as next week. Speaker John Boehner said he would look to legislation that would override the President.

Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy & Natural Resources Committee, said Clinton had done exactly what she said she would if Congress forced the issue. He said, “I’m hopeful that once the necessary environmental studies are done, this project can be considered on the merits.”

Pipeline proponents, including several large construction unions, claim the project would create some 20,000 jobs in the next two years and support half a million jobs in the long run, as well as increasing energy security with more Canadian oil.

American Petroleum Institute President Jack Gerard cited those “shovel-ready jobs” and said Obama’s decision was “a clear abdication of responsibility,” since the project has been studied for three years, an environmental impact statement was performed, and the pipeline “is clearly in the national interest.”

The Keystone pipeline decision was at the heart of earlier discussions held by API on the State of American Energy. Read more on Breaking Energy here.

Gerard’s remarks, made to the US Energy Association, were initially drowned out by demonstrators chanting “Fact Check” and “Big Oil lies.”

They echoed arguments of environmentalists and other pipeline opponents who cite both State Department and TransCanada documents to contend that construction would create 6,000 jobs and during long-term operation, only a few hundred.

Opponents also cite greenhouse gases created by the processes that extract the sticky oil, warn of pipeline leaks across the Midwest, and say the oil would be heading for Gulf refineries and, in many cases, export.

“This pipeline would enable producers to bypass the Midwestern refineries and move oil to refineries on the Gulf,” said Tyson Slocum of Public Citizen. “This is not about supplies for the US market.”

Pipelines now carry oil sands crude east to Ontario or south to Midwestern refineries, where it fetches domestic prices. Access to ports would let producers ship to Asia where prices are higher. Canada this month began formally considering an Enbridge pipeline across the Canadian Rockies to a Pacific port, but it is encountering environmental and tribal opposition.

TransCanada’s stock dipped on the White House announcement, but some analysts say the project has better prospects next year, even if Obama is re-elected, and Canadian Prime Minister Stephen Harper’s office expressed optimism the project will go forward.

Kevin Book of ClearView Energy Partners said one factor that could help TransCanada is including a spur, already in discussion, to connect Keystone with North Dakota’s Bakken oil shale. That area is now so tight on take-away capacity that some producers are shipping oil by rail, a more costly alternative, and including US crude in the pipeline could help sell it here.

But Book also notes that the picture could change depending on the developing Iranian situation in the Middle East. And in the long run, if oil sands production increases as predicted by Canada’s National Energy Board, he said, Keystone XL would be the first of “five or six” pipeline needed out of the area by 2035.

Photo Caption: House Majority Leader Eric Cantor (R-VA) (C) leaves a press briefing at the U.S. Capitol January 18, 2012 in Washington, DC. Cantor and House Republican leaders lashed out at President Barack Obama and his decision to reject a bid to expand the Keystone XL oil sands pipeline. ‘This fight is not over,’ said Speaker of the House John Boehner.