Prime Minister Stephen Harper is "disappointed" with news that Washington will delay a decision on whether to approve TransCanada's controversial Keystone XL pipeline project.

The U.S. State Department announced in a statement on Thursday that due to "national concern ... the department has determined it is necessary to examine in-depth alternative routes."

Under the current proposal, the pipeline would traverse Nebraska's Sandhills region and an aquifer that's a source of water for several states -- something that has been of particular concern to environmentalists lobbying against the project.

The review could be completed "as early as the first quarter of 2013," the State Department said, which would be months after the next presidential election.

TransCanada's proposed pipeline would funnel crude from the oilsands in northern Alberta to refineries in Texas, 2,700 kilometres away.

The Prime Minister's Office issued a statement shortly after learning of the delay, expressing dissatisfaction.

"We are disappointed with today's decision," the statement said. "We continue to believe the Keystone XL pipeline will create thousands of jobs and billions in economic growth on both sides of the border."

The move also prompted criticism from newly elected Alberta Premier Alison Redford, who pledged to visit Washington next week to lobby for the $7-billion project.

But U.S. President Barack Obama praised the decision, saying in a statement that it's necessary since the project "could affect the health and safety of the American people as well as the environment."

Opposition MPs in Ottawa also welcomed the decision.

New Democrat environment critic Megan Leslie noted that exports of crude from the oilsands have run into regulatory trouble in both U.S. and in Europe.

"Right now, we are laughing stocks. We are being told no repeatedly," she said on CTV's Power Play.

For months, protesters ranging from environmentalists to farmers have been lining up against the proposed pipeline. As recently as Sunday a crowd of thousands gathered near the White House in the hopes of pressuring Obama to scrap the project.

The decision to review the pipeline's route takes political heat off Obama, who runs the risk of angering environmental groups if he approves it, and angering labour and business groups if he blocks it.

TransCanada argues that a delay would cost the company millions of dollars and keep thousands of workers from taking jobs building the pipeline.

But on Thursday, TransCanada CEO Russ Girling said in a statement on Thursday that he's confident the contentious pipeline will eventually be built.

"This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed," he said.

With files from The Canadian Press