Republicans and many business groups say the project would help achieve energy independence for North America and create thousands of jobs.
But environmental groups say the pipeline would transport "dirty oil" from tar sands in Alberta, Canada, and produce heat-trapping gases that contribute to global warming. They also worry about a possible spill.
"Starting with rejecting the Keystone XL pipeline, the president must make fighting global warming a central priority," Margie Alt, executive director of Environment America, said Monday.
Alt and other environmental leaders said they are counting on Obama to set tough limits on carbon pollution from coal-fired power plants and to continue federal investments in renewable energy sources such as wind and solar power.
Obama tried and failed in his first term to get a climate change bill through Congress. Efforts for a new climate bill would trigger major resistance in Congress, especially in the Republican-controlled House.
Scott Segal, an energy lobbyist who represents utilities and natural gas drillers, said Obama "missed the opportunity to remind listeners that climate change is an international phenomenon" that will require international solutions.
By imposing "inflexible" national policies to curb climate change, Obama could restrain the U.S. economy without delivering promised solutions, Segal said.