TORONTO (AP) Canadian prime minister Stephen Harper said Jan. 18 he told Barack Obama he was profoundly disappointed after the U.S. president called to tell him the administration rejected a plan to build an oil pipeline from Canada to Texas.

But the Canadian government expressed optimism the Keystone XL pipeline will ultimately be approved. Natural Resource Minister Joe Oliver said it is clear the process is not yet over and said Canada is hopeful TransCanada’s pipeline will be accepted on its merits.

Andrew MacDougall, a spokesman of Harper, said that Obama explained the decision was not on the merits of the pipeline, but rather on the “arbitrary nature” of the Feb. 21 deadline set by a Republicans as part of tax measure he signed.

Obama said the decision was without prejudice, meaning that TransCanada is free to reapply. The Calgary, Alberta-based company said in a statement that it would reapply and said it expects the presidential permit to be processed in an expedited manner that would allow the pipeline to go online in late 2014.

TransCanada CEO Russ Girling said in a statement that plans are already under way to largely maintain the construction schedule of the project. He said the project is too important to the U.S. economy and the Canadian economy for it not to proceed.

MacDougall said Harper told Obama that he hoped the pipeline would eventually be approved.

The pipeline is critical to Canada, which must have infrastructure in place to export its growing oil sands production from northern Alberta. The region has the third largest oil reserves in the world with 170 billion barrels of proven reserves. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves.

MacDougall said Harper also reiterated to Obama that Canada will look to sell its oil to Asia. Harper previously called Obama’s decision to delay the Keystone XL delay a “wake up call” and said Canada is far too dependent on the United States, which Canada relies on for 97 percent of its energy exports.

With the product of oil sands and pipeline delivery to the United States under perennial clouds of environmental objection, Canada wants to ensure a market for the growing production.

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