A company always face the possibility that an offer may be declined. In a sense, it verifies that they find a good person other companies also want to hire.
The key is to decline an offer in a respectable way (tell them how much you like them, how hard the decision was, how great their people are, how wonderful the opportunity is, etc). Give them some reasons about your choice (shorter commute, better match to your current interest, etc), and express your interest to consider them in the future. You may even ask if you can recommend others for that position. Try to be low key and helpful.