Coyotes and wolves separated as species relatively recently. The most simplistic reason is one got bigger (stayed bigger is more accurate) and one got smaller and now tens of thousands of years later there is an opportunity for the return of an intermediate sized canid in this particular part of the continent. Wolves are actually found throughout northern latitudes across the globe and smaller canids seem to have diverged from them more than once, coyotes being one example here.

Cold weather is part of the reason, Bergmann's rule covers size in relation to climate, but wolves and coyotes probably also diverged due to prey species and what was available where.