US President Joe Biden's move to scrap the Keystone XL oil pipeline, while a blow to Canada's energy sector, is a blessing in disguise for Prime Minister Justin Trudeau, who is eager to embrace the new administration, two sources familiar with the matter said.
Biden formally revoked the permit to build the pipeline on Wednesday, killing the $8 billion project to pump oil sands crude from Alberta to Nebraska.
"At first glance this is bad news... but at least now the matter is settled and won't be souring bilateral relations for months to come," a diplomatic source from a major allied country said.
"Canada hasn't had to expend any serious political capital with the Biden administration on the pipeline and can now focus on the many other areas where Trudeau feels the two nations should cooperate," the source said.
Trudeau was the first world leader to congratulate Biden after the November election, and hopes to be the first to meet with him in a bid to turn the page on the Donald Trump era, when relations between the two countries were often turbulent.
A Biden spokeswoman said the president's first call to a foreign leader would be to Trudeau on Friday.
In a statement late on Wednesday, Trudeau said "we are disappointed but acknowledge the President's decision" while welcoming his move to rejoin the Paris agreement on climate change.
"I look forward to working with President Biden to reduce pollution," he said. Trudeau, first elected in 2015, has consistently said cutting the greenhouse gases widely blamed for global warming is a big priority.
Trudeau is also weighing a possible snap election this year, and he has much riding on his ties with Biden.
"The relationship is much bigger than one project," said a Canadian source familiar with the matter.
Keystone XL was meant to carry 830,000 barrels per day to the United States, but ran into fierce domestic opposition.
During his election campaign, Biden promised quash the pipeline, which Trudeau has supported since before he became prime minister.
The permit revocation "is not the best way to start off" with a new president, said Roland Paris, a former foreign policy adviser to Trudeau and University of Ottawa international affairs professor.
"This issue should not be seen as a litmus test to the relationship because there are many other areas where Canada will be able to cooperate with the new Biden administration," Paris said.
Trudeau told Reuters last week he was looking to Biden to re-engage with allies around the world, and that he wanted to discuss climate change.
Biden's ambitious climate change plan includes $2 trillion in investment for clean-energy infrastructure over four years and "opens up opportunities for collaboration" with Canada, said Sara Hastings-Simon, a researcher at the Colorado School of Mines.