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The federal government is providing $1.65-billion in loans and other financial support to Western Canada’s beleaguered oil industry, indicating the assistance is meant to tide companies over until new crude export capacity is added over the next couple of years.

Faced with anger and protests over federal policies toward Alberta’s leading industry, Natural Resources Minister Amarjeet Sohi and Trade Diversification Minister Jim Carr announced the aid package Tuesday at a college in Edmonton, and proclaimed the Liberal government’s support for the industry.

“Our government always has and always will stand with the energy industry and the hard-working Canadians who are employed in the sector," said Mr. Sohi, who represents Edmonton Mill Woods in the House of Commons. "We understand that when Alberta hurts, so does Canada.”

Export Development Canada will provide $1-billion in loans for companies that want to invest in new equipment, expand their market or cover working capital needs. Business Development Bank of Canada will allocate $500-million in credit for smaller oil companies that are having cash-flow challenges but are deemed to be financially viable. Ottawa will also provide an additional $150-million for companies through existing programs that encourage investment in technological innovation.

The Liberal government is facing demonstrations across Alberta over its failure to get the Trans Mountain pipeline expansion back on track after a federal court quashed its approval in August. The anger turned to rage this fall after Western Canadian crude prices – depressed by the lack of sufficient export capacity – fell sharply in relation to global oil benchmarks, touching as low as US$10 a barrel for heavy oil sands crude.

While those prices recovered from the lows of this fall, Western Canadian Select took a beating in trading Tuesday, losing US$6.78 – or fully 18 per cent of its value – to US$30.60 a barrel, according to Bloomberg. Fears of trade wars and a glut on global crude market played havoc in international markets as North America’s benchmark West Texas Intermediate fell US$3.60 – or 7.2 per cent – to US$46.60 a barrel. The S&P/TSX Capped Energy Index slumped close to a 10-year low.

Faced with a crisis in the province’s main industry, Alberta Premier Rachel Notley earlier this month ordered an across-the-board cut of 8.7 per cent in the province’s crude output starting in January to reduce the glut in inventories. Her government also plans to purchase 7,000 crude-carrying rail cars to increase exports from the province.

Industry officials and Alberta politicians offer a litany of other complaints over the Trudeau’s government energy policy, including federal intrusion in provincial jurisdiction and new legislation that industry fears will make it virtually impossible to obtain approval for new pipelines.

On Tuesday, Ms. Notley said Ottawa’s financial support may benefit some small producers but is not an answer to the industry’s fundamentals problems.

“It’s a start, but offering Alberta business owners and industry the opportunity to go further in debt is not any kind of long-term solution," she told reporters in Calgary. “One of the things we would like to see is support for the province of Alberta for our plan to buy rail. But we’re not waiting for them to make that decision.”

Canadian Association of Petroleum Producers chief executive Tim McMillan said the money will help financially battered firms but added the industry wants a shift in federal policy, including major changes to the government’s C-69 legislation that overhauls the environmental assessment process for resource projects. That bill is now before the Senate.

“This is absolutely not what is needed,” Grant Fagerheim, chief executive at Whitecap Resources Ltd., said with reference to the federal loan package. “We don’t need welfare; we need policies that get our products to markets, simple.”

Mr. Sohi insisted Ottawa is doing everything it can to help the province through the tough times, while maintaining its focus on solving the problem by getting the Trans Mountain project completed in a way that answers the court’s concerns about inadequate Indigenous consultations and a gap in the environmental assessment that was conducted by the National Energy Board.

He noted the government had invested $4.5-billion to purchase the Trans Mountain pipeline system when the expansion project stalled last spring because of opposition from the government of British Columbia. Mr. Sohi noted Enbridge Inc. is set to add 350,000 barrels a day of capacity to its main export line to the United States, while the federal government continues to support to TransCanada Corp.'s long-promised, oft-stalled Keystone XL line.

“I made it very clear today, and we have in the past, that the long-term solution to the challenges that Alberta’s and Saskatchewan’s oil sector are facing is to build more pipeline capacity, and we’re doing that,” the minister said in an interview. “But we also know that takes time and in the interim, what can we do to support works and to support industries and businesses.”

The EDC and BDC will provide loans to companies that are having short-term financial difficulty and that cannot get financing from banks or other commercial lenders. The government agencies will charge what Mr. Sohi described as “commercial” rates on those loans. Ottawa provided additional financing through its two main lending agencies in 2016 when the oil industry saw prices plunge because of an international price war, and the minister said it was clearly effective in providing a financial boost to struggling companies.

With a file from James Keller