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The country’s struggling energy industry got some long-awaited emergency aid Friday, with Ottawa providing more than $2.4-billion to help laid-off workers clean up orphaned oil and gas wells and stop the leakage of methane gas.

Prime Minister Justin Trudeau told reporters that plunging oil prices and the economic impact of combating COVID-19 has devastated the oil and gas sector and left too many energy workers without an income.

“To help these workers, our government will invest $1.7-billion to clean up orphaned and inactive wells in Alberta, Saskatchewan and B.C.,” he said. “Cleaning them up will bring people back to work and help many landowners who had these wells on their property for years, but haven’t be able to get them taken care of and the land restored.”

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Mr. Trudeau said Ottawa will also create a $750-million emission-reduction fund to help fossil-fuel companies reduce methane emissions, including $75-million for Newfoundland and Labrador’s offshore oil sector.

The oil and gas cleanup should create 5,200 jobs in Alberta alone and both measures should create 10,000 jobs across the country, Mr. Trudeau said.

The $2.4-billion falls far short of the $20-billion to $30-billion demanded by Alberta, including additional liquidity for hard-hit energy companies. However, the government announced new loan measures on Friday but declined to put a price tag on the program or provide further details.

Mr. Trudeau said medium-sized energy companies will be able to access credit from the Business Development Bank and Export Development Canada. Ottawa said additional liquidity measures will be announced later.

Alberta Premier Jason Kenney and Saskatchewan Premier Scott Moe called the federal cleanup aid a positive step to putting oil and gas workers back on the job.

Mr. Kenney thanked the federal government for the funding and programs announced Friday, saying the money allocated to clean up old wells will be a lifeline for skilled, blue-collar workers in the oilfield services sector, many of who are based in rural parts of Western Canada, and are now unemployed.

“That can’t go to things like bonuses or dividends, or anything except actually doing the work,” Mr. Kenney told reporters late Friday. “This will allow for a surge of well reclamation and completion work, all across the province, we hope starting immediately.”

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Between that and the investment in methane-reduction technologies, Mr. Moe said the cash provides much-needed support, but he also pushed Ottawa to move quickly on much needed credit for the sector.

“With liquidity being a daily risk to energy companies, federal funding must start flowing immediately,” he said.

Finance Minister Bill Morneau told reporters that further measures related to liquidity for larger energy companies will be announced later.

“What we talked about today is middle-sized firms, mid-tier firms, in the energy sector. We’re going to go broader on mid-sized firms in the coming days, and then we will need to provide credit for the largest of firms to make sure they can bridge the gap as well,” he said.

Mr. Morneau declined to put a price tag on the amount of new liquidity being offered Friday, saying the program will be “demand driven.”

He said the new credit is aimed at medium-sized companies in the energy sector and is similar to the recently announced Business Credit Availability Program, run through the Business Development Bank of Canada and Export Development Canada.

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Details posted later on the BDC website said the new program will provide loans ranging from $15-million to $60-million, offered at commercial rates and repayable within four years. The website says further details will be finalized shortly.

Alberta’s Orphan Well Association (OWA), the industry-funded body in charge of cleaning up wells abandoned by failed oil and gas businesses, will receive $200-million of the $1.7-billion. Executive director Lars DePauw isn’t yet sure if the cash is a grant or a loan, but said it will go a long way to help clearing the association’s 6,300-strong inventory.

“I’m hoping a lot of people will be able to be rehired as a result of these additional funds,” Mr. DePaux said.

Mark Scholz, president and chief executive of the Canadian Association of Oilwell Drilling Contractors, said the number of jobs created could even be higher than the 5,200 estimated by Mr. Trudeau, depending on the size and complexity of the wells being cleaned up.

Support for orphan wells is important, but it is unlikely that all of the funds would go to cleaning up sites that no longer have solvent owners, said Tristan Goodman, president of the Explorers and Producers Association of Canada, which represents the small and mid-size companies. Many of them have high cleanup liabilities on their books tied to inactive wells. Those represent a big problem for the industry as it seeks liquidity from lenders, because future reclamation is factored into an oil company’s capacity for credit.

“You will see improved cleanup, which is good and we are supportive of that. At the same time, you will see a cleanup of the financial books of some of these companies, which will be very helpful,” Mr. Goodman said.

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Environmental groups, such as Greenpeace, the David Suzuki Foundation and Environmental Defence, were generally positive about the federal initiative, saying that cleaning up orphaned wells and reducing gas emissions is preferable to giving handouts to the oil industry.

“These measures will put people to work, providing much-needed jobs while cleaning up some of the oil industry’s existing mess,” Greenpeace senior strategist Keith Stewart said.

Alberta officials say three people have tested positive for COVID-19 at Imperial's Kearl oil sands camp north of Fort McMurray, and others there are being tested. The Canadian Press

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