Canada governments to fund 2nd carbon project

Wed Oct 14, 1:01 PM

CALGARY, Alberta (Reuters) - The Canadian and Alberta governments said on Wednesday they will spend C$779 million ($756 million) on a carbon capture project planned by TransAlta Corp, their second such funding announcement in less than a week.

TransAlta, the country's largest investor-owned power generator, plans the carbon capture and storage project at its Keephills 3 coal-fired power plant near Edmonton, Alberta, where it aims to cut emissions of greenhouse gases by 1 million tonnes a year.

Under a letter of intent, Ottawa will invest C$343 million in the project and the Alberta government will kick in C$436 million.

A TransAlta official said the overall cost of the project will be known once the company completes its front-end engineering work.

Last week, the governments of Canada and Alberta said they would spend C$865 million on a carbon capture and storage project proposed by Royal Dutch Shell Plc for its oil sands upgrading plant in northern Alberta.

The TransAlta plan involves using chilled ammonia capture technology, developed by France's Alstom SA, to strip out carbon dioxide from the power plant. The gas, which is blamed for global warming, would then be piped to old oil fields to boost production as well as stored in saline aquifers deep underground.

TransAlta's partner in the project is Capital Power Corp.

Canada has set aside C$1 billion for such ventures in a clean energy fund and Alberta has earmarked C$2 billion for carbon capture and sequestration projects as they aim to cut carbon emissions, while preventing a drop in investment in energy projects.

Some environmentalists have criticized the strategy, saying public money is being funneled into projects with uncertain results when it could be invested in alternative energy sources and conservation.

Ottawa has said it seeks to cut greenhouse gas emissions by 20 percent from 2006 levels by 2020.

Alberta has short-listed two other carbon capture projects that have yet to be finalized for funding commitments. They are being proposed by groups including Epcor and Enbridge Inc as well as Enhance Energy and Northwest Upgrading.

($1=$1.03 Canadian)

(Reporting by Jeffrey Jones; editing by Peter Galloway)