Date: 15-Oct-09

Country: CANADA

Author: Jeffrey Jones

CALGARY, Alberta - 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 development 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 and the Alberta government will kick in C$436 million over 15 years.

Canadian Prime Minister Stephen Harper said at a news conference at the plant that the overall cost of the so-called Project Pioneer is estimated at about C$1.4 billion.

Last week, his government and Alberta's 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.

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

"Of course, the incentive is that we all have a long-run interest, as governments, as the private sector, in developing technology that we think will be in widespread need in the decades to come," Harper said.

TransAlta's 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.

Capital Power Corp is TransAlta's partner in the 766 megawatt power plant and the carbon capture project.

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. The two governments aim to cut carbon emissions, while preventing a drop in investment in energy projects.

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 Capital Power and Enbridge Inc as well as Enhance Energy and Northwest Upgrading.

(Editing by Peter Galloway)

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