2nd UPDATE: Canada Backs Alberta Carbon-Emissions Pipeline

The Canadian government announced funding Tuesday for the construction of the world's largest carbon-capture and storage pipeline in Alberta, the center of Canada's emissions-heavy oil sands industry.

The Canadian and Alberta governments pledged a total of C$558 million (US$528.1 million) to create the Alberta Carbon Trunk Line, a 240-kilometer pipeline beginning near Edmonton, Alberta, that will capture emissions from the energy industry and pump them beneath old oil fields for the dual purpose of re-pressurizing the declining fields and to prevent the emissions, seen as a key contributor to global warming, from entering the atmosphere.

The pipeline will be able to transport up to 14.6 million tons of carbon-dioxide emissions per year, the equivalent emissions created annually by 2.6 million cars, Canadian officials said. Construction is scheduled to begin in 2011 and for the line to be in operation in 2012. The officials said the project will reach its full capacity within 10 years of operation.

"This new pipeline will significantly advance Alberta's capacity for future carbon capture and storage projects," Alberta Premier Ed Stelmach said in a conference call Tuesday. "The Alberta Carbon Trunk Line will be the backbone of CO2 transportation for Alberta. It will be built with long-term capacity in mind, so as more companies capture CO2, they will be able to connect to the line."

The pipeline will be operated by Enhance Energy Inc., a carbon-capture technology company, in partnership with North West Upgrading Inc., an oil upgrading company. Both companies are privately owned and based in Calgary. The project will initially capture carbon from North West's facilities near Edmonton and transport it south for enhanced oil recovery in fields near the cities of Red Deer and Lacombe.

The Carbon Trunk Line is the third major carbon-capture initiative announced in Alberta, which has set aside C$2 billion in funds for carbon capture and storage projects in the province. Last month, the Canadian and Alberta governments announced C$865 million in funding for a carbon-capture system at a Royal Dutch Shell PLC (RDSA, RDSB) refinery near Edmonton and C$774 million in funding for a similar system at a coal-fired power plant owned by TransAlta Corp (TAC).

Canadian Natural Resources Minister Lisa Raitt said the Canadian and Alberta governments strategically chose to fund three large projects including a pipeline, refinery and coal-fired power plant to demonstrate how a large carbon-capture and storage system could be integrated across several segments of the energy industry.

Environmental groups including the World Wide Fund for Nature have criticized Alberta's carbon-capture plans, calling them a way for the Canadian government to justify the expansion of its oil-sands industry and inadequate to offset the emissions it produces.

Raitt said carbon capture and storage technology was Canada's "best chance to capture emissions, not only for oil sands but for coal plants as well."

Funding for the project will be disbursed over 15 years, with C$495 million in funding coming from Alberta and C$63 million from the federal government.

-By Edward Welsch, Dow Jones Newswires; 613-237-0669; [e-mail]