02/25/2013 01:41 EST | Updated 02/25/2013 01:51 EST

Swan Hills Synfuels, Alberta Government Cancel Carbon Capture And Storage Project


A $285-million green initiative to capture and store greenhouse gases in Alberta has been put on the chopping block.

Market pressures, like the ones forcing the provincial government to get creative with their budgeting, are being blamed for the cancellation of the carbon capture and storage (CCS) project partnership between the province and Swan Hills Synfuels LP, the Alberta government announced on Monday.

In 2011, the province committed $285 million over 15 years for Swan Hills Synfuels to capture carbon dioxide, from the gasification of underground coal, and sell it for use in enhanced oil recovery.

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But economic realities have forced both parties to abandon the initiative, said Alberta Energy Minister Ken Hughes.

“Persistent low prices for Alberta’s natural gas have driven this business decision,” he said, but added that CCS is still a key part of the province's greenhouse gas emissions reduction strategy.

Two CCS projects - the Alberta Carbon Trunk Line and Shell Quest - are still moving forward, the province said.

Swan Hills Synfuels CEO Martin Lambert said lower than expected natural gas prices pushed the timeline for the project beyond the government's funding requirements.

The province had yet to forward any funds to the project, said a government press release.

This is not the first greenhouse reduction project cancelled in the last year.

Project Pioneer, a joint effort by TransAlta Corporation, Capital Power L.P., Enbridge Inc., with funding from the federal and provincial governments, was supposed to be a demonstration of the commercial-scale viability of CCS technology.

But in April 2012, the players in the project decided that despite having the funding and the technology, the market for carbon sales was insufficient and the initiative was shelved.

“While we are disappointed that Project Pioneer will not go ahead, we now know the technology works and we still believe there is a future for CCS,” said TransAlta's Dawn Farrell.