WINNIPEG, Manitoba (Reuters) - The Western Canadian province of Saskatchewan, which depends heavily on burning coal for power, will build one of the world's first commercial-scale power plants that will capture carbon dioxide emissions, the provincial government said on Tuesday.
Saskatchewan said the power utility it owns, SaskPower, will proceed with a long-planned C$1.24 billion ($1.31 billion) conversion of a generating unit at its Boundary Dam Power Station at the city of Estevan as the province moves to comply with new Canadian requirements for cleaner coal power.
The project will have capacity to produce 110 megawatts of electricity per year, while reducing greenhouse gas emissions by 1 million tonnes -- the equivalent of taking 250,000 vehicles off the road each year, the provincial government said.
Construction will start shortly with operations beginning in 2014, the government said.
The Canadian government has already committed C$240 million to the project, with Saskatchewan covering the C$1 billion balance.
The province, which is rich in oil, potash and uranium, had been holding off on final approval of the project as it awaited details of new federal regulations for coal plants.
SaskPower's three coal-fired power plants account for half of the utility's electricity production.
Canada's Conservative government, which is facing an election May 2, said last June that the country will phase out older coal-fired power plants to cut greenhouse gas emissions as the country moves to make cleaner-burning natural-gas plants the new standard.
Canada has 51 coal-fired units producing 19 percent of the country's electricity and 13 percent of its greenhouse gas emissions.
The new standards will force electricity producers to phase out older, high-emitting coal-fired plants and require newer facilities to match the lower greenhouse-gas emissions of more efficient natural-gas-fired plants. Unless operators make substantial investments to cut emissions from aging coal-burning facilities, they'll be required to shut down.
TransAlta Corp, the country's largest operators of coal-fired plants, is developing a near-commercial-scale demonstration project near Edmonton, Alberta, that will also capture carbon.
SaskPower, meanwhile, is working on deals to sell its captured carbon to oil drillers, which can use it to extract oil from the ground, a spokesman for the utility said.
Cenovus Energy Inc currently imports carbon from the United States to extract oil at its Weyburn, Saskatchewan, oilfield. Penn West Petroleum, which also owns Western Canadian oilfields, has said it plans to increase use of non-conventional means to extract oil.
(Reporting by Rod Nickel in Winnipeg. Additional reporting by Scott Haggett and Jeff Jones in Calgary; editing by Peter Galloway)