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CALGARY, Alberta (Reuters) - The oil-rich Canadian province of Alberta said on Tuesday it will put C$4 billion ($3.92 billion) into two funds that will be used to pay for carbon capture and storage programs and to boost use of public transit to cut the province's carbon-dioxide emissions.
The Alberta government said it will set aside C$2 billion in each of the two funds, with the cash coming from its budget surplus for this year - a figure last pegged at C$1.6 billion but expected to be billions of dollars higher due to the increased royalties the province is collecting from record high oil prices.
"We're reducing the impact of industrial emissions with carbon capture and storage and investing in public transit to reduce the impact from our tailpipes," Alberta Premier Ed Stelmach said in a statement.
Alberta is facing pressure from environmental groups to cut greenhouse gas emissions. Projects exploiting the western province's oil sands deposits, the largest oil reserves outside the Middle East, produce massive amounts of carbon dioxide. So do the coal-fired generating plants used to produce the lion's share of the province's electricity.
The province said it will use the cash to encourage carbon capture and storage projects, where carbon-dioxide is removed from industrial emissions and buried underground or used to boost oil output from aging reservoirs. Alberta expects to be able to capture 5 million tonnes of greenhouse gases per year.
TransAlta Corp, the largest power producer in the province, said in a statement it will apply for funding for a feasibility study on a carbon-capture facility at one of its coal-fired power stations.
"Once operational, TransAlta's CCS project is expected to have a major impact on greenhouse gas emissions, reducing our current CO2 emissions by one million tonnes per year by 2013," Steve Snyder, TransAlta's chief executive, said in a statement.
The transit fund will be used to expand local, regional and inter-city transit in the province. The money can used to purchase new buses and trains, build terminals and purchase land for rights-of-way.
Reporting by Scott Haggett; Editing by Peter Galloway