OTTAWA, October 14, 2009 (AFP) - The governments of Canada and its Alberta province on Wednesday announced $778.8 million in funding for a second project to capture carbon emissions in western Canada -- home to its oil sands.

The monies coming partly from Canada's stimulus package will be spent to upgrade TransAlta's coal-fired Keephills 3 power plant near Edmonton, Alberta and reduce its carbon emissions, said officials.

It is estimated that up to one million tons of carbon emissions will be captured and stored annually in wells 2.8 kilometers deep below the surface near the plant.

Last week, Canada announced it would invest US $821 million to capture carbon emissions from its vast oil sands, reviled by environmentalists as hugely polluting.

Those funds are to be spent over 15 years on the Shell Quest project -- a joint venture by Shell Canada, Chevron Canada Limited and Marathon Oil Sands -- integrating carbon capture technology at an upgrader near Edmonton.

The application is expected to capture up to 1.1 megatons of greenhouse gas emissions annually -- a reduction of about 40 percent, officials said.

At an estimated 175 billion barrels, Alberta's oil sands are among the largest oil reserves in the world behind Saudi Arabia, but they were neglected for years, except by local companies, due to high extraction costs.

Since 2000, skyrocketing crude oil prices and improved extraction methods have made exploitation more economical.