Aug. 21 (Bloomberg) -- The first coal-fueled plant capable of capturing and burying carbon dioxide will move forward this fall when Canada's Saskatchewan Power Corp. begins lining up vendors to build it.

Requests for proposals were sent to 10 companies, SaskPower, as the utility is known, said yesterday in a statement.

Canada, which will spend C$1.4 billion ($1.34 billion) on the plant, is incorporating oil recovery in the plans to offset costs, a different approach than the U.S., which canceled a similar plant last year. Slated for 2013, the Canadian facility will prevent 1 million tons a year of carbon dioxide emissions, Max Ball, the project's manager.

``This will be the first time there will be full integration of a coal power plant with carbon dioxide capture and sequestration,'' Ball told reporters yesterday at a press briefing.

Canada and the U.S. are drafting policies mandating greenhouse-gas reductions. The push for regulation has been heightened by a United Nations-sponsored report last year concluding that greenhouse gases are warming the planet, causing extreme weather events, fires and rising sea levels.

Coal, which fuels two-thirds of Saskatchewan's power and half of the U.S.'s, is the focus of potential global-warming laws. Coal plants account for 30 percent of U.S. greenhouse-gas emissions, according to the U.S. Energy Department.

Provincially owned SaskPower, which is paying for more than half of the project, will select among two technologies and three companies to refurbish a 100-megawatt coal unit that can capture and pipe carbon dioxide to nearby oil fields. The gas can be used to pull up deep reservoirs of previously unreachable oil from geological seams.

Return on Investment

About C$400 million would come from the oil industry to build the infrastructure for the oil field, an investment that will pay back quickly, Floyd Wist, executive director of the province's energy and resources ministry, said at the briefing.

``The reason we feel it is a significant opportunity in Saskatchewan is we have a combination of large carbon sources in close proximity to oil reserves and saline aquifers,'' Wist said. ``If we can get the cost of carbon sequestration down using enhanced oil recovery, that can seed development of other sequestration projects.''

The Canadian government, which is spending C$240 million on the project, has targeted a 20 percent carbon-emissions cut by 2020 and is requiring sequestration of emissions from oil-sands projects started after 2011.

FutureGen Costs Soar

The U.S. announced it was abandoning a similar project, called FutureGen, which was planned for Mattoon, Illinois, last year after the cost climbed to $1.8 billion. The Energy Department and an industry group targeted Mattoon over two sites in Texas, where enhanced oil recovery may have been able to offset some costs.

The Energy Department also chose to build the entire 275- megawatt facility from the ground up, rather than retrofitting an existing one, which would have been cheaper, said Malcolm Wilson, who directs the International Test Center for Carbon Dioxide Capture at the University of Regina in Saskatchewan.

The Canadian project is much smaller in scope than FutureGen, Luke Popovich, a spokesman for the National Mining Association in Washington, told reporters. The FutureGen approach would ``dwarf any practical use'' for oil recovery, he said.

American Electric Power Co., the largest North American producer of electricity from coal, has pushed back plans to begin capturing carbon dioxide for enhanced oil recovery in Oklahoma and hasn't sought bids from contractors, spokesman Pat Hemlepp said in a telephone interview.

Columbus, Ohio-based American Electric said in March 2007 it expected to begin delivering carbon dioxide from the plant in 2011. Delays in developing the carbon-capture technology have pushed back the operating date to at least 2013, Hemlepp said.

``I'm glad somebody else is doing it,'' he said. ``A lot of the industry has been standing around watching.''

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net

Last Updated: August 21, 2008 14:25 EDT