The province announced Monday that a nearly $300 million funding agreement for a carbon capture and storage project had been cancelled.

The provincial government said the agreement with Swan Hills Synfuels was discontinued due to lower than expected natural gas prices – making it more economical to purchase natural gas than make synthetic gas.

That pushed plans back for the company’s production of synthetic gas, and related carbon capture plans.

The province said those deferred timelines meant carbon capture was outside of the government’s funding requirements.

An agreement had originally been reached with Swan Hills Synfuels in 2011, with the government committing $285 million over 15 years to capture carbon dioxide, produced from the gasification of underground coal, and sell it for use in advanced oil recovery.

Energy Minister Ken Hughes said while low prices for natural gas were behind this decision, CCS is still part of the province’s efforts to reduce greenhouse gas emissions.

The province is moving forward with two other oilsands related CCS projects – the Alberta Carbon Trunk Line and Shell Quest.

According to the province, those two projects are expected to reduce greenhouse gas emissions by 2.76 million tonnes annually by 2016 – equivalent to removing 550,000 cars from the road.

The province has committed $1.3 billion to those projects – no decisions have been made regarding the reallocation of funds no longer committed to the Swan Hills Synfuels project.