Alberta Premier Ed Stelmach speaks at the announcement in Fort Saskatchewan on Feb. 16. (CBC)Alberta is moving its massive carbon capture and storage plan into the nuts-and-bolts construction stage and has also greenlighted an upgrader to refine bitumen in-province to keep profits from flowing south.

"We are taking the next bold step to ensure Albertans get more from the production of their non-renewable resources," Premier Ed Stelmach told a hotel reception room full of reporters, business leaders and cabinet members Wednesday.

"I've always said that shipping raw bitumen out of our province is comparable to selling the topsoil on a farm," he said.

"I know by doing that you can make a big buck, but by the end of the day it doesn't get you very far."

Stelmach said a refinery partnership between the government, North West Upgrading Inc. and Canadian Natural Resources Ltd. will be built under a program that allows the province to take oilsands royalties in the form of bitumen — the heavy petroleum goo that must painstakingly be extracted from the earth — rather than in cash.

It's a way for the province to encourage investment and production.

Phase 1 of the Redwater upgrader, to be located 45 kilometres northeast of Edmonton, is to be constructed by Calgary-based North West Upgrading. Two more phases will follow.

The initial phase, to be completed by the summer of 2014, will process 50,000 barrels a day, most of which will be ultra-low sulphur diesel fuel. Three-quarters of that will be owned by the province and the rest by Canadian Natural Resources.

"We're doing something different," Ian MacGregor, head of North West, told the news conference. "It's a one-step conversion process. We're not making something that's intermediate grade. We're making refined products."

The first phase will also capture more than 3,000 tonnes daily of carbon dioxide, which will be sent down a 240-kilometre pipeline to pre-existing oilfields in central Alberta.

The gas will be pumped underground to push leftover oil to the surface, said MacGregor.

"There's 1.2 to 1.4 billion barrels of stuck oil in our province that can be extracted. The CO2 from our refinery will unstick the stuck oil."

MacGregor estimated a return of $25 billion in royalties.

Enhance Energy Inc. is to construct the pipeline with the help of $495 million from the province's carbon capture and storage initiative. The pipeline is one of four projects to be paid for with the $2-billion fund created two years ago.

Carbon capture and storage is a relatively new technology designed to make the oil and gas business less harmful to the environment, but it's untried on a large industrial scale.

The process traps waste gases such as carbon dioxide rather than allow them to enter the atmosphere as greenhouse gases. It liquefies them and stores them underground.

Opponents say the technology will take too long to implement even if it works on a large scale and they suggest industries should instead focus on reducing greenhouse gas emissions.

But proponents say carbon capture is the best solution because greenhouse gas reductions in the developed world won't mean anything if polluters in the Third World aren't given technology as an incentive to cut back as well.

Construction on the pipeline is to start next year. Energy Minister Ron Liepert said Europeans have told him they're watching the rollout closely.

"Within a two-year period from when we announced our $2-billion for carbon capture and storage, we're kicking our first project out the door and it is going to be viewed worldwide," he said.

The projects are expected to create 10,000 jobs during construction.

The Building Trades of Alberta association called the announcement a win-win.

"By refining our resources right here in Alberta, we will provide employment for Albertans and stimulate the Canadian economy," said Ron Harry, the association's executive director.

The environmental activist group Greenpeace criticized the plan, saying the area where the upgrader will go is already overburdened by refinery projects. People who live nearby already have health concerns and call the area "Cancer Alley."

Greenpeace spokesman Mike Hudema said the province needs to address air, land and water pollution concerns before building more refineries.

"This government needs to learn to subtract, not just keep adding," he said.