CALGARY, Alberta - Alberta intends to spend C$285 million ($271 million) to help fund a coal-gasification project that would both produce electricity and capture carbon for use in boosting oil production from old fields, it said on Tuesday.

The government in the Western Canadian province, which has spent the last few months distributing money from a C$2 billion carbon capture fund, said it signed a letter of intent with Swan Hills Synfuels, a private company, for the project, the fourth to get government backing.

Swan Hills wants to turn coal that is too deep to mine into synthetic gas that would be used as fuel for a 300 MW power plant. It would also capture 1.3 million tonnes per year of carbon dioxide to be used for enhanced oil recovery.

The C$1.5 billion project is scheduled to start up in 2015.

Premier Ed Stelmach's Conservative government is looking to carbon capture as a way to cut greenhouse gas emissions while promoting investment in the province's carbon-intensive oil sands.

Some environmentalists have criticized the strategy, saying public money is being funneled into expensive projects with uncertain results when it could be invested in alternative energy sources and conservation.

($1=$1.05 Canadian)

(Reporting by Jeffrey Jones; editing by Peter Galloway)

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