The project, dubbed Quest, will be constructed on behalf of the Athabasca Oil Sands Project, a joint venture of Shell, Chevron and Marathon Oil.
Shell Chief Executive Officer Peter Voser said CCS deployment was a global endeavor but Quest is his company's flagship project.
"If you want to achieve climate change goals, CCS has to be part of the solution," he said in a statement.
Starting in 2015, the project would store more than 1 million tons of carbon dioxide produced during the mining of oil sands in Alberta province. Shell said the facility could cut down on direct emissions from a facility near Edmonton by as much as 35 percent.
The provincial government set aside $745 million from a CCS fund to support Quest. The central government will invest another $120 million from its clean energy fund.
Alberta regulators backed the project in July. The International Energy Agency said CCS technology could potentially cut CO2 emissions from the industrial sector by as much as 4 gigatons by the middle of the century.
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