Jan 30 - McClatchy-Tribune Regional News - Dave Michaels and Elizabeth Souder The Dallas Morning News

Texas lost out last month when a government-sponsored zero-emissions coal plant went to Illinois, but its bid could be revived because the project has stalled over questions about its rising cost and technological scope, officials said.

The U.S. Department of Energy told members of Congress from Illinois on Tuesday that it would pull its support for building the $1.8 billion FutureGen plant in Mattoon, Ill.

The department could scale back the project, and Texas might compete again to host a facility that's smaller or includes slightly different technology.

"I fully expect Texas will have an opportunity to get involved," said Texas Railroad Commission Chairman Michael Williams, who led Texas' bid to host FutureGen. "There were indications even before the announcement that the Department of Energy was looking to perhaps go in a different direction."

Fredrick D. Palmer, a board member of the FutureGen Alliance, said federal officials probably knew last month, when they didn't attend the event announcing Mattoon's selection, that "they were not going forward."

Mr. Palmer cautioned against redesigning FutureGen, saying the project has already cleared regulatory and legal hurdles. Any major changes would slow it down and drag into 2009, when a new president would have control of the project.

"It will delay proving out carbon capture and sequestration -- by how long I don't know," said Mr. Palmer, a senior vice president at Peabody Energy in St. Louis. "Clearly, FutureGen was teed up to do this relatively quickly."

The FutureGen Alliance is a group of mining and utility companies that includes Dallas-based Luminant, a unit of Energy Future Holdings, the former TXU Corp. A Luminant spokesman wouldn't comment on FutureGen's plans.

Energy Department officials said details of a restructuring would be announced soon. The department committed to funding 74 percent of the project's cost, which was $950 million when it was announced.

Energy Secretary Samuel Bodman "has maintained a strong commitment to the FutureGen project since we announced its public-private agreement in 2005," department spokeswoman Julie Ruggiero said. "But the cost of the plant has almost doubled, and we've seen technological advances over the past five years that require a thorough reassessment."

The news about the Energy Department's plans comes only a day after President Bush emphasized the federal government's role in funding clean-coal technology in his State of the Union speech. Department officials said the plans for FutureGen don't mean they are reducing their commitment to clean-coal projects.

FutureGen was a technological anomaly when Mr. Bush announced it in February 2003. Since then, mounting pressure on power companies to reduce carbon dioxide emissions have prompted them to move forward with cleaner technology.

Two power companies are considering coal gasification plants, known as integrated gasification combined cycle, or IGCC. NRG Energy has said it's ready to plan an IGCC plant if state or local governments offer financial aid.

Energy Future Holdings has asked IGCC vendors for bids to build at least two plants in Texas. Those bids were due Jan. 14. A spokesman said the company expects to give an update in the next few weeks.

Even with the Energy Department's opposition, FutureGen could move forward because its industry partners intend to keep lobbying Congress for funding. Congress could direct the department to spend money to build the plant.

One of FutureGen's key supporters is Illinois Sen. Dick Durbin, the second-ranking Democrat in the Senate. Mr. Durbin called the department's decision a "cruel deception."

Key Texans are poised to step in if the Energy Department decides to break up the project to keep costs down. Matt Mackowiak, a spokesman for Sen. Kay Bailey Hutchison, said she met with Odessa officials last week about the project. Odessa and Jewett, in Central Texas, made losing bids to host FutureGen.

"The state of Texas and our private industry have a lot to offer if DOE decides to competitively bid this project," he said.

Sen. John Cornyn said: "If DOE decides to break up FutureGen, I will work with Texas Railroad Commissioner Michael Williams and the Texas congressional delegation to push for a piece of it."

Dave Michaels reported from Washington, and Elizabeth Souder reported from Dallas.

dmichaels@dallasnews.com

and esouder@dallasnews.com