Jan 12 - McClatchy-Tribune Regional News - Jeffrey Tomich St. Louis Post-Dispatch

Developers of a next-generation coal-fired power plant planned for central Illinois are proposing a new cost-sharing agreement with the federal government to alleviate concerns about the project's rising cost.

The FutureGen Industrial Alliance, a consortium of 13 power producers and electric utilities including St. Louis-based Peabody Energy Corp., issued a letter on Thursday to C.H. "Bud" Albright Jr., an undersecretary for the Department of Energy. In the letter, the companies agreed to pick up a larger share of the $1.75 billion project.

"In an effort to accelerate progress on one of the world's most important climate technology projects and alleviate administration cost concerns, the Alliance proposes a new approach to financing FutureGen," wrote Michael J. Mudd, chief executive of the FutureGen alliance.

FutureGen was proposed by President George W. Bush in 2003 as a way to prove the feasibility of producing electricity and hydrogen from coal with near-zero emissions.

After 20 months of review, Mattoon was chosen as the project site last month -- a potential boon for Illinois' economy and its coal industry. But the Energy Department, which had agreed to pay for 74 percent of the project, has been unwilling to move forward because costs have nearly doubled what they were in 2003.

The alliance's proposal calls for "increased cost-sharing if overall costs rise, post-project repayment and partial bank construction financing," according to the letter.

"One benefit to this new approach is that final taxpayer investment in the project would be no greater than what it was on the day President Bush first announced the project," the letter said.

If agreed to, the federal government's obligation for FutureGen would drop to about $800 million from $1.33 billion, according to a source who spoke to The Associated Press.

A spokesman for the Energy Department couldn't be reached Friday evening.