The Obama administration gave conditional support today for a federal-industry partnership that would build an advanced coal-burning power plant in Illinois to trap and store carbon dioxide emissions, reversing a Bush-era decision to abandon the FutureGen project.

The Energy Department plans to contribute slightly more than $1 billion to the project. The announcement follows pressure from Illinois lawmakers -- including Dick Durbin, the Senate's No. 2 Democrat -- who had savaged former Energy Secretary Samuel Bodman's decision to abandon the plan early last year.

With a former Illinois senator now in the White House, DOE has changed directions on FutureGen. President Obama's Energy secretary, Steven Chu, today announced a "provisional agreement" with the FutureGen Alliance, a consortium of major coal and utility companies such as American Electric Power Co. Inc. and Peabody Energy Corp.

"This important step forward for FutureGen reflects this Administration's commitment to rapidly developing carbon capture and sequestration technology as part of a comprehensive plan to create jobs, develop clean energy and reduce climate change pollution," Chu said in a prepared statement.

DOE said FutureGen would be the first commercial-scale, "fully integrated" carbon capture and sequestration project in the country. The plant would marry the use of integrated gasification combined cycle (IGCC) technology with greenhouse gas emission controls.

Under the deal, DOE will issue a record of decision in mid-July, to be followed by several actions through early 2010, such as restarting design work, releasing an updated cost estimate, expanding the private sponsorship group, and potentially preparing a new analysis of underground regions where the emissions would be sequestered.

A decision about whether to proceed from there would come early next year, DOE said, adding that deciding to move forward is the "preferred outcome."

FutureGen Alliance CEO Michael Mudd said that under the deal announced today, DOE and the industry group would work jointly through the rest of this year on refining the design to reduce costs and "technical risk."

"Several technology configurations will be considered and upcoming discussions with equipment vendors, the engineering team and economics will shape the final design of the facility," the group said in a statement today.

DOE plans to spend $1.073 billion, all but $73 million of which comes from funding for carbon capture and storage in the economic stimulus law. The industry group would be expected to provide $400 million to $600 million, with a goal of having 20 companies kick in $20 million to $30 million over four to six years, DOE said.

Also, the alliance would seek other nonfederal funds to build and operate the plant, including "options for capturing the value of the facility that will remain after conclusion of the research project," according to DOE.

DOE, under President George W. Bush, cited cost overruns in the then-$1.8 billion project as one of the major reasons for pulling the plug, claiming that original costs had almost doubled and would keep rising.

Bodman instead wanted to pursue a "restructured" approach in which DOE would fund only the carbon capture and sequestration portion for multiple commercial coal-fired power plants.

But in March, the Government Accountability Office released a report saying flawed calculations by DOE -- which was picking up about three-fourths of the tab for the project -- had led it to overstate the extent of the increases by $500 million.

The report said DOE was comparing a 2004 estimate of $950 million in constant dollars to the alliance's 2006 estimate of $1.8 billion in asserting costs had almost doubled.

"However, that assertion did not take into account a major difference between the two estimates: one was based on constant dollars and the other on inflated dollars," GAO said, adding that had the alliance's estimate not considered inflation, it would have showed an increase to $1.3 billion, or a 39 percent increase.

The plant would be built in Mattoon, Ill. Illinois lawmakers and other state officials were dismayed at DOE's earlier decision to abandon FutureGen, arguing it would rob the state of jobs and other economic benefits.

Durbin, the Senate majority whip, cheered DOE's decision today and thanked Chu and Illinois officials "for working with me to keep this project alive for the Obama Administration."

"In my time in Congress, I can't recall a project that has greater scientific and practical significance than FutureGen, not to mention the enormous economic benefit it will have in Illinois," he said in a statement.

Bush first announced FutureGen in 2003 as a cornerstone of federal efforts to develop low-emissions coal-fired power plants, envisioning the plant as a way to pioneer several technologies.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC., 202-628-6500