States Vie for Share of Clean-Coal Cash

By REBECCA SMITH

The federal government is once again dangling billions of dollars for "clean coal" projects, sparking a high-stakes lobbying effort among different states trying to score some of the cash for local projects.
The recently enacted American Recovery and Reinvestment Act designates $3.4 billion in federal funding for investment in pioneering clean-coal technology, including power plants that would capture carbon dioxide so only small amounts are released to the atmosphere.
The Texas political establishment launched a campaign this month to press Energy Secretary Steven Chu to consider funding a project proposed by Summit Power Group for a site near Odessa, in western Texas.
Another clean-coal project by Tenaska Inc. at a site east of Sweetwater, Texas, also is a contender. A power-plant proposal in Mattoon, Ill., which was a showcase project under a failed Bush administration clean-coal program called FutureGen, also is trying to secure financing and is backed by the Illinois congressional delegation.
These plants would be among the most costly power projects ever constructed, more expensive even than nuclear-power plants, per unit of productive capacity. Without massive federal funding, it is unlikely that any of them would move forward. The Department of Energy has yet to detail how it would dole out the money.
The funding comes on the heels of the FutureGen effort, which was stalled last year by then Energy Secretary Samuel Bodman when the estimated cost rose to $1.8 billion. Mr. Bodman said he thought the project had little chance of yielding results.
The Energy Department's decision to cancel FutureGen, after many millions of dollars had been spent, was a blow to those who believed the technology would never move forward without strong federal support.
The program was begun in 2003 with the aim of funding a power plant that would convert coal into a combustible gas, then burn it to make electricity. Carbon-dioxide emissions were to be removed from the waste stream and pumped underground for permanent storage, reducing the release of greenhouse gases that are linked to climate change.
There is no indication that the current effort will fare any better or prove any less costly than FutureGen. However, the promise of billions of dollars in funding means these projects have attracted strong political support.
In a letter signed by nearly 100 members of the Texas legislature, Mr. Chu was asked last week to offer federal assistance to the Odessa project. U.S. Sen. Kay Bailey Hutchison (R., Texas) is also lobbying for the plant, as are more than two dozen members of the Texas congressional delegation. On Friday, Ms. Hutchison said the project would create badly needed jobs and was "critical for the production of clean domestic energy."
The Odessa project had lost out under the FutureGen program when it was beaten out by the Illinois site. But its backers believe it stands a strong chance under the new program.
At $1.6 billion, the Odessa plant would cost about 10 times as much as a modern gas-fired power plant. Summit Power Chairman Donald Hodel, formerly energy and interior secretary under President Ronald Reagan, said he expects "significant savings from each successive plant that's built." The plant's economics, he said, would be improved by cap-and-trade legislation that would raise the cost of traditional fossil-fuel generation and electricity prices, which are now very low.
"There are a lot of moving pieces," in terms of financing, said Mr. Hodel, "but we have got to find a way to use coal in an acceptable manner."
Write to Rebecca Smith at rebecca.smith@wsj.com