February 1, 2008 11:17 AM PST

Coal industry fires back at Dept. of Energy on FutureGen project

Posted by Michael Kanellos

The coal industry isn't happy with the Department of Energy's cancellation of an ambitious clean coal project, and has issued a bulletin to correct what it considers inaccurate statements about the cost of the project.

Earlier this week, the DOE said it was pulling out of the FutureGen Alliance, a coalition of coal and oil companies banded together to create a coal-fired power plant in Mattoon, Ill., that injects carbon dioxide emissions underground. The cost, the DOE claimed, had become prohibitive. The budget for the 300-megawatt demonstration plant had ballooned to $1.8 billion because of price increases for things like steel, the DOE said. However, the DOE said that President Bush will request $648 million for so-called clean coal research that will accomplish the same goal.

The FutureGen Alliance, which includes companies like Foundation Coal and Peabody Energy, says that the government is exaggerating its pain. The DOE initially agreed to contribute $800 million to the project. The DOE's share has only risen to $1.1 billion. Alliance members have also agreed to provide the DOE partial or full repayment for overruns. "The cost is manageable," the organization read.

The DOE also claimed that financing such a project was inappropriate. Hardly, said the Alliance. Power plants are always financed. It also disputed the DOE's claim that the plant wouldn't be commercially viable. Not so, says the Alliance.

Finally, the DOE claimed that the new projects will sequester as much carbon dioxide at a lower cost than FutureGen.

"The Mattoon site as currently configured can sequester approximately 2 million tons per year," the Alliance said. The new projects aim for 1 million tons a year--or half as much.

Whoever is right, the dispute seems to add to the Department of Energy's (or at least the Department as it has been configured for the last couple of years) inability to keep its mind on research. In the '90s, it kicked off an ambitious program to build hybrid cars. Japanese manufacturers weren't invited. In response, Toyota and Honda released hybrids. The DOE program was canceled. It then shifted to developing a hydrogen economy. We're still waiting on that one.

Meanwhile, other nations are increasing funding for energy technology projects.