The companies behind a first-of-its-kind project to store carbon dioxide from a coal-fired power plant selected a central Illinois county as their preferred location Monday.

The proposed FutureGen 2.0 project, which already has $1 billion in federal funding, would be located in Morgan County, Ill., a consortium of companies backing the storage facility said.

The $1.3 billion project would retrofit a 200-megawatt Ameren Corp. (AEE) coal power plant in Meredosia, Ill., with so-called advanced oxy-combustion technology and build pipelines that connect the plant to a new carbon-storage facility. It would be the first demonstration of the technology at a commercial scale.

Oxy-combustion burns coal with a mixture of oxygen and carbon dioxide instead of air to produce a concentrated carbon-dioxide stream for storage. If successfully applied, the technology could help existing coal-fired power plants reduce greenhouse-gas emissions without shifting to natural gas and meet proposed tougher Environmental Protection Agency regulations of traditional pollutants such as mercury.

The Morgan County site "best supported the overall mission of the project cost-effectively," FutureGen Alliance Chief Executive Kenneth Humphreys said. In particular, the storage facility in Morgan County could be located in "close proximity" to the power plant, cutting down on pipeline costs, the FutureGen Alliance said in a press release.

"This project will put Morgan County and Illinois on the global map as a center of clean energy technology," Humphreys said.

The Department of Energy will now begin an environmental review of the project.

Babcock & Wilcox Co. (BWC) and Air Liquide Process & Construction Inc. are also part of the FutureGen Alliance.

Christian and Douglas counties in Illinois were named as alternative sites.

-By Ryan Tracy, Dow Jones Newswires; 202-862-9245; ryan.tracy@dowjones.com
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