The U.S. Department of Energy has announced that it has dumped the FutureGen clean coal project after costs spiraled upward, and said it wants to play the field instead.

The FutureGen Alliance, based in Washington, D.C., said it plans to try to keep the $1.8 billion carbon capture and storage project alive, but the DOE has already put out the call looking for new, multiple, 300 megawatt projects across the country.

The DOE said spreading the cash around would be a more cost-effective approach to demonstrate clean coal technology, enabling wider use and more rapid commercialization, although the new plan calls for projects to be up and running by 2015, and FutureGen was expected to be operational in 2012.

The FutureGen Alliance, made up of 13 energy and mining companies from around the world, just last month picked a site in Illinois for the now-defunct project, designed to gasify and store carbon deep underground, as well as produce hydrogen (see FutureGen to build plant in Mattoon, Ill.)

Sen. Dick Durbin of Illinois, along with Sen. Barack Obama and seven congressmen from the state, sent a letter to President Bush criticizing the DOE.

"We are currently voicing our opposition on the reprogramming proposal, and we'll see what happens next," said a spokeswoman from Durbin's office.

The senator is focused on preserving the original FutureGen plan, according to his office, but without the administration's support, there may be little recourse.

The Energy Department was responsible for the majority of the funding of FutureGen, which was originally supposed to be a $1 billion project.

Under the new plan, the DOE will only be putting up cash for the carbon capture and storage, or CCS, parts of the new facilities, and expects to have up to $1.3 billion available to fund the multiple projects.

The agency plans to keep to a tight schedule with its new program, with public comments on its Request for Information due in March and the Funding Opportunity Announcement to go out three months after that.

The DOE said it expects to evaluate proposals and announce selections by the end of this year.

Some of the companies involved in FutureGen already have other CCS projects in the works.

"We are disappointed, but we will continue to explore ways to test clean coal technologies going forward," said Valerie Holpp, a spokeswoman for Atlanta's Southern Co. (NYSE: SO)

Southern, which is developing an advanced coal gasification facility in Mississippi, has been working with the DOE over the past decade on clean coal technologies at the company's Power Systems Development Facility near Wilsonville, Ala.

Southern's partners in the test facility include fellow FutureGen member Peabody Energy, based in St. Louis, Mo., as well as Houston's KBR (NYSE: KBR), Orlando, Fla.-based Siemens Power Generation, and the Palo Alto, Calif.-based Electric Power Research Institute.

Duesseldorf, Germany's E.On (OTC: EONGY), another member of the FutureGen Alliance, also has a number of clean coal projects in the works, including a bid to be a part of a government-backed CCS project in the U.K. (see U.K. launches carbon capture and storage project)

Under that plan, the government will fund the carbon capture and storage portion of a single plant, with the carbon dioxide to be stored offshore.

The U.K. expects to announce the winning proposal next year and hopes to have the project fully up and running by 2014.

Columbus, Ohio-based American Electric Power (NYSE: AEP), which also expressed disappointment at the FutureGen restructuring, has two integrated gasification combined cycle, or IGCC, projects going through regulatory approvals right now, as well as a CCS program in the works.

"We will start a carbon capture and storage project validation around the end of this year, which will be capturing about 100,000 tons of carbon dioxide a year from one of our power plants," said Pat Hemlepp, spokesman for AEP.

The company plans to store the CO2 in a deep aquifer, with the project serving as a step toward having a fully commercial installation on a plant in Oklahoma early in the next decade.

But the FutureGen project would have tested some significant advances for clean coal.

"FutureGen was going to be developing the technology that was going to be really the next phase of coal-fired generation, almost like IGCC-plus," said Hemlepp.

He pointed out that an IGCC plant produces hydrogen as it turns coal into the synthetic gas that is used to produce electricity.

"To the best of our knowledge, there really aren't turbines out there to be able to burn hydrogen to turn it into electricity. That's what FutureGen was going to be working to develop," he said.

The DOE's revamped plans do not include the use of hydrogen, but the agency said hydrogen production for commercial use will remain a part of its other energy initiatives.

The Energy Department said President Bush requested $648 million for fiscal 2009 for the agency's Office of Fossil Energy, which handles research and development of clean coal at the department.

The DOE said that's a $129 million increase from the president's 2008 request and the largest amount requested for the agency's coal program in more than 25 years.