The FutureGen Alliance, a nonprofit coalition of coal producers, coal users, and coal equipment suppliers, on Monday said it was negotiating an option to buy portions of the Meredosia Energy Center in Illinois from Ameren Corp. to continue development of the FutureGen 2.0 carbon capture and storage project, an initiative begun in 2003.

The move comes just a month after Ameren Energy Resources (AER) Co.—the holding company for Ameren’s merchant generation—announced it would shutter its coal- and oil-fired Meredosia units in Illinois by the end of this year, citing concerns about rising costs related to the compliance of the Environmental Protection Agency’s Cross-State Air Pollution Rule.

Ameren has said that the closures would not affect plans to build a full-scale oxycombustion plant for capture and storage of carbon dioxide because “FutureGen is still several years from needing a generating unit to test clean coal technology.”

As recently as March of this year, the alliance had claimed that construction of the project was set to begin in 2012 with a target completion date of 2015.

Meanwhile, project costs, estimated at $737 million just last year, have shot up to $1.65 billion. About $1.1 billion will be used to repower the Meredosia unit, and $550 million for the carbon pipeline and storage site, the alliance said in a statement on Monday. But even these figures may change: “Program participants have identified several hundred million dollars in potential cost reduction opportunities that will be evaluated over the coming months,” it added.

“DOE has granted no cost extensions of the existing Alliance and AER cooperative agreements to allow for completion of the design work and cost estimate,” it said. “The Alliance expressed its appreciation to DOE for the extensions, and acknowledged the opportunity that the Alliance would have in leading the program and making a number of enhancements to improve its overall economics.”

The DOE had a year ago announced it would award $1 billion in Recovery Act funds to the so-called FutureGen 2.0 project, which plans to repower the 200-MW coal-fired Meredosia Unit 4 using oxyfuel technology—not construction of an integrated gasification combined-cycle facility at Mattoon, Ill., as originally envisioned. The project had also originally called for use of a Mattoon geologic storage site to sequester carbon dioxide, but the city of Mattoon last year declined participation in the project. Morgan County, Ill., is now expected to host a sequestration site captured by the pilot project.

The eight-member FutureGen Alliance said buying the unit from Ameren would allow it to continue development of the FutureGen 2.0 project. The alliance also said they would prepare an application to the DOE to take over Ameren’s agreement with the DOE.

“AER has indicated that it will not continue with its cooperative agreement beyond 2011; however, it has pledged to provide continued environmental permitting assistance and to maintain the power plant required for the FutureGen 2.0 program in a retrofit-ready condition,” the alliance said.

Ken Humphreys, chief executive officer of the FutureGen Alliance said plans were expected to progress smoothly and the project was on track to begin operations in 2016, buoyed by the strong support of the State of Illinois. “Two pieces of enabling legislation benefiting FutureGen 2.0 were enacted this year: one related to pipeline siting and one addressing liability management. The State of Illinois is to be commended for its support, which helped substantially move the program forward. As we look ahead, the State and the project will work together on a power purchase agreement,” he said.

Humphreys added that the storage aspect of the project was progressing well: Ongoing drilling of the geologic characterization well has nearly reached the target storage formation and “overall storage costs are expected to come in under budget.”

Sources: POWERnews, DOE, FutureGen Alliance