MATTOON, Ill. - Residents celebrated when this central Illinois city was chosen Tuesday as the site of a futuristic power plant that would burn coal without emitting global warming gases, then got to work figuring out what comes next.

The $1.8 billion plant known as FutureGen, which would store carbon dioxide deep underground, is expected to bring hundreds of jobs to this central Illinois town and will be built on several hundred acres. Mattoon was chosen over nearby Tuscola and two Texas towns, Jewett and Penwell.

“I know this is the biggest economic development opportunity for east-central Illinois in decades, so Merry Christmas Mattoon,” said Gov. Rod Blagojevich, who arrived in town after the announcement.

For Texas, there was disappointment.

“Our nation needs FutureGen, which is why we have all been working so hard to see it become a reality,” Congressman Joe Barton, R-Ennis, said. “I’d like to congratulate the team in Mattoon, Ill., whose site has been selected as the home of FutureGen. No doubt they have worked hard and there’s much work left to be done.

“I can’t say I’m not disappointed by today’s announcement nor can I say I’m not puzzled that the FutureGen Alliance failed to select the site in Jewett, which was ranked No. 1 on technical merit,” Barton said. “Nevertheless, I hope FutureGen continues and is successful. With demand increasing for all types of energy, we need projects like this one to harness our abundant coal resources, utilizing technology to make it cleaner and more efficient.”

But hours later, the U.S. Department of Energy warned that projected cost overruns involving the plant “require a reassessment of FutureGen’s design.”

The FutureGen Alliance, a consortium of 12 U.S. and foreign energy companies, announced the site against the advice of the DOE, which had said it was not yet ready to sign off on the site.

“DOE believes that the public interest mandates that FutureGen deliver the greatest possible technological benefits in the most cost-efficient manner. This will require restructuring FutureGen to maximize the role of private sector innovation, facilitate the most productive public-private partnership, and prevent further cost escalation,” James Slutz, the DOE’s acting principal deputy assistant secretary, said Tuesday in a statement.

The project, three-fourths of which is taxpayer funded, has been under increasing scrutiny in Congress. Some lawmakers have questioned its soaring cost — nearly double the $950 million originally projected — and its long delays.

President Bush has touted FutureGen as key to developing carbon-free coal-burning power plants. It is supposed to be virtually pollution-free and produce both electricity and hydrogen — while its carbon dioxide, a leading greenhouse gas, is to be captured and stored deep underground.

Griffin said representatives from the FutureGen Alliance would be in Mattoon Wednesday to begin seismic surveys of 16 square miles of land. Officials have said the plant is expected to be operating by 2012, and said Tuesday that they hope to begin construction by July 2009.

Meanwhile, city officials say they must determine how to get water to the site, build a road that can handle heavy construction equipment and hire a city planner. City attorney Preston Owen said they’ll even examine their subdivision code to see if the city is prepared to handle an influx of new housing construction.

Mike Mudd, chief executive of the FutureGen Alliance, said Mattoon was chosen because of its “very good” water resources and geologic conditions and because carbon dioxide could be injected underground directly at the site, possibly simplifying construction.

Jerry Oliver, chief operating officer of the FutureGen Alliance, said bids for the first major project — the core technology that would turn coal to gas — will be sought beginning Jan. 2. Oliver said The Washington Group already has been hired as the engineering and construction manager and there eventually will be three to four major contractors at the site.

Environmentalists said they’re eager to see if the technology delivers on its promises,

For the coal industry, besieged by questions about its role in global warming, “this is sort of their last stand. This is it,” said Bruce Nilles of the group’s Midwest Clean Energy Campaign.

“We welcome an honest discussion about is it technically and financially feasible for coal to be burned in a responsible manner,” he said. “Obviously … this is a very important research project.”

The project has been the subject of intense lobbying.

Illinois offered a $17 million grant to help pay for various project costs and an estimated $15 million in sales tax exemptions on materials and equipment through local enterprise zones. The state also set aside $50 million for below-market rate loans to the FutureGen alliance.

The alliance members — including major U.S. coal-burning utilities American Electric Power and Southern Co., and the country’s largest coal producer, Peabody Energy — have committed $400 million over 10 years.

Congress is giving the program $75 million this year, $33 million less than the administration had wanted. Committees overseeing Energy Department spending expressed concern that FutureGen was siphoning money away from other clean-coal programs.

“I’d like to thank the many, many people in Texas who have worked so diligently on this project,” Barton said. “Gov. Rick Perry, Commissioner Michael Williams, the Texas Legislature, the entire FutureGen Texas team, the Heart of Brazos team, have all gone above and beyond in a multi-year effort to see that Texas plays a role in providing clean energy for our nation.

“I am very proud of the work they’ve done and the efforts they’ve put forth together in proposing a phenomenal site in Jewett,” he said. “And it is a phenomenal site, one that I hope will be used someday.”