The announcement of the project came as delegates from around the world met at a UN conference in Canada to step up the fight against global warming. The Bush administration refused several years ago to participate in the UN-backed Kyoto treaty to cut emissions linked to global warming.

The US government will foot $700 million of the bill for the new coal-fueled plant, with the rest split evenly among the consortium members, said Michael Mudd, head of the alliance and an AEP executive.

The group will choose a site for the plant in 2007, with initial operations by 2012.

The project will cut emissions of heat-trapping greenhouse gases while capitalizing on the nation's plentiful coal supplies - enough to last about 250 years.

"This program will do what is necessary to secure coal as the fuel of our future and to secure a clean environment," Mudd told Reuters in an interview.

AEP is the largest coal user in North America and has the biggest US aggregation of coal-burning power plants.

To produce electricity, FutureGen would burn coal as well as hydrogen, the energy source the Bush administration has chosen to power a new breed of clean-running automobiles.

The project would also separate heat-trapping greenhouse gases out of the exhaust spewed by the plant and inject them into underground reservoirs to keep them from entering the atmosphere.

Other US partners are Consol Energy Inc., Foundation Coal Holdings and Kennecott Energy.