MATTOON, Ill. - Illinois beat out Texas yesterday for a futuristic power plant aimed at burning coal without emitting global-warming gases.

Known as FutureGen, the plant will be built on several hundred acres near Mattoon, which was chosen by an industry group over nearby Tuscola and two Texas towns, Jewett and Penwell. The $1.8 billion venture is expected to bring hundreds of jobs to this central Illinois town.

A standing-room-only crowd that gathered in the old Times Theater to watch the announcement on a big screen roared when Mattoon was announced as the winner.

"I brought two speeches today for two possible outcomes, and this is what I'm going to do with one of them," a teary-eyed Angela Griffin, president of the Coles County economic development group, said as she held a consolation speech in the air and ripped it to pieces.

Gov. Rod Blagojevich, who arrived in Mattoon later, said the town was chosen for the right reasons, including because it is in a coal-producing state.

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 Energy Department, which had said it was not yet ready to sign off on the site.

The alliance includes major U.S. coal-burning utilities American Electric Power Co. Inc. and Southern Co. and the country's largest coal producer, Peabody Energy Corp. It has committed $400 million to the project over 10 years.

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.

Environmental groups will watch the plant closely. For now, the Sierra Club welcomes the testing of the technology, said Bruce Nilles of the group's Midwest Clean Energy Campaign. For the coal industry, besieged by questions about its role in global warming, "this is sort of their last stand. This is it," Nilles said.

"We welcome an honest discussion about is it technically and financial feasible for coal to be burned in a responsible manner," he said. "Obviously, this is being heralded as does coal have a future. And this is a very important research project."

But 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.