Illinois won a battle with Texas for a showcase clean-coal research project, but within hours the Bush administration waved a caution flag about rising costs and said it wasn't ready to sign off on the $1.8 billion FutureGen power plant.

The quick turn of events did not dampen the party that broke out across this town of 18,000 when an energy consortium announced plans to use Mattoon as the site for FutureGen.

The cutting-edge plant is designed to test whether technology can coax abundant coal into making electricity with little pollution, burying greenhouse gases deep in the earth.

If construction proceeds, Mattoon's selection over nearby Tuscola, Ill., and two sites in Texas will bring a badly needed injection of new jobs and investment. It will also instantly transform a small town known for its Soybean Museum and annual Bagelfest celebration into a world center for energy research.

Hundreds of people crammed into the old Times theater downtown to watch the announcement beamed from Washington on a big screen. When FutureGen Chief Executive Officer Mike Mudd named Mattoon as the winner, the crowd erupted in fist waving, high-fives and tears. Quickly, the marquee was updated to read: "FutureGen, We Got It."

"I know this is the biggest economic development opportunity for east-central Illinois in decades, so Merry Christmas, Mattoon," said Gov. Rod Blagojevich, who showed up soon after the announcement.

The FutureGen project is a partnership of coal and utility companies and the U.S. Department of Energy, which is picking up the lion's share of development costs. But department officials threw a note of uncertainty over Mattoon's selection by steering clear of Tuesday's announcement, then issuing a warning that costs were already out of hand before ground was broken.

"Projected cost overruns require a reassessment of FutureGen's design," read a statement from James Slutz, the department's principal deputy for fossil energy. Slutz said the department would provide more details next month on plans to restructure the FutureGen initiative.

At the same time, the department signaled its commitment to clean-coal research in Illinois with the release of a $67 million research grant for a separate project that will test technologies like those that are proposed to bury greenhouse gases from FutureGen.

Federal officials had asked the consortium to delay Tuesday's FutureGen announcement but were rebuffed. The Energy Department has the power to stop the project, and it has been trying without success for months to get its private-sector partners to pick up a greater share of the expense. Estimates of FutureGen's price tag have doubled over the last few years.

U.S. Sen. Dick Durbin (D-Ill.) said he has had discussions with Energy Secretary Samuel Bodman about concerns over FutureGen's cost and design.

Durbin doubted the project was in danger of being scuttled before it even begins, adding that the selection of Mattoon has left him at once proud and worried. "It's like having a baby," Durbin said. "It's a source of great joy, and as soon as you leave the hospital you think, 'How are we going to pay for college?' "

Mudd, the CEO of the FutureGen alliance, said Mattoon got the nod because it offered sound geology, good water resources and was move-in ready for work crews without fear of legal battles over property rights.

Because of its price tag and its promise, FutureGen has grown into one of the biggest research plums of the energy crisis. It is designed to marry a range of sophisticated technologies to demonstrate that coal, which fouls the air when burned by traditional methods, can be tapped as a clean fuel.

The U.S. sits on enormous coal reserves, and Illinois has more than any other state. China, India, South Korea and other rapidly developing Asian nations have also become involved with FutureGen in hopes that it could be an answer to their energy problems.

Instead of burning coal, the plant is designed to use a proven process called gasification that breaks the fuel down into chemical components while releasing energy. Gasification still releases great quantities of carbon dioxide, a major contributor to global warming. But instead of releasing the greenhouse gas into the atmosphere, plans call for it to be liquefied and pumped deep into the earth, where experts believe it will remain harmlessly trapped under a thick layer of sandstone.

The major test of FutureGen is to prove that the gases won't percolate back to the surface.

Environmental groups are split over the promise of FutureGen. Howard Learner, executive director of the Environmental Law and Policy Center, called FutureGen "the Holy Grail" of energy research that holds the potential to boost coal use without harming the environment.

Bruce Nilles, director of the Sierra Club's National Coal Campaign, called for a moratorium on the construction of new coal-fueled power plants in the U.S. until the FutureGen technology is thoroughly vetted.

But Brian Urbaszewski of the Respiratory Health Association of Metropolitan Chicago said the coal plant won't be as clean as it's cracked up to be. Urbaszewski said FutureGen's own environmental studies show it will still emit considerable pollution, though less than a conventional coal plant.

"Calling it zero-emission is a blatant lie, and vastly overselling the benefits," said Urbaszewski, director of the group's environmental health program. "Energy efficiency, wind and other sources are much, much cleaner and create fewer health problems."

The FutureGen plant will be small, producing only enough energy for about 150,000 homes. It is expected to open in 2012, and there will be years of testing before its techniques could have widespread application.

Gasification and sequestration, as the burying of greenhouse gases is called, is expected to add 20 to 40 percent to the cost of making power. So for the technology to become widely adopted, costs will have to come down or consumers will have to learn to accept that as the price for cleaner power.

In the short term, however, the plant would bring a major new source of investment and jobs to a region that has been bleeding industry for years. Coal mining had long been the primary economic engine of the state's southern half, and the economy there has suffered since clean-air laws sent the industry into a deep swoon two decades ago.

"Hopefully it will springboard the community," said Mattoon Mayor David Cline, hanging out at a post-announcement party in the JaLeniz bar.

Helen Townley, 78, plans to sell her home in a few years, but was concerned about the state of the local real estate market. FutureGen, she hopes, will change that. "The price of things will be better," she predicted.

Over at Mattoon High School, athletic director Gerald Temples was already dreaming about championships he can win with an influx of talented kids that FutureGen might bring to town with their parents.

"If we have that increase, it puts our athletes on a better playing field," said Temples, whose school is the smallest in the Big 12 conference it plays in.