Participants in the U.S. government-backed Futuregen project to capture and store greenhouse-gas emissions from a coal-fired power plant need to find one or more new partners to replace American Electric Power Co. (AEP) and Southern Co. (SO), which are leaving the project, U.S. Energy Secretary Steven Chu said Thursday.

The Futuregen Alliance won renewed support from the federal government earlier this month when the Obama administration all but guaranteed almost $1.1 billion for the project, to be based in Mattoon, Ill. The project suffered a major setback in 2008 when the Bush administration pulled the plug on the project's funding after costs nearly doubled.

Executives at Southern Co. and AEP, two of the biggest coal-burning utilities in the U.S., said they support Futuregen, but had decided to focus their investments on their own carbon-capture and storage projects.

The Futuregen Alliance "will have to get another partner or two," Chu said, speaking on the sidelines of the Edison Electric Institute conference here. "I'm hopeful they can do this, but it's not a guarantee."

Chu said he was convinced the project was worth keeping after he talked to several scientists and utility industry experts who expressed near-unanimous enthusiasm about its potential. He said he hoped the plant would get built and generate electricity for customers in the next several years.

The remaining members of the alliance include U.S. and overseas coal companies, including Consol Energy Inc. (CNX), Peabody Energy Corp. (BTU) and BHP Billiton Ltd. (BHP), and utilities E.on AG (EOAN.XE) and China Huaneng Group.

Chu suggested that Futuregen and other potential projects could provide opportunities for the U.S. and China to work together to improve carbon capture and storage technology.

The Futuregen project aims to build a power plant that will capture and permanently store underground 60% of the carbon-dioxide emitted in combustion. This is down from the original aim to capture 90% of the plant's CO2 emissions. The plant would test the technology on a commercial level, a critical step in the face of likely federal climate change legislation that would limit U.S. greenhouse gas emissions.

For its part, Southern Co. will begin in 2011 capturing a fraction of the CO2 from its 2,525-megawatt Barry plant near Mobile, Ala., in a partnership with the Department of Energy and Mitsubishi Heavy Industries Ltd. (7011.TO). Southern will also manage and operate the DOE's new National Carbon Capture Center near Wilsonville, Ala., where carbon-capture technologies will be developed. In addition, Southern unit Mississippi Power in January filed plans to build a 582-megawatt plant that would be fueled with gas derived from coal, with carbon-capture capability.

"We've moved onto other projects," Southern Chief Executive David Ratcliffe said on the sidelines of the EEI conference in San Francisco. He said he told Energy Secretary Chu that "I've had to devote my resources to other, more tangible projects that are moving faster," adding he still strongly supports the Futuregen project and Southern would share information with developers.

Chief Executive Mike Morris said AEP will devote its resources to other sequestration projects, including a plant in West Virginia. The company will start in September to test CO2 capture-and-storage technology at the coal-fired Mountaineer plant in New Haven, W.Va., injecting up to 165,000 metric tons of CO2 a year into the ground.

"It's going to happen a whole lot sooner than Futuregen," Morris said on the sidelines of the conference. He added, however, that he still supports Futuregen, noting the alliance's CEO, Michael Mudd, comes from AEP and AEP engineers would continue working on the Illinois project.

-By Cassandra Sweet and Mark Peters, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

(Christine Buurma in New York contributed to this report.)