The privately held company proposed a site near Sweetwater, Texas, where its plan would capture up to 90 percent of the carbon dioxide (CO2) that would otherwise enter the atmosphere.

The carbon dioxide would be sold for use in oil production in the Permian Basin, resulting in geologic storage.

Tenaska filed a request for a state permit for the plant, whose cost was estimated at three billion dollars, but said a final decision to proceed would be made in 2009 depending on incentives, costs and prices for electricity and CO2.

Bill Braudt, Tenaska's general manager of business development, said the plant "will use abundant and relatively low-cost coal and help keep Texas electricity prices in check."

If built, the plant would be the first commercial coal-fired plant, other than small research projects, to capture and provide for storage of CO2, according to Tenaska.

CO2 is a greenhouse gas that is believed to contribute to global climate change.

The CO2 would be captured and transported via pipeline to oil fields in the Permian Basin where it will be used in oil recovery and stored in the Basin's geologic formations.

The announcement came weeks after the US government's decision to end funding for a "zero emissions" coal-fired power plant project, with carbon emissions stored underground.

Government officials say they remain committed to the idea of clean coal, but a public spat with a public-private alliance raised doubts about the project known as FutureGen, which also has international partners.

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