WASHINGTON (Reuters) - Energy Secretary Steven Chu announced on Friday plans to restart the country’s first clean coal power project, scrapped by the previous Bush administration as too expensive.

Under an agreement with the non-profit FutureGen Alliance, the Energy Department will take the first steps toward developing the first U.S. commercial scale-carbon capture and storage project, to be located in Mattoon, Illinois.

“Not only does this research have the potential to reduce harmful greenhouse gas emissions in the U.S., but it also could eventually result in lower emissions around the world,” Chu said.

The FutureGen project was scrapped by the Bush administration due to a ballooning price tag of some $1.8 billion. But a congressional report released in March accused the Bush administration of inflating the cost in order to scrap the project.

President Barack Obama and other Illinois politicians have expressed support for the project in their home state.

“For nearly a year and a half, the people of Illinois have endured delays, reversals and disagreements over costs and funding of FutureGen,” Illinois Senator Dick Durbin said.

“Today, patience and perseverance pay off -- FutureGen at Mattoon is finally ready to move forward,” he said.

The new agreement calls for a restart of preliminary design activities and updating the cost estimate, the department said.

Once these activities and others are completed in early 2010, the department and the alliance will decide whether to continue with the project.

The Energy Department expects to spend about $1.07 billion on the project, with $1 billion from the American Recovery and Reinvestment Act.

Not all environmental groups, however, embrace the concept of clean coal.

Several groups, including the Alliance for Climate Protection, Natural Resources Defense Council and the League of Conservation Voters, launched a multi-million dollar campaign last winter against clean coal, calling it a myth.

They contend that coal-fired power plants are major carbon emitters contributing heavily to climate change. The technology to capture and store carbon in an environmentally safe way is commercially untested and not yet cost competitive, they say.