American Electric Power told Bloomberg it would pull out on July 1, while Southern Company said it would pull out immediately.

A FutureGen spokesperson told the news service the two utilities were key members of the alliance, but there was still a core membership committed to the project.

According to the report, Southern intends to look at coal gasification at its power plant in Kemper County, Mississippi, and at an Alabama-based carbon research centre.

Dow Jones Newswires reported that AEP would start to test carbon capture and storage technology at the Mountaineer plant in West Virginia, aiming to store up to 165,000 tonnes of carbon dioxide in the ground per year.

FutureGen is anticipated to be the flagship project demonstrating CCS in the US, though the aim to capture 90% of carbon dioxide emissions at the Mattoon plant in Illinois has recently been revised to 60%.

The project is planned for a rapid restart after being stalled by the previous federal government.

Next steps include site-specific completion of preliminary design, the release of an updated cost estimate and a funding plan development, an expansion of the alliance and, potentially, additional subsurface characterisation.

This month the Obama administration earmarked funding, with the Department of Energy to chip in $US1.073 billion and another $1 billion to come from Recovery Act funds.

The 444-acre Mattoon site, chosen in late 2007 as FutureGen’s home, was in the running with three other finalist cities – Tuscola, also in Illinois, and Jewett and Odessa, both in Texas – that were selected more than a year earlier in July 2006.

The facility will use an integrated gasification combined cycle and will capture and store 60% of carbon dioxide expelled, sequestering it in the geological sandstone reservoirs of Mt Simon more than one mile underground.

Construction is anticipated to begin in 2010 with the plant to be fully operational by 2013, creating an estimated 1300 construction jobs and 150 permanent jobs.

The plant will produce 275 megawatts of electric power, or enough electricity to power 150,000 homes, as well as hydrogen for fuel-cell technology.

The FutureGen Alliance is now made up of Anglo American, BHP Billiton, the China Huaneng Group, Consol Energy, E ON US, Foundation Coal, Luminant, Rio Tinto Energy America, Peabody Energy, PPL Corporation and Xstrata Coal.