Carbon dioxide produced by a proposed coal gasification plant near the southern Indiana town of Rockport would be used to help boost oil production in the Gulf of Mexico under a plan by the company leading the project.

Developer William Rosenberg of Indiana Gasification LLC said his company would sell carbon dioxide created at the Rockport plant to Denbury Resources Inc. of Plano, Texas. Denbury would build a $1 billion pipeline to the Gulf and use the gas to force oil out of wells.

Companies in Illinois and Kentucky also have expressed interest in the pipeline to offset the cost, Rosenberg said.

The plant would turn coal into synthetic natural gas, stripping it of pollutants to create a gas similar to real natural gas. But finding a solution to the carbon dioxide emissions is crucial to the project.

Federal lawmakers want to curtail greenhouse gas emissions and have proposed a "cap and trade" system that would require power plants, factories and other emitters to pay for the right to release the gas.

Indiana Gasification last year withdrew its application with the Indiana Utility Regulatory Commission for permission to build the plant about 25 miles east of Evansville because of concerns over limits on greenhouse gases. Officials said then they hoped to revive the proposal in another form.

Rosenberg said the method he proposes to transport the carbon dioxide has proven effective at a gasification plant in North Dakota.

Gov. Mitch Daniels has said the Rockport plant would be the nation's first coal-gasification plant of its kind and put Indiana at the forefront of so-called "clean coal" technology.

The state ranked fourth in the nation for carbon dioxide emissions from mostly aging power plants in an Environment America report issued this week.

Daniels signed a bill into law in March that allows the state's finance authority to negotiate long-term contracts to buy and sell synthetic natural gas from the Rockport plant. But the project still has hurdles to overcome.

The Department of Energy is conducting an environmental impact study of the proposed plant, looking at pollution, noise and its impact on geology. The process could take up to two years.

The cost of the fuel produced also hasn't been determined. Rosenberg said he hopes to sell natural gas for $7.50 a therm, nearly double what natural gas was being sold for earlier this week.

Critics say the cost is too high, but Rosenberg said he expects ratepayers will save money by using gas made from coal as natural gas prices continue to rise.