The vision for the project, sponsored by the United States Department of Energy, is development of a 275MW facility that produces electricity and hydrogen from coal with close to zero emissions.
It is a major component in the commercialising of integrated gasification combined cycle (IGCC) generating plants.
Texas has enough coal underground to provide the country with a 250-year supply and is listed with Illinois and Ohio among the top contenders.
The large lignite coal reserve in Texas and access to petroleum coke which could also be used in the gasification process are attractive to developers.
FutureGen officials released three criteria in screening sites across the state, according to the Midland Reporter-Telegram.
The Texas Permian Basin met two of the three criteria: the capability to store a million tons a year of carbon dioxide in adjacent geologic formations, and oil reservoirs appropriate for CO2 enhanced oil recovery.
"Our unique geology, coal reserves, oil and gas fields, and vast array of petrochemical facilities make Texas a clear choice to be the site for FutureGen," Dr Scott Tinker, state geologist, told the Midland Reporter-Telegram.
“Besides the appropriate geology and economic considerations, strong community support for FutureGen will be critical if Texas is to develop a winning proposal.”
Tinker also directs FutureGen Texas, which is preparing the state's proposal.