Texas came two steps closer to hosting the world’s first near-zero-emissions coal power plant Tuesday.

Both cities Texas had proposed as sites for FutureGen – Odessa and Jewett – made a shortlist of locations for the plant.

The other two cities on the shortlist are in Illinois: Mattoon and Tuscola.

“I’m thrilled, I’m excited,” said Texas Railroad Commissioner Michael Williams, who’s in charge of Texas’ bid to host the $1 billion plant, funded largely by the Department of Energy.

A group of coal industry companies, called the FutureGen Alliance, came up with the shortlist and will choose the final site for the project next year. The power plant is expected to begin operating in 2012.

FutureGen will combine several different kinds of technology to scrub nearly all polluting emissions from the coal-fired power plant. Most important, the research project will be the first big coal power plant to include equipment to capture carbon dioxide and store it underground.

Traditional coal plants vent the carbon dioxide into the atmosphere, thus contributing to global warming.