Developers of a coal-to-fuel plant in western North Dakota say more than a dozen similar plants are planned in the U.S. - though no one wants to be the first to build one.

"There is significant risk to being No. 1," said David Straley, a North American Coal Corp. spokesman. "In an ideal world, we would be the third or fourth to come online. But we will be the first, if we have to."

Dallas-based North American Coal, along with Headwaters Inc. of South Jordon, Utah, and Great River Energy, of Elk River, Minn., have formed American Lignite Energy LLC to oversee the proposed $4 billion project in western North Dakota.

A decision on whether to build the plant is still at least two years away, Straley said. The North Dakota Industrial Commission has committed up to $10 million in state aid from coal tax collections to help weigh the project's potential.

The plant would produce 460 million gallons of gasoline a year and generate electricity to power the plant and to sell to markets in Minnesota and Wisconsin. Company officials say it would create about 700 jobs in western North Dakota, with an average salary of about $70,000 a year.

If the plans move ahead, the plant could come on line in late 2013, company officials said.

Some small coal-to-fuels demonstration projects have been built over the last several decades but no commercial plant exists.

Developers worry without a commercial plant to act as a proven model, lenders will balk at financing others, said John Ward, a vice president with Headwaters Energy Services, a division of Headwaters Inc. They also worry that market manipulation by oil producing nations will snuff out the new industry, he said.

"I'm of the opinion that oil cartels today could not do what they did in the 1970s and crash the price of oil," Ward said. "But the perception, particularly on Wall Street, is that they could."

Gasoline made from lignite can compete with petroleum-based fuel with oil prices at $35 to $45 a barrel, said Al Christianson, Great River Energy's business developer. A barrel of oil has been fetching around $80 in recent days.

The companies want guaranteed government loans and contracts, along with tax breaks to develop the coal-to-fuels industry in the U.S. Backers of the North Dakota plant say they have been meeting with newspaper editorial boards in the state to help get support.

Ward said the energy industry can develop without help from taxpayers, but not as quickly.

"We're going through a very methodical process of building our business case for the North Dakota project," Ward said. "Right now, we're operating under the assumption that government incentives are not available because they are not."

Wayde Schafer, a North Dakota spokesman for the Sierra Club, said coal-to-fuel plants create more carbon dioxide emissions than traditional oil refineries.

"This makes no sense in the context of global warming," Schafer said. "We need to find fuels that don't contribute to global warming.

"It's a red flag that they need government subsidies to make this happen," Schafer said. "If this is truly a magic bullet, the marketplace should be embracing this. And the marketplace is not."

Three places in western North Dakota are being considered for the coal-to-fuels plant, with Underwood the top prospect, Straley said.

"It most likely will be in McLean County, near the Falkirk mine, but that's not firm," Straley said. "It looks like we have the most potential for the Underwood site."

The other two sites are in western North Dakota but Straley would not name them.

The three energy companies that formed North American Coal already are doing business in North Dakota. North American operates the Freedom and Falkirk lignite mines in west-central North Dakota. Great River Energy operates electric power plants near Underwood and Stanton, and an ethanol factory near Underwood. Headwaters is a partner in the ethanol plant.

Straley said of all the coal-to-plants that are being developed in the U.S., the proposed plant in North Dakota is among the farthest along, and is the best situated.

"We have access to coal, water and land," Straley said.

North Dakota has 25 billion tons of proven lignite reserves, the largest in the world, said Steve Van Dyke, a spokesman for Bismarck-based Partners for Affordable Energy, a coalition that supports coal-based electricity.

Van Dyke said North Dakota can be a big contributor if the nation choses to wean its dependence on foreign oil.

"This is about energy security and energy independence," said "That's a very important message that's getting skewed."

Developers of the western North Dakota plant believe they can capture at least 70 percent of emissions before they enter the atmosphere and inject them underground, for storage or to force more oil or methane to the surface for processing.

Christianson, of Great River Energy, said companies in North Dakota's oil patch would purchase the entire amount of the CO2 that is captured.

What once was considered pollution "is now a valuable commodity for our project," Christianson said.

The coal-to-gasoline factory in western North Dakota would draw 15,000 gallons of Missouri River water per minute for its operations. That's enough water to fill an Olympic-size swimming pool in less than five minutes.

Lee Klapprodt, the state Water Commission's director of planning and information, said the water needed for the plant is less than one-third of 1 percent of the Missouri River water, even at record low flow, and would not have a major effect on the river level.

"You're talking about a pretty small percentage of water, even at low flow," Klapprodt said.

Straley said the Energy Department has developed a loan guarantee program for coal-to-fuel projects but no money has been appropriated for it. Sen. Kent Conrad, D-N.D., included the program in an energy bill approved by Congress two years ago.

Sen. Byron Dorgan, D-N.D., has introduced a bill this month that would authorize $10 billion in loans and tax incentives for coal-to-liquid and other projects that can capture at least 70 percent of greenhouse gas emissions.

"We need to be less dependent on foreign sources of oil," Dorgan said.

Schafer, of the Sierra Club, said American taxpayers are getting hit at both ends.

"We're paying the research to make fuel from coal and we're paying to clean up global warming," he said. "It's not a good idea."

Ward said he also supports the development of all other alternative energy sources, including wind, solar, hydrogen and nuclear, but he said the U.S., with the largest coal reserves in the world, is making a mistake by not using coal to its potential.

"It would be folly for us to continue to ignore energy security issues while we're waiting for these other technologies to take hold and have an impact," Ward said.