UPDATED WITH VIDEO: Gov. Daniels proud that Indiana has stepped up and passed historic coal legislation

Daniels signed a bill into law Tuesday that allows the state's finance authority to negotiate long-term contracts to buy and sell synthetic natural gas from a planned southern Indiana coal-gasification plant.

The governor said the law will save Indiana's natural gas users billions of dollars by ensuring a steady supply of synthetic natural gas free of the price fluctuations of the natural gas market.

Under the bill, the Indiana Finance Authority would act as an intermediary contracting partner between the state's gas utilities and the developer of a coal-gasification plant near the Ohio River town of Rockport in Spencer County.

The law allows the finance authority to negotiate 30-year supply contracts with the plant's developer for the gas, which the utilities would pipe to their customers.

In the two previous sessions, lawmakers passed tax credits for the eventual developer of the plant, which would turn coal into synthetic natural gas, stripping it of pollutants and carbon dioxide to create a gas similar to real natural gas.

Click on the arrow below to hear Ind. Gov. Mitch Daniels talk with Daily World Assistant Editor Nick Schneider, Greene County Republican Party Chairman Otto Prow and former Greene County Sheriff Gene Gastineau about Indiana coal and it's future with coal gasification plants planned near Edwardsport and Rockport. He also talks about a potential for higher utility costs if federal legislation sought by the Obama administration is passed in Washington D.C.

Daniels said the state will open bidding soon on a contract to build the coal-gasification plant, which is expected to attract $2 billion in private investment, create up to 1,000 temporary construction jobs and 200 permanent jobs.

The governor said the plant would be the nation's first modern coal-gasification plant of its kind and would put Indiana at the forefront of so-called "clean coal" technology.

Aside from that plant, Duke Energy Corp. is building a $2.35 billion power plant near Edwardsport in neighboring Knox County that will turn coal into gas and then burn it in turbines to produce electricity.

Much of the coal will come from the new Peabody Coal Company Bear Pit surface mine that will open later this year south of Dugger.

"The big context here is, this (plant in Spencer County) will be the world's first clean coal gas plant of the modern variety. Edwardsport will be the world's first clean-coal electrical plant and will make us the capital for clean coal," Daniels said. "Think about this, we spend more than a billion dollars a year -- Indiana rate payers -- for coal from out of state. Now think about that. We are sitting on a mountain of coal here. Why? Because our coal has sulfur in it and it's very expensive to put the scrubbers on the smoke stacks to try and stop that pollution. With this thing there isn't any. There is potentially no pollution. It turns coal to gas on the ground.

"These plants will deliver savings to rate payers over time because the long-term cost of coal will be less than the long term cost of natural gas. So what do you get -- a ton of jobs and we pay ourselves instead of someone else for the coal. It's essentially as clean as nuclear and wind power and all of these other things and it's savings to rate payers. It's a really good deal. I've been working on this for three years, so if I sound fired up, I am."

The governor urged Hoosiers to pay attention to a federal movement originating with the current administration in Washington D.C. of what is being suggested in the name of "climate controls" is what he called a "horrible threat to Greene County (and) to all of Indiana."

"The way it is being suggested is this carbon tax will be paid on your utility bills and would more than double utility bills in this state," Daniels said, and pointed out this would hurt the state's ability to attract new business and hinder jobs creation.

"What this is beginning to smell like is a plan that will tax the living day lights out of the Midwest so they can spend money on whatever (Speaker of the House) Nancy Pelosi has in mind in California," Daniels stressed. "I'm hoping that this whole climate change freight train is slowing down a little bit. They (the administration) is determined to do this thing. I've talked to (Senators) Evan Bayh and Richard Lugar about this and I think they are aware of the dangers."

The governor pointed out that jobs and the economy continue to be a concern. He noted that the state is among the leaders in the Midwest in creating new jobs, but are losing far too many other manufacturing jobs as the recession tightens.

"We should never forget that the economy is changing all of the time. We're filling a bathtub with the stopper out. We have hit records for new ones coming in, but have been just overwhelmed by the temporary set-backs that we've had," Daniels said.

The governor said he is optimistic that things are going to turn around, but he quickly added, "I don't know when. All I know is, when it does, I am sure Indiana is in better shape than certainly any other place in the Midwest to get the benefits of the comeback. We've already been found to be the best state around for business."