Consol Energy (NYSE: CNX) and Synthesis Energy Systems (NSDQ: SYMX) are teaming up to build an $800 million plant that will turn coal into fuel.

The companies, which claim the West Virginian plant will be “the nation’s first modern coal-to-liquids plant,” made the announcement with Gov. Joe Manchin, Sen. Jay Rockefeller and other officials Monday.

“It’s clearer than ever that one of the biggest issues our state and country faces is meeting our energy needs,” Manchin said in a written statement. “Technological solutions like this plant at Benwood will lead to more environmentally friendly ways to use our coal and hold the key to America’s energy security.

Consol, the largest producer of bituminous coal in the United States, and Synthesis, an industrial gasification company, have formed an equal joint venture, called Northern Appalachia Fuel, to develop the technology and engineering for the project.

The companies plan to convert coal into synthetic gas, or syngas, using a fluidized bed gasifier and to sequester carbon in a deep saline aquifer, or an underground reservoir of saltwater.

The announcement didn’t say when the plant would be completed, but added that it is expected to produce 720,000 metric tons of methanol per year, which the companies say could be converted into about 100 million gallons of 87-octane gasoline.

Northern Appalachia Fuel is negotiating to license a technology, from ExxonMobil Research and Engineering, to convert methanol into gasoline. It also hasn’t yet filed for environmental and other permits it needs to build the plant.

West Virginia and the Regional Economic Development Partnership, a nonprofit that works to generate business opportunities in part of the state, plan to provide financing and tax incentives for the project.

John Quealy, a managing director of Canaccord Adams, said the news is a sign of continued forward movement for coal gasification, and added that it carries some weight because of Consol’s involvement.

“This is one of the only cases where we’ve seen a coal miner partner in a meaningful way in a coal gasification plant,” he said.

Still, coal gasification has a long way to go, he said.

“Gasification has been living in a very strong macro environment, but day to day, it’s been one step forward, two steps back,” he said. “It’s a promising market, but still very much in development.”

For example, the New York Power Authority earlier this month rejected plans for a clean-coal project from NRG Energy, and Massachusetts – which drew protest when its environmental protection department gave preliminary approval for another NRG coal-gasification project last month – has passed some stringent gasification regulations, he said.

The state’s alternative energy portfolio standard, passed as part of the energy bill last year, will require about half of the carbon from coal to be captured and sequestered.

Meanwhile, Gov. Deval Patrick on Monday signed a bill that exempts cellulosic ethanol from state gasoline taxes, making Massachusetts the first in the country to do so.

The bill also requires diesel fuel and distillate heating oil to include 2 percent biodiesel in 2010, ramping up to 5 percent in 2013.