That workhorse of early industrialization, the steam engine, could move out of museums and back to work for industry. Fred Prahl wants to bring back the coalfired steam engine, but without the banners of black smoke that choked cities a century ago.

National Steam Propulsion Co., Prahl's Woburn, Mass., company, has designed a steam engine powered by a boiler that burns crushed coal in a bed of sand. Combustion takes place at a high enough temperature to prevent many common pollutants from forming. The smoke rises through a limestone bed that removes sulfur and any unburned coal particles.

American railroads spend about $3 billion a year on diesel fuel, and are eager to find cheaper alternative fuels, says Frank Wilner, a spokesman for the Association of American Railroads. Prahl, he says, "is no more crazy than Steve Jobs was when he developed his Apple computer out in the garage." Prahl uses most of the components of existing diesel engines, thereby allowing customers to retrofit their locomotives, rather than scrap them.

Prahl estimates that it would cost $1.8 million to convert a diesel train engine and add a car to carry coal, limestone, and a "bag house" that sucks up ash like a vacuum cleaner. A train operator would save about $300,000 a year in fuel costs, he says.

Prahl is also concentrating on a multipurpose engine, ideal for use in developing countries, that runs on such agricultural waste as coconut shells. He also has designed a coal-powered towboat engine that would cost $2.2 million for retrofitting, with a two-to-three-year payback period for a 6,000-horsepower boat.

Prahl is millions of dollars away from a prototype, having run on $235,000 seed capital for two years. He hopes to raise more than $7 million this year. It may be difficult to convince investors that a machine consigned to history could actually be on the cutting edge.