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Big Coal angry over EPA water standard rule change

NEW YORK (Reuters) - New federal rules to restrict mountaintop mining are likely to hurt coal production and endanger jobs in poor Appalachian communities recovering from the recession, industry experts, politicians and analysts say.

The move by the Environmental Protection Agency has already sparked a battle pitting mining companies against the Obama administration and even split Republican senatorial ranks. It comes at a time when Big Coal is fighting another major public relations issue -- mine safety -- after a blast in West Virginia this week killed 25 miners.

While environmental groups laud the EPA’s move, Wall Street analysts believe tighter rules will make it more difficult for mining companies to operate at a time of surging demand for coal from power plants and steelmakers. Legislators and unions are concerned that jobs will be lost.

Last week, as Wall Street was leaving for a long Easter weekend, the EPA set new water guidelines that Administrator Lisa Jackson said would allow “no or very few valley fills.”

That refers to mining companies dumping debris in waterways after blasting into mountainsides for surface mines, which are cheaper to operate than underground mines. The EPA guidelines focus on water conductivity limitations strict enough that one miner, Massey Energy, even suggested Perrier or San Pellegrino bottled waters would fail.

“Let me be clear -- this is not about ending coal mining; this is about ending coal mining pollution,” Jackson said.

Luke Popovich of the National Mining Association, an industry trade group, was not convinced. “It could mean the end of an era.

“They talk about coal being important for the future,” he said of the Obama administration, “but everywhere we see their actions fall short of their words.”

Tighter water controls come six months after the EPA ruled that 79 West Virginia mine permits must undergo further evaluation because of a potential hazard to water. Mining groups complained the hold-ups threaten job security in Kentucky, West Virginia and Ohio that depend on coal mining.

“DEVASTATING IMPACT” ON APPALACHIA

“The EPA policy and guidelines announcement is as dangerous and threatening an action as this region has ever seen,” said Bryan Brown, of FACES of Coal, a pro-coal industry group. “This action by the EPA sets standards that most underground mines can’t achieve and will have a devastating impact on the Appalachian regions.”

Naturally, environmentalists were pleased with the move. The Sierra Club called it “a bold new policy to protect communities and waterways from the impacts of mountaintop removal coal mining.

“By setting tough guidance for mining near streams, the EPA will severely limit this most devastating form of coal mining,” it said in a statement.

One miner, Arch Coal, has already sued the EPA over what it calls the agency’s “unlawful” effort under the Clean Water Act, to revoke a mining permit it had already issued three years ago.

“The EPA has left us with no other course of action,” said spokeswoman Kim Link. She said the 13-year permitting process for the Spruce No. 1 mine had included a full environmental impact statement.

Coal industry analyst Jeremy Sussman of Brean Murray, Carret & Co, said he did not expect to see many new surface mining permits being approved in the future.

“While very little production in 2010 and 2011 will likely be impacted, we see this having a very meaningful impact in 2012 and beyond,” he wrote in a research note.

He estimates about half of Central Appalachia’s (CAPP) roughly 200 million tons per year comes from surface mining. “If the EPA’s action holds up, we are essentially talking about the end of CAPP surface mining in the not-too-distant future.”

The issue has split Republican senators in two Appalachian states. “The Obama administration’s war on coal has taken a costly turn,” said Sen. Jim Bunning, of Kentucky. “Thousands of lives will be affected by this one decision that will have a devastating impact on the entire region.

“During these difficult economic times bureaucrats in Washington should be trying to find ways to create more jobs instead of playing political games with the livelihood of the good people in Eastern Kentucky,” he said.

But his colleague, Sen. Lamar Alexander, of Tennessee, actually called for a full ban on the dumping of mining waste into Appalachian streams.

“Coal is an essential part of our energy future,” he said, “but it is not necessary to destroy our mountaintops in order to have enough coal to meet our needs.”

Reporting by Steve James; Editing by Richard Chang

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