Two big coal companies got a boost on Tuesday after federal regulators came out in support of a permit for one West Virginia mountaintop mining operation and offered signs they may be willing to endorse another permit for the largest mountaintop mining operation in Appalachia.

The announcement by the U.S. Environmental Protection Agency sent shares in Patriot Coal Corp. (PCX) and Arch Coal Inc. (ACI) higher. Patriot shares rose 6% to $18 recently after the EPA said it supports a permit for an operation planned for Logan County. Arch shares rose 4.4% to $24.52 after the EPA said it wanted to talk further with the company about a big permit.

The EPA said it decided to support a permit sought by Patriot's Hobet Mining LLC after talks with the company "resulted in additional significant protections against environmental impacts." Patriot Chief Executive Richard Whiting said he was "hopeful" that the company could begin work in the area "in the very near future." The U.S. Army Corps of Engineers still must issue the permit.

The EPA separately said that a court has agreed to extend a deadline for discussions with Arch's Mingo Logan Mining Company about an already issued permit, which the EPA halted late in 2009. The EPA's initial decision to hold up the permit was the first time in 37 years that the agency had used its power to hold up a previously issued mountaintop-mining permit.

"We remain hopeful that a resolution can be reached," said Kim Link, a spokeswoman for Arch Coal, in an email.

The announcements continue the Obama administration's up-and-down stance on mountaintop coal mining, which involves blasting off mountain tops to get at the coal underneath. Environmentalists oppose the practice since it shaves off mountaintop forests and sends rock and other debris spilling into streams. Mining companies say the practice is safer and cheaper than traditional underground mining.

In September the EPA put 79 proposed projects on hold, citing evidence that the projects would damage water quality. The permit sought by Patriot appeared to be the second one to be cleared by the EPA. An EPA spokeswoman said the EPA has already cleared another permit, sought by Buckingham Coal Company and planned for southeastern Ohio.

The U.S. Army Corps of Engineers grants permits necessary for mountaintop mining, but the Obama administration's EPA has recently been using its power to block or influence those permits.

For a list of the 79 permits put on hold by the EPA, go to:

http://www.epa.gov/owow/wetlands/pdf/ECP_Initial_List_09-11-09.pdf

-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com
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