Obama mine limits threaten coal output - analyst

HOUSTON, June 11 (Reuters) - An Obama administration inter-agency deal announced Thursday to regulate mountaintop coal mining could reduce production 50 million to 70 million tons a year over the next three to five years, an analyst said.

The agreement between the Environmental Protection Agency, the Department of the Interior and the Army Corps of Engineers could "slow permits for new production to a trickle," wrote analyst Kevin Book of ClearView Energy Partners LLC.

"It doesn't mean you can't get a permit, but you'll never be able to replace reserves if you're waiting through environmental impact statements," Book said, calling the move a "major victory" for environmental groups.

Mountaintop removal -- used to reach seams too thin for underground mining -- has been a hot issue since environmental lawsuits led to a U.S. court order that halted government permitting of such mines. A U.S. appeals court overturned the ruling in February, stirring calls for an administrative ban.

The coal industry has decried environmental groups' attacks on the mining technique as a threat to the economy and energy security.

Environmental advocacy groups, meanwhile, complained that the administration agreement does not stop mountaintop mining altogether.

"Until the White House announces that it will stop the blowing up of mountains and burying of streams we cannot support their policies, regardless of what process is used to review the mines on a case-by-case basis," said Joan Mulhern, senior legislative counsel at Earthjustice.

Analysts at FBR Capital Markets said the impact will be less than supposed because 42 mountaintop mining permits have been issued this year, more than twice the total in the past two years, and 110 more are pending.

"We believe that greater scrutiny is less likely to impact the larger companies participating in mountaintop mining," wrote FBR's David Khani and Luther Lu. (Reporting by Bruce Nichols; Editing by Christian Wiessner)