“Peabodys revised proposal remains highly conditional and does not fully value Macarthur and its significant growth prospects,” chairman Keith De Lacy said in a statement.

The board gave no indication of a possible price it might accept but said Peabodys offer is not an “adequate premium” for control. The American offer is 15.8 percent above Macarthurs closing stock price on March 30 but the board said it is below the price industry analysts believe represents the full value of the company.

Foreign investors who are rushing to buy into Australias mining and resource industries in hopes of profiting from future demand. Some Australian critics object to selling control of natural resources to foreigners, but many target companies welcome the influx of capital to pay down debt or expand.

Peabody, based in St. Louis, Missouri, is one of the worlds biggest coal producers. It has eight mines in Australia and wants to expand in a country rich in coal used in the resurgent steelmaking industry and in demand by key Asian markets such as China.

Macarthur plans to pursue its own bid to purchase Gloucester Coal Ltd., a smaller Australian rival, and further consolidate Australias coal industry. The Peabody offer would have required Macarthur to drop its bid for Gloucester.

“The board … continues to believe these transactions are in the best interests of Macarthur and its shareholders,” de Lacy said.

On Wednesday, Macarthurs shares were trading down 4.04 percent at AU$14.49 soon after the announcement.

Gloucesters shares remained in a trading halt, and last traded at AU$9.31.

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U.S. Mine Safety and Health Administration documents show 18 of the deaths occurred in coal mines, down from 29 in 2008; and 16 were in gold, copper and other types of mines, down from 22 in 2008. Most involved aboveground truck accidents on mine property, though some of the deaths resulted from rock falls and being struck by machinery.

Obama administration mine safety czar Joe Main said the numbers are encouraging, but he wont be satisfied until no miners are killed on the job.

“I think thats accomplishable, if you look at where we came from, and where weve come to,” Main said.

The latest statistics are vastly improved, he said, from a century ago when hundreds, sometimes thousands of miners were killed each year.

The deadliest year in recorded U.S. coal mining history was 1907, when 3,242 deaths were reported. That year, the nations most deadly mine explosion killed 358 people near Monongah, W.Va.

Main credits the decrease in deaths over the past year to beefed-up enforcement and stricter regulations in the wake of a series of mining disasters over the past four years in Kentucky, Utah and West Virginia.

In 2006, 73 miners were killed, including 12 who died in a methane explosion at the Sago Mine in West Virginia and five who died in a similar explosion at the Darby Mine in Kentucky. In 2007, 67 miners died, including six who were killed in the collapse of the Crandall Canyon mine in Utah.

Coal states reacted by revamping their mine safety laws, and Congress toughened federal rules that that brought a variety of advances. Among the improvements are caches of oxygen stashed in underground mines in case miners are trapped, refuge chambers to provide shelter in emergencies, and a communications system to allow underground miners to talk with colleagues on the surface.

Steve Earle, United Mine Workers of America international vice president for the Midwest, said while those were important improvements, getting inspectors into the field is the key.

“I can say without reservation that the safest day coal miners have is when inspectors are in the mines,” he said. “The more we can put our inspectors in the mines, the safer those mines will become and the closer we will come to zero fatalities.”

Mine safety advocate Tony Oppegard, who has successfully lobbied to triple the number mine inspections conducted in Kentucky, said mining remains a dangerous occupation.

Kentucky led the nation in mining deaths last year with six in coal mines and one in a limestone quarry. That was followed by West Virginia and Alabama, each of which had three coal miners killed.

Illinois, Louisiana, Missouri, Pennsylvania, Tennessee, and Texas each had two miners killed in coal, salt, alumina, zinc or sand and gravel operations. Arizona, Arkansas, California, Georgia, Iowa, Nevada, Ohio, Virginia and Puerto Rico had one miner killed in either clay, copper, gold, lime or sand and gravel operations.

“Its never positive when you have numbers like that, but it could have been worse,” said David Moss, spokesman for the Kentucky Coal Association. “Were always striving for that goal of zero. Thats what we work toward every single day.”

Main credited cooperation between regulatory agencies, coal companies and miners with making mines safer, which led the decrease in workplace deaths.

“It is historic,” he said. “And it does tell us we can achieve a point in time when we have no fatalities.”

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Natural gas abundance and low price come as governments around the world debate how to curtail carbon dioxide and other pollution that contribute to global warming. The likely outcome is a tax on companies that spew excessive greenhouse gases. Utilities and other companies see natural gas as a way to lower emissions - and their costs. Yet politicians arent stumping for it.

In June, President Barack Obama lumped natural gas with oil and coal as energy sources the nation must move away from. He touts alternative sources - solar, wind and biofuels derived from corn and other plants. In Congress, the energy debate has focused on finding cleaner coal and saving thousands of mining jobs from West Virginia to Wyoming.

Utilities in the U.S. arent waiting for Washington to jump on the gas bandwagon. Looming climate legislation has altered the calculus that they use to determine the cheapest way to deliver power. Coal may still be cheaper, but natural gas emits half as much carbon when burned to generate the same amount electricity.

Today, about 27 percent of the nations carbon dioxide emissions come from coal-fired power plants, which generate 44 percent of the electricity used in the U.S. Just under 25 percent of power comes from burning natural gas, more than double its share a decade ago but still with room to grow.

But the fuel has to be plentiful and its price stable - and that has not always been the case with natural gas. In the 1990s, factories that wanted to burn gas instead of coal had to install equipment that did both because the gas supply was uncertain and wild price swings were common. In some states, because of feared shortages, homebuilders were told new gas hookups were banned.

Its a different story today. Energy experts believe that the huge volume of supply now will ease price swings and supply worries.

Gas now trades on futures markets for about $5.50 per 1,000 cubic feet. While thats up from a recent low of $2.41 in September as the recession reduced demand and storage caverns filled to overflowing, its less than half what it was in the summer of 2008 when oil prices surged close to $150 a barrel.

Oil and gas prices trends have since diverged, due to the recession and the growing realization of just how much gas has been discovered in the last three years. Thats thanks to the introduction of horizontal drilling technology that has unlocked stunning amounts of gas in what were before off-limits shale formations. Estimates of total gas reserves have jumped 58 percent from 2004 to 2008, giving the U.S. a 90-year supply at the current usage rate of about 23 trillion cubic feet of year.

The only question is whether enough gas can be delivered at affordable enough prices for these trends to accelerate.

The worlds largest oil company, Exxon Mobil Corp., gave its answer last Monday when it announced a $30 billion deal to acquire XTO Energy Inc. The move will make it the countrys No. 1 producer of natural gas.

Exxon expects to be able to dramatically boost natural gas sales to electric utilities. In fact, CEO Rex Tillerson says thats why the deal is such a smart investment.

Consider Progress Energy Inc., which scrapped a $2 billion plan this month to add scrubbers needed to reduce sulfur emmissions at 4 older coal-fired power plants in North Carolina. Instead, it will phase out those plants and redirect a portion of those funds toward cleaner burning gas-fired plants.

Lloyd Yates, CEO of Progess Energy Carolina, says planners were 99 percent certain that retrofitting plants made sense when they began a review late last year. But then gas prices began falling and the recession prompted gas-turbine makers to slash prices just as global warming pressures intesified.

“Everyone saw it pretty quickly,” he says. Out went coal, in comes gas. “The environmental component of coal is where we see instability.”

Nevada power company NV Energy Inc. canceled plans for a $5 billion coal-fired plant early this year. That came after its homestate senator, Majority Leader Harry Reid, made it clear he would fight to block its approval, and executives fears mounted about the costs of meeting future environmental rules.

“It was obvious to us that Congress or the EPA or both were going to act to reduce carbon emissions,” said CEO Michael Yackira, whose utilty already gets two-thirds of its electricity from gas-fired units. “Without understanding the economic ramifications, it would have been foolish for us to go forward.”

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Natural gas competes with coal as a power source.

“Unfortunately coal has suffered the full brunt of this economic recession,” Steve Leer, Archs chairman and CEO, told analysts during a conference call. But “looking ahead, were beginning to see signs of life in the economy and expect industry fundamentals and our performance to improve as we progress through the remainder of the year.”

Performance may improve, but Leer said the company expects “a significant overall decline” in coal consumption for electric generation this year.

Still, Arch Coal Inc., which fuels about 6 percent of all U.S. electrical generation, said it expects per-share earnings of 25 to 55 cents for the year, a nickel lower that earlier projections.

Company shares rose more than 3 percent, or 55 cents, to $17.42 in early trading.

The results were not good, but “maybe not as bad as some had expected,” said Daniel Scott, an analyst with Dahlman Rose & Co.

Arch reported that it lost $15.1 million, or 11 cents per share, in the three months ended June 30. A year ago, it earned $113 million, or 78 cents per share.

Revenue fell to $554.6 million, from $785.1 million last year.

Analysts surveyed by Thomson Reuters expected, on average, a loss of 6 cents per share on revenue of $634.6 million.

Arch said it again was shaving its 2009 sales volume to between 114 million and 118 million tons, excluding coal purchased from third parties. In April, Arch said it was slashing its U.S. production this year by an additional 4 million to 7 million tons, down from the 120 million to 127 million tons the company had forecast in January.

Arch also said it was further cutting its capital spending for the year, saying it now expects to spend $160 million to $170 million for capital programs excluding acquisitions, and $130 million to $150 million for land and reserve additions this year.

For the first half of the year, Arch said it earned $15.5 million, or 11 cents per share, compared with $194.1 million, or $1.34 per share, during the same span last year.

Arch said it sold 27.4 million tons of coal in the second quarter, down from 34.4 million tons the same period a year ago. Each ton Arch sold fetched on average $19.43, down from $21.04 in last years a year earlier.

Arch, which extracts the bulk of its coal from its western U.S. operations, said sales of its coal mined from Wyomings Powder River Basin slipped, to 21.3 million tons in the second quarter from 24.8 million tons the same period last year. Each ton sold on average for $12.56, $1.18 a ton better than a year earlier.

The company said it sold 2.7 million tons of coal from its central Appalachia region for an average of $60.66 per ton, compared with 3.9 million tons that on average fetched $43.43 a ton the during last years second quarter.

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Coal plants generate about half of the countrys electricity and 80 percent of the nearly 2 billion tons of carbon dioxide released annually into the atmosphere from power production. China also relies heavily on coal for electricity production and in the last five years has been on a rush to build new coal plants - none of them designed to capture carbon dioxide.

“There is no credible pathway towards stringent greenhouse gas stabilization targets without CO2 emission reductions from existing coal power plants,” says the report. Members of Congress, where a bill to limit U.S. greenhouse gas emissions could come up for a House vote as early as next week, were being briefed on the MIT report.

Carbon dioxide has been captured and put into the ground in relatively small scale projects - mostly in connection with enhanced oil recovery, for years, but never in the huge volumes that would be needed to capture emissions from a large coal plant.

The MIT report says there are multiple technologies being explored for carbon capture, but the government still has not adequately supported carbon capture research and is moving too slowly to develop large demonstration projects to show that capturing carbon dioxide and injecting it into the ground will work at the scale needed.

The report, a copy of which was provided to The Associated Press in advance of a press conference Friday, says the federal government and industry need to “dramatically expand” its support for carbon capture research and development to the tune of $12 billion to $15 billion over the next decade.

Such technology, if shown to work in U.S. plants, could get China to reduce greenhouse gases from its rapidly growing network of coal burning power plants, the report says.

“Weve got to address the carbon emissions from our current fleet (of coal plants) and also have to think how the technology we develop can be applied in China,” Ernest Moniz, director of the MIT Energy Initiative and co-author of the report, said in an interview.

Together, the U.S. and China account for 20 percent of the worlds carbon dioxide from coal burning power plants, said Moniz. If China doesnt address emissions from its coal plants “we really cant address the climate issue in a serious way.”

The MIT report summarizes a consensus view of participants in a symposium sponsored by MITs Energy Initiative on the feasibility of retrofitting existing coal plants with carbon capture technology. Participants included 54 representatives utilities, academia, government, public interest groups and industry.

The report said about half of the U.S. coal plants - most of those producing 300 megawatts or more of power - may be suitable for carbon capture technology. Many of the smaller plants, accounting for about 30 percent of electricity production, can achieve emission reductions through increased efficiency, use of a mix of coal and biomass as fuel and other measures. Other plants, especially the oldest, may have to be replaced, said Moniz.

Wayne Leonard, chief executive of Entergy Corp., who was a co-chairman of the symposium, said the symposiums conclusions should be viewed “in an international context” especially as carbon capture technology development relates to China.

While Entergy, the New Orleans-based utility, relies on coal for less than 10 percent of its electricity production, it was a co-sponsor with MIT of the carbon capture symposium on which Fridays report is based.

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“Developing this technology is critically important for reducing greenhouse gas emissions in the U.S. and around the world,” Chu said in a statement.

Negotiations for the FutureGen project have been under way since the Obama administration announced it would consider reviving the project. Under President George W. Bush, the project was canceled after cost overruns that a congressional auditor later said were based on false projections.

The Energy Department will commit more than $1 billion to the project, under the agreement announced on Friday, with the governments contribution drawn almost entirely from federal economic stimulus funds.

The projects business partners, known as the FutureGen Alliance, will agree to contribute as much as $600 million during the next six years. The FutureGen Alliance will be allowed to raise funds for the project to defray government costs. The agreement also opens the possibility of eventually selling the facility - which initially will be largely an experimental project to show the feasibility of carbon capture and sequestration - to private entities for use as commercial power plant.

Preliminary design work on FutureGen could restart as soon as July. By early next year, the Energy Department expects to have an updated cost estimate and a complete funding plan for the project.

Fridays announcement is the latest sign of the Obama administrations commitment to carbon capture technology.

The project, planned for Matoon, Ill., is part of a broader effort to develop large demonstration projects on carbon capture and sequestration. The Energy Department is considering as many as seven such projects that would capture and put into the ground at least 1 million tons of carbon dioxide a year. FutureGen would be the project likely to be furthest along in development.

The economic recovery plan includes $3.4 billion for carbon capture research and development, about a third of that going for FutureGen. An energy bill being considered in Congress urges development of as many as 10 such projects. Climate legislation before the House would provide as much as $60 billion for carbon capture and sequestration, including $1 billion a year for the next 10 years to fund large demonstration projects.

“There are a number of projects being reviewed,” Chu told the AP earlier this week before the tentative FutureGen agreement was announced. “I agree with the notion that we have to begin commercial scale demonstration” of carbon capture.

Coal burning power plants are the leading source of carbon dioxide, the major greenhouse gas linked to global warming, and finding economical ways to capture carbon from such plants is viewed as key for the future of coal if a price is put on carbon to combat climate change.

The FutureGen plant would use Illinois coal, which is high in sulfur and has been used less frequently after changes to the Clean Air Act in 1990. As originally planned, the plant would have experimented with coal from Texas and Wyoming, too.

“Eighty percent of our coal now goes out of state because almost every power plant in this state decided to switch to (cleaner) western coal,” he said. “When you have a market in your own state that may open up for the first time in 20 years, that is significant.”

Illinois officials said they were elated with FutureGens resurrection. U.S. Sen. Richard Durbin, D-Ill., called the plants revival a “historic moment.”

“In my time in Congress, I cant recall a project that has greater scientific and practical significance than FutureGen,” Durbin said.

The FutureGen Alliances chief executive, Michael J. Mudd, praised the departments decision.

“The jobs created at FutureGen will result in important technology to reduce emissions from coal-fueled power plants at home and around the world,” Mudd said in a statement.

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Chu said coal will remain an essential energy source. He said even if coal plants in the United States were shut down, as some environmentalists want, China and India will not turn their back on coal.

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Talk of another wave of consolidation in the coal industry has been growing louder in recent weeks and on Tuesday, Alpha Chief Executive Mike Quillen said the bid for Foundation reflected that need.

Producers have wrestled with declining demand, falling prices and tight credit, not to mention increased environmental scrutiny under the administration of Barrack Obama.

“I think people had predicted that the Alpha-Foundation one was one that made a lot of sense,” Quillen said in an interview.

Combined, Alpha and Foundation would be well-financed - theyd have approximately $743 million in cash and available credit - and diversified. The companies would have 2.3 billion tons of coal reserves balanced between higher-profit Appalachian mines and high-volume western operations. Their 91 million tons of annual production from 59 mines would rank third behind Peabody Energy and Arch Coal.

Both companies had been searching for partners, Foundation CEO James Roberts said.

“I dont think theres any other company out there that we could have merged with that ended up with the same results,” Roberts said.

One result is size, which Roberts said was vital given the poor economy.

“In these times, with regulatory issues, legislative issues that we have to deal with, size really matters,” he said.

The Environmental Protection Agency has begun scrutinizing permits for surface coal mines in the eastern U.S. and the Interior Department has taken steps to reverse one mining-friendly stream regulation adopted late in the Bush administration.

Quillen said the deal dilutes risk tied to environmental regulations. Alpha operates in West Virginia, Virginia, Kentucky and Pennsylvania, where resistance to surface mining is strongest. Foundation has mines in Wyoming.

Alpha and other large coal companies routinely talk about making acquisitions, but Teck Comincos takeover of Fording Canadian Coal Trust last year and St. Louis-based Peabody Energys purchase of Australias Excel Coal in 2006 have been the exception. More common have been smaller deals such as Russian metals company Mechel OAOs recent purchase of Appalachian coal producer Bluestone Industries for $436 million plus 83.3 million preferred shares of stock.

Some on Wall Street gave an early stamp of approval to the latest takeover bid.

“I want to thank you for letting us all release the breath that we have been holding regarding coal M&A for so long,” Goldman Sachs analyst Justine Fisher said during the conference call.

Marshall University economist Cal Kent said big buyouts will likely remain rare, but consolidation will continue in the form of smaller deals.

Besides what Alpha is paying in stock for Foundation Coal Holdings Inc., it will assume $530 million in debt. The companies value the total transaction, including debt, at about $2 billion.

Linthicum Heights, Md.-based Foundation shares gained $4.79, or 20.61 percent, to close at $28.03. Alpha closed down $1.84, or 6.38 percent, at $27.02.

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In a break from Bush administration policies, EPA is asserting its authority under the federal Clean Water Act to scrutinize plans to dump mine waste into streams and wetlands.

The National Mining Association estimates EPAs reviews could threaten 77,500 coal mining jobs and 385 million tons of annual production in southern West Virginia, eastern Kentucky, southwest Virginia, Ohio and the Illinois Basin.

But environmentalists see EPAs decision as an opportunity to end mountaintop removal mining and the regions dependency on coal, and to spark new jobs by developing renewable energy sources.

Mountaintop removal mining is an efficient but destructive practice where ridgetops are blown up to expose multiple coal seams. Tons of rock, dirt and debris are typically dumped in fills that bury valleys and streams.

Destroying the mountains “also destroys the economic potential of Appalachia,” said Matthew Wasson of North Carolina-based Appalachian Voices. “This decision rekindles hope for a new economy in Appalachia built around green jobs and renewable energy.”

West Virginia Gov. Joe Manchin met with White House Council on Environmental Quality and the Environmental Protection Agency on Wednesday to clarify EPAs intentions.

“I told them we are looking for a balance between the environment and the economy, and they assured me that they will work with us to find that balance,” the Democratic governor said in a prepared statement. Manchin said state officials would meet with EPA and coal companies to seek agreements on the applications.

West Virginia is the nations second largest coal producer and mine operators like to say coal keeps the lights on. More than 90 percent of the states electricity and about half of the nations comes from burning coal.

Coal helps keep West Virginia state government in business.

Despite its long history of poverty, West Virginia has largely avoided the budget deficits facing other states because of soaring coal prices that exceeded $120 a ton last year. Coal prices are now declining, but state budget planners still predict total severance tax collections will surpass $400 million this year. The state is expected to receive $320 million of that, or about 8 percent of West Virginias total general revenue collections.

Elsewhere in Appalachia, Kentucky and Virginia - which are less dependent on energy production - havent fared as well. Both have been dealing with large budget deficits.

“There isnt very much coal production that can be done in a state without a valley fill,” said Randy Huffman, secretary of West Virginias Department of Environmental Protection.

Rory McIlmoil, an activist with West Virginias Coal River Mountain Watch, said environmentalists now have at least a six-month window to strengthen arguments for the creation of green jobs in alternative energy industries.

Restoring former mine lands, building wind farms and developing sustainable forestry jobs are all part of the solution - and all jobs that strip miners can be trained to take, McIlmoil said.

Kentucky Coal Association President Bill Caylor predicts economic devastation for the eastern half of his state, the nations third-largest coal producer behind Wyoming and West Virginia.

“We would lose half our production in east Kentucky,” Caylor said. That adds up to more than 46 million tons from mines that employ more than 6,000 miners earning $354 million in direct wages.

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In recent weeks, a group of rural Montana electric co-ops abandoned a partially built 250-megawatt coal plant, ending a four-year legal campaign by environmentalists to stop the project. The co-ops plan to instead get their electricity from a natural gas plant - more expensive for customers but also more likely to get built.

A few miles away, the U.S. Air Force dropped plans for a major coal-to-jet fuel plant once touted as the harbinger of a new market for coal. There are no signs it will be revived.

Other plants are moving forward in Montana and at least a dozen other states, but the exodus from coal has hit every corner of the country. On Thursday, two more were shelved - plants in Iowa and Nevada that would have generated enough power for 1.6 million homes.

In Nevada, LS Power said it was postponing a 1,600 megawatt coal plant and will instead focus on tapping the states geothermal, wind and solar potential. Iowas Interstate Power and Light dropped a 630 megawatt plant as it pursues a 200 megawatt wind farm.

“In the last year the world has changed 180 degrees,” said Bruce Nilles, director of the Sierra Clubs “Beyond Coal” campaign.

In 2007, the Department of Energy forecast 151 plants would be built in coming years. The agencys latest forecast put the figure at 95.

Soon after the Energy Department released its forecast two years ago, the Kansas Department of Health and Environment became the first agency in the country to reject a permit for a coal-fired power plant, citing carbon dioxide emmissions.

Kansas acted six months after the Supreme court ruled that carbon dioxide and other greenhouse gasses were pollutants that should fall under the purview of the Clean Air Act.

Driven by the change at the White House, the political landscape for coal is fast shifting. President Barack Obama - once a reliable supporter of the industry - on Feb. 17 signed an economic stimulus package with $16.8 billion for renewable energy and efficiency programs.

The coal industry was left with just $3.4 billion. Congress had earlier removed $50 billion in loan guarantees for coal-to-liquids plants and the nuclear industry.

Last year, only five new coal plants totaling about 1,400 megawatts came on line. Meanwhile, the wind energy sector added a record 8,300 megawatts.

Coal companies are scrambling after federal subsidies for cleaner-coal technologies - hoping to at least soften the beating they have taken over climate change.

And after spending an estimated $40 million during the 2008 election on a pro-coal public relations campaign, a consortium of companies that dig, ship and burn the fossil fuel may match that spending this year.

“We see this as an ongoing effort,” said Joe Lucas, who has led the industrys public relations campaign as vice president for the American Coalition for Clean Coal Electricity.

“When we talk about plugging in (electric) cars, were going to create new demand in this country and that demand is going to be met in large part like it is today, by fuels like coal.”

Environmental groups tally more than 90 plants canceled or delayed since 2002. The Sierra Club and others have vowed to challenge plants at every turn - in the courts, in state houses and through the regulatory process.

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