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The Obama administration moved to block a mountaintop coal-mining project from going forward and said Tuesday it would scrutinize more than a hundred mining permits amid concern about the waste that is dumped into rivers and streams.

It was viewed as the first time in at least eight years the U.S. Environmental Protection Agency has flexed its muscle to block a mountaintop coal-mining project. Environmentalists said the move would protect rivers and streams. The coal industry complained the decision would cost thousands of high-paying jobs.

The EPA disclosed the initiative Tuesday, announcing it has recommended the U.S. Army Corps of Engineers deny a permit to a Peabody Energy Corp. (BTU) unit, which had proposed dumping mining debris into streams. The EPA said another project, to extract millions of tons of coal in Kentucky, could potentially go forward if more steps were taken to protect streams.

"The two letters reflect EPA's considerable concern regarding the environmental impact these projects would have on fragile habitats and streams," EPA Administrator Lisa Jackson said in a statement. "I have directed the agency to review other mining permit requests. EPA will use the best science and follow the letter of the law in ensuring we are protecting our environment."

In mountaintop removal, companies shear off the tops of mountains and dump the rubble into valleys to gain access to seams of coal. Producers often see mountaintop removal as a safer, cheaper alternative to traditional underground mining. Environmental groups decry the practice, saying it increases levels of dangerous heavy metals in the water and damages plant and animal life.

The EPA's review comes after a U.S. federal appeals court handed a victory to the coal-mining industry by overturning a lower-court ruling restricting mountaintop removal. A district court judge in West Virginia had ruled that the U.S. Army Corps of Engineers violated the Clean Water Act by issuing permits to four mines. The appeals court reversed that decision and confirmed the Corps of Engineers' authority to issue fill permits and approve the mitigation steps associated with them.

The court case slowed down the issuance of permits, resulting in a backlog of 150 to 200 applications with the U.S. Army Corps of Engineers. EPA spokeswoman Adora Andy said the agency would review those permits, focusing on eastern Kentucky and southern West Virginia, where most of Appalachia's coal is mined. She said in an email "we will also be looking at permits in Tennessee, Ohio, Pennsylvania, and Virginia."

The Corps is evaluating the EPA's concerns as it finishes the review of the West Virginia and Kentucky projects. The EPA delegated authority to issue fill permits to the Corps, while retaining the authority to veto applications. Although expressing concerns, the EPA hasn't vetoed the permit applications, said Ginger Mullins, regulatory branch chief for the Corps' Huntington, W. Va. branch.

The EPA has communicated to the Corps on only the two projects, but Mullins expects it may receive letters raising similar concerns on additional projects.

Carol Raulston, a spokeswoman for the National Mining Association, said the group was "very concerned" about the EPA's review. "It not only potentially affects thousands of jobs in the region; it also affects coal production, which is responsible for half of all U.S. electricity."

Mary Anne Hitt, deputy director of the Sierra Club's anti-coal campaign, said "the EPA is now asserting their authority in their denial of these permits." She said the Bush administration had never recommended denying a single such permit.

-By Siobhan Hughes and Mark Peters, Dow Jones Newswires; 202-862-6654; siobhan.hughes@dowjones.com