* Army Corps suspends permit system in Appalachia

* Coal industry sees it as new assault on surface mining

* Coal company stocks fall

NEW YORK, June 17 (Reuters) - Federal authorities suspended the mine permitting process in six states on Thursday, prompting the coal industry to charge the Obama administration was targeting surface mining and that the change would hurt the economies of the poor Appalachian region.

The U.S. Army Corps of Engineers, the government agency that issues permits relating to waterways, said it is suspending the NWP 21 permit system that covers dumping of earth and rocks in rivers and streams.

The system is in effect nationwide, but will be suspended in parts of traditional mining states of Kentucky, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia.

Companies proposing surface mines in that region that discharge dredged or fill material into waterways will now have to obtain an individual permit from the Department of the Army under the Clean Water Act, it said. That will prolong an already long and costly process, mining experts said.

“This decision takes us in the wrong direction,” said Hal Quinn, president and chief executive of the National Mining Association (NMA) trade group.

“Today’s decision will slow job creation, add further uncertainty to the permitting process and undermine our ability to utilize the nation’s most abundant domestic energy resource - coal.”

Surface mining, also known as mountain-top mining, involves blasting into the sides of mountains to reach coal seams rather than tunneling below in underground mines, which are more expensive and dangerous. Surface mining, which has become prevalent in West Virginia, is opposed by environmentalists who charge the dumping of earth and rocks pollutes water systems.

The Corps’ decision was not unexpected and followed a series of public hearings on the issue.

Quinn, head of the NMA, which groups most major U.S. mining companies, said he was concerned that the suspension was made “over the opposition of thousands of people who voiced their comments at public hearings earlier this year.

“They were concerned about their jobs, their economic future and the energy security of the nation,” he said.

Jim Thompson, editor of the industry newsletter, Coal & Energy Price Report, said the rule change was “another assault on surface mining.

“Another shoe has dropped on Appalachia, and while it’s not exactly an unexpected kick in the pants, it is another in an increasingly long line of suggestions that the Obama administration will work to give the boot to Central Appalachian surface mining.”

Last year, the Environmental Protection Agency delayed scores of pending permits in West Virginia for further review. In April, the EPA issued a new set of tightened water standard guidelines related to surface mining.

In addition to environmental issues, coal mining is in the spotlight on safety issues because of an explosion that killed 29 miners at a West Virginia mine in April.

On the New York Stock Exchange, coal company stocks fell. Arch Coal ACI.N closed down about 2.6 percent at $22.53, Consol Energy CNX.N dropped 2.32 percent to $38.67 and Massey Energy MEE.N slipped 2.3 percent to $31.47. Alpha Natural Resources ANR.N ended 1.4 percent down at $37.14 and Peabody Energy BTU.N lost 1.5 percent to close at $40.63. (Reporting by Steve James; editing by Carol Bishopric)