* Export-Import Bank of US earlier rejected application
* India's Reliance Power seeks $600 million loan guarantee
By Lesley Wroughton
WASHINGTON, July 14 (Reuters) - The Export-Import Bank of the United States on Wednesday agreed to proceed with a review of export financing for a coal-fired power plant in India, weeks after it rejected the application due to environmental concerns.
India's Reliance Power has requested a $600 million loan guarantee from Exim Bank to support the sale and export by Wisconsin-based Bucyrus International of mining equipment to the 4,000-megawatt Sasan power plant in central India.
The proposed transaction would support hundreds of jobs at Bucyrus and its U.S. suppliers, Exim Bank said in a statement.
The Exim Bank's board of directors voted on June 24 not to proceed with the application due to environmental concerns, a move U.S. export groups said would cost American jobs.
The Bank, however, reversed that decision on Wednesday, saying it would proceed with a full financial, technical and environmental review before its board votes on whether to support the application.
Exim Bank said it decided to revisit the application after Reliance Power agreed to cap the project's emissions at 850 grams of carbon dioxide per kilowatt hour. It also committed to develop a 250-megawatt renewable energy facility, which when built will be among the largest renewable energy projects in India, Exim Bank said.
"We are pleased that Reliance is making this commitment to renewable energy, which allows us to sustain U.S. jobs and promote both conventional and renewable energy exports," Exim Bank President Fred Hochberg said in a statement.
GREENHOUSE GAS EMISSIONS
But environmental groups said supporting the coal project goes against an overall approach by the Obama administration to cut greenhouse gas emissions.
Washington has targeted cutting emissions by 17 percent from 2005 levels, by 2020, but that plan is stalled in the U.S. Senate.
In April, the United States was among four countries, including Britain, the Netherlands and Italy, which withheld support for a controversial $3 billion World Bank loan for a coal-fired plant in South Africa due to environmental worries.
The plant being developed by South African utility Eskom, which had suffered chronic power shortages, would use the latest so-called clean coal and carbon storage technologies available on the market, and be developed alongside a renewable energy project.
The U.S. Treasury said it had not supported the Eskom loan due to concerns about the climate impact of the project, warning the World Bank not to propose similar coal projects in middle-income countries without a plan that ensures there is no increase in carbon emissions.
Environmental groups said the Sasan project would generate some 26 million tonnes annually of greenhouse gas emissions, more than Exim Bank's annual emissions for all fossil fuel projects approved in 2009.
"It is notable and ironic that the administration pressured Exim to reverse its position and give the green light to Reliance Power," said Michelle Chan, coordinator of economic policy projects at Friends of the Earth.
She said that technically Exim Bank only voted to approve the enhanced due diligence for Sasan, adding: "It wouldn't be totally surprising if the agency were forced to abandon other policies and standards to get this deal done."
(Editing by Eric Beech)