West Virginia's coal mining industry warned that it is headed for ruin, and Gov. Cecil Underwood (R) ordered a state hiring and spending freeze Friday after a federal judge barred the dumping of strip mine waste into streams.

"The impact of this ruling will be devastating to state and local budgets," Underwood said, telling state agencies to prepare for a 10 percent budget cut in January.

In a victory for environmentalists who sued the coal industry last year, U.S. District Judge Charles Haden II ruled Wednesday that dumping mining waste into West Virginia's streams fouls the water in violation of the federal Clean Water Act, which bans mining operations within 100 feet of a stream.

The ruling could all but halt mountaintop removal mining, a strip mining technique used increasingly in Appalachia. With this process, the top of a ridge is sheared off, the coal is extracted, and the leftover rock and dirt are pushed into a nearby river valley.

Kathy Karpan, director of the U.S. Office of Surface Mining, said the ruling could also affect mining operations nationwide. "It could virtually stop all coal mining," she said, "not just strip mining but underground mining," which also dumps waste into river valleys.

West Virginia is the second-highest coal-producing state, behind Wyoming, and coal accounts for 3 percent of all jobs in West Virginia, which had 392 underground mines and 227 strip mines last year. The strip mines produced less than a third of the state's total production of 181 million tons of coal.

State regulators said they do not yet know how many mines will be affected by the ruling. But the state Tax Department said it could cost West Virginia as much as $100 million this fiscal year, out of an annual budget of $2.6 billion.