Selby pits are to get state aid to boost coal sales after the European Union approved a £110 million rescue package for the beleaguered coal industry.

An independent panel is to be set up by the Government to decide the level of support for five applications for cash aid from RJB Mining - and one of them includes Selby.

The subsidy - announced yesterday by Prime Minister Tony Blair - will be used to bridge the gap between UK mines' production costs and lower world coal prices over the next two years.

The panel will be looking at coal supply contracts, including the £800 million deal struck recently by RJB and Drax Power Station, with a view to making up the difference between production costs and the selling price.

An estimated £70 million will go to RJB, safeguarding pits and jobs. It is thought that up to five mines and several thousand jobs could have been lost without the subsidy.

Trade Secretary Stephen Byers also announced yesterday that the Government was lifting the ban on new gas-fired power stations, presenting a new threat to the coal industry's survival.

But UK coal producers, including RJB, today played down the threat, claiming many of the proposed new gas-fired stations would never be built because of soaring gas prices.

A spokesman for the Confederation of UK Coal Producers said: "The price of gas has trebled from 9p to 27p a therm, putting a big question mark over these new gas stations."

RJB Mining today welcomed the subsidy, saying it was a further stage in providing short-term support for the industry and mining communities.

Selby MP John Grogan also dismissed the dash-for-gas threat, adding: "I've spoken to local coal-fired power generators, and I'm confident they will be able to compete as gas prices continue to rise.

"We have always asked for fairness, not favours, and that's what we've got. It's now up to the coal industry and generators to compete aggressively and get on with it."

Selby district councillor Dean Howson, a Riccall mineworker and Selby delegate to the Coalfield Communities Campaign, said: "We always knew the ban on new gas-fired stations was going to be lifted.

"What the Government has done with this package is give us two years' breathing space to allow us to compete.

"It's now up to us. Public ownership days are gone and we have to embrace today's competitive culture and make this subsidy work."