(Reuters) - Wyoming Governor Mark Gordon on Monday signed HB 207, legislation that appropriates funds to initiate lawsuits against other states' laws and regulations that harm its coal industry, the governor's communications director, Michael Pearlman, told Reuters.

The law creates a $1.2 million legal-defense fund to sue other states whose laws "impede" the top coal-producing state's ability to export coal or that cause the early retirement of its coal-fired power plants, Governor Gordon's office said.

Wyoming is the country's largest coal producer, accounting for nearly 40% of U.S. coal production. But its production of the fossil fuel has decreased by about 9% between 2019 and 2018, U.S. Energy Information Administration data shows, following a nationwide trend.

The law, titled "Coal fired generation facility closures-litigation funding," passed the state House and the Senate in late March.

It says that laws by other states that encourage their transition to "other forms of energy ... may impermissibly burden interstate commerce and may be contrary to federal law regulating the wholesale sale and transmission of electric energy in interstate commerce."

The fund will pay for "litigation expenses" that challenge such laws with the goal of limiting their harm to the state's economy, the law says.

More than half of U.S. states have targets that specify a percentage of electricity that must come from renewable sources, according to the National Conference of State Legislatures.

Wyoming sued the Biden administration in the U.S. District Court of Wyoming on March 24 to challenge its Jan. 27 pausing of new oil and gas leases on federal land or in offshore waters. That lawsuit is pending.