By Susan Cornwell and Valerie Volcovici
WASHINGTON, July 8 (Reuters) - U.S. Democrats are struggling with their own differences over legislation to renew the Export-Import Bank's charter, an issue that has long been a source of tension between Tea Party and pro-business Republicans.
Democrats, who control the Senate, largely favor keeping alive the bank. The agency, which provides credit to foreign purchasers of U.S. exports, will be forced to close its doors if Congress does not act to renew its charter by Sept. 30.
To spur momentum on legislation to reauthorize the bank, Democrats are considering moving a reauthorization bill in the Senate this month. The issue would then move to the Republican-dominated House of Representatives, where renewal would face a tougher road because of strong opposition by some conservatives.
But Democrats are debating whether to include a provision broadening Ex-Im's ability to extend credit to companies using U.S. equipment and other products in the building of coal-fired plants.
The provision would overturn restrictions put in place by the Obama administration limiting the bank's financing for coal-fired plants to buyers in only the world's poorest countries.
Senator Joe Manchin, who hails from the coal-producing state of West Virginia, is crafting a bill that would reauthorize Ex-Im for five years while also expanding the number of countries where Ex-Im can finance coal-fired power plants from 69 to 82.
This would allow for the financing of projects in emerging economies, such as India and Vietnam, which are interested in expanding coal-based electricity.
Manchin contends the change would help preserve jobs in the struggling U.S. coal industry that has been hit by competition from natural gas and environmental restrictions.
But many other Democrats fear the provision would be a setback for President Barack Obama's agenda of fighting climate change. They argue the party would be better off pursuing a more a streamlined reauthorization bill.
"I'd like us to stick to our knitting here and get Ex-Im reauthorized. We've got a lot of places we can fight over carbon," said Senator Claire McCaskill, a Missouri Democrat.
Democrats are under pressure to reauthorize Ex-Im, both from businesses such as Boeing Co and Caterpillar Inc, as well as labor unions, a key constituency for the party.
Customers of big U.S. companies such as Boeing are among the biggest beneficiaries of Ex-Im.
Backers say the bank supports thousands of U.S. jobs and helps American businesses compete abroad. Republican critics label the bank an example of "crony capitalism" and an effort by the government to pick winners and losers in the private sector.
Chuck Schumer, the No. 3 Senate Democrat, has said he believed the Senate should act this month to reauthorize Ex-Im. But a Senate leadership aide said there is no guarantee that the chamber will vote on it in July. Senate Majority Leader Harry Reid has not yet taken a position on Manchin's proposal.
As Democrats weigh Manchin's proposal, his bill has attracted two Republican co-sponsors, Senators Mark Kirk of Illinois and Roy Blunt of Missouri.
Although the Republican-run House is the bigger hurdle to the bank's reauthorization, any reauthorization bill also needs to attract at least five Republican senators to meet the 60-vote threshold for overcoming procedural hurdles in the Senate. (Additional reporting by Emily Stephenson; Editing by Caren Bohan and Cynthia Osterman)