NEW YORK – The Bristol Herald Courier, a small paper in the coalfields of Appalachia, beat out journalism’s powerhouses to win the Pulitzer Prize for public service Monday for uncovering a scandal in which Virginia landowners were deprived of millions in natural gas royalties.

The seven-reporter daily was honored for what many regard as an endangered form of journalism in this age of wrenching newspaper cutbacks — aggressive reporting on local issues.

The Washington Post received four Pulitzers and The New York Times won three — including one in investigative reporting for collaborating with the fledgling nonprofit news service ProPublica for a story on the life-and-death decisions made by New Orleans doctors during Hurricane Katrina.

The ProPublica prize — and an editorial cartooning award for the self-syndicated Mark Fiore, whose work appears on the San Francisco Chronicle Web site SFGate.com — represented a victory for new media in a competition long dominated by ink-on-newsprint.

ProPublica, a two-year-old organization based in New York with around 30 employees, is bankrolled by charitable foundations, staffed by distinguished veteran journalists, and devoted to doing the kind of big investigative journalism projects many newspapers have found too expensive. It offers many of its stories to traditional news organizations, free of charge.

The 33,000-circulation Bristol Herald Courier won for reporter Daniel Gilbert’s computer analysis that showed how a state board allowed the energy industry to funnel into an unaudited escrow fund tens of millions of dollars in royalties owed to people in one of the poorest regions of Virginia.

With its small staff, two bottles of cheap champagne were all the newsroom needed to mark the occasion.