Treatment of high-pyrite, high-sulfur Illinois (IBC) coals and pyrite-free Blind Canyon (DECS) coal with added pyrite in the presence of Acidianus brierleyi showed formation of iron oxyhydroxide (FeOOH) particles and subsequent sulfiding caused enhancement in liquefaction and oil yield. IBC No. 101 and 105, and DECS No. 17 containing different amounts of pyrite were treated with A. brierleyi to evaluate its effect on FeOOH formation. Chemical analysis of the liquid phase and Mossbauer analysis of the coals revealed that all the biotreated coals showed significant reduction in pyrite after 21 days (or less with pH alteration in the middle of IBC No. 105 coal run) of incubation. Further data on bioprocessed coals obtained from Mossbauer spectroscopy verified the formation of an FeOOH phase, which acts as a catalyst precursor for direct coal liquefaction (DCL). The direct Liquefaction conversion and oil yield of the biotreated DECS No. 17 coal with added pyrite increased by 14 and 5%, respectively, over the control which did not contain A. brierleyi.