Chile court freezes Glencore hydro project to weigh appeal


* Appeals court halts $733 million Cuervo dam

* Opponents cite environmental, geological risks

* Case seen likely to end up in Supreme Court

SANTIAGO, Oct 25 (Reuters) - A Chilean appeals court haspreventively blocked a recently approved $733 millionhydroelectric dam to weigh an environmental appeal, a surprisesetback for owners Origin Energy and Glencore XstrataPLC.

Opponents of the 640-megawatt Rio Cuervo project planned inthe remote southern Aysen region say it would harm theenvironment and would be built above a geological fault line inhighly-seismic Chile.

Lawyers from the environmental prosecutor's office lodgedthe appeal, claiming the plant's environmental permit grantedlast month was not legal.

The Coyhaique Court of Appeals agreed to look at their case,and has in the meantime blocked construction of the complex.

The fresh freeze on the project is another blow forenergy-strapped miners in copper powerhouse Chile, where unclearrules have allowed environmental and social groups to appealagainst projects even after approval, putting in limbo billionsof dollars of investment.

If recent history is any guide, the project is likely toeventually up in the Supreme Court.

"In Coyhaique the case will be dealt with in about two tothree months," a court source told Reuters. "At this point ...the case will probably arrive at the Supreme Court next year, if(one or more parties) seek to elevate it."

The Energia Austral joint venture between Origin Energy andGlencore Xstrata also has plans to build two other generatingunits, Condor and Blanco, for which it has yet to presentenvironmental impact studies.

"For now we're analyzing the appeal ... and we're of coursecarefully following the court's determinations to define thenext steps to follow," Energia Austral told Reuters.

"We reiterate that Cuervo has the potential to offer clean,renewable and trustworthy energy in the face of Chile's growingenergy needs, in addition to generating long-term benefits tothe region of Aysen."


The Andean country's complex legal system and newenvironmental regulator make it tricky to anticipate what willhappen to controversial projects.

Last year, the Supreme Court suspended a key permit forCanadian miner Goldcorp Inc's El Morro copper-goldproject and rejected the planned $5 billion Central Castillathermo-electric power plant.

But it cleared the way for the unpopular HidroAysenhydro-power project, planned in the country's deep south.

For a FACTBOX on resource projects that have been facingenvironmental roadblocks in Chile, see.

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