Tuesday August 8, 2:40 PM

SURABAYA, Indonesia, Aug 8 (Reuters) - A major toll road in Indonesia has been forced to close after hot mud pouring out of an exploratory oil well engulfed a large section of the highway, an official at a state transport firm said on Tuesday.

The road to Indonesia's second-largest city, Surabaya, was shut after huge amounts of muddy water swamped a 500 metre (1,600 ft) stretch, said Dukut Wibisono of PT Jasa Marga, the firm administering the toll road.

"The water is between the knee and ankle," Wibisono told Reuters.

"We don't know how long it will be closed. We are waiting for investigation results from the Surabaya Technology Institute."

The highway is the main transport route for goods from industrial areas south of the city, East Java's provincial capital.

Authorities have been struggling for more than two months to plug the leak near the well that has displaced about 8,000 people from their homes.

Hospital officials say noxious fumes from the hot, thick sludge have left scores gasping for breath or vomitting.

The torrent has inundated swathes of land in four villages and contaminated many shrimp ponds dotting coastal Sidoarjo regency, famous in Indonesia for its shrimp crackers.

Authorities have told residents of villages that might eventually be engulfed to leave their homes, but some fear they would not be properly compensated.

The government has said it will give five million rupiah ($550) to affected families to cover rent for two years.

"If the mudflow inundates the entire house, will they really compensate according to the market price or do they think five million rupiah is enough?" said Taufik Ridho, a 47-year-old villager.

An oil industry watchdog official has said the mudflow that began at the end of May could have been triggered by a crack at about 6,000 feet (1,800 metres) in the Banjar Panji-1 exploration well, operated by Indonesia's Lapindo Brantas. (Additional reporting by Diyan Jari in JAKARTA)

AP

Mud Flow Breaches Dam in Indonesia

Thursday August 10, 1:43 pm ET

Mud Flow From Gas Well Breaches Dam in Indonesia, Forcing More Evacuations

SIDOARJO, Indonesia (AP) -- Hot mud flowing from a gas well in Indonesia that has inundated a large swath of Java island breached a dam on Thursday, damaging more homes and threatening a key rail network, a government official said.

"People panicked as if a tsunami was coming," said district chief Mochammad Pain in the affected district of Sidoarjo. "In a second, my office was flooded as were other people's houses around here."

The mud began flowing from the well just outside the major industrial city of Surabaya on May 29.

It has since inundated 25 square kilometers (10 square miles) of land, forced more than 10,000 people from their homes, closed a major highway and caused breathing difficulties in scores of villagers.

The environment minister said he would block a plan to channel the mud into the sea.

"I reject and will not allow the mud to be dumped into the sea," Rachmat Witoelar told reporters, saying chemicals in the mud could pollute the marine environment. "I think we can handle this problem by building a larger embankment that can hold all the mud in the area."

Witoelar said the government will build more dams to accommodate the mud.

On Thursday, the mud surged over a dam built to stop one section of the flow.

Aside from damaging homes and forcing fresh evacuations, it also inundated local railway lines and could yet affect the main Surabaya to Jakarta rail link, oil and gas regulatory body chairman Trijana Kartoatmodjo said.

The exploratory gas mine is 50 percent owned by local company PT Lapindo Brantas, PT Medco E&P Brantas has a 32 percent stake and Australian oil and gas producer Santos Ltd holds 18 percent.

The company is trying to cap the flow, but so far has failed. Some experts have said it might be impossible to stop it.

Later Thursday, after a meeting at the vice presidential office, Win Hendarso, chief of Sidoardo district, said 2,117 families -- or 8,253 residents -- from four affected villages would be relocated.

It says it is insured for a disaster such as this, and has paid emergency compensation to some of those affected and for relocation that began Thursday.