Chile’s Supreme Court is expected next month to begin considering challenges to the first-ever decision by a court here to block a government-approved investment project on environmental grounds.

The Supreme Court is reviewing a Jan. 29 Santiago Third Court of Appeals ruling that an environmental-impact study approved for Forestal Itata, a $1.4-billion timber project planned for central Chile, was flawed.

The decision prevents construction from starting and directs the investor, Chilean-owned Celulosa Arauco y Constitución (Celco), to file a new environmental-impact study providing information missing from the current one. It also faults Conama, Chile’s lead environmental agency, for failing to observe due-process and administrative-integrity statutes.

Conama and Celco filed the Supreme Court appeals now pending. Whatever the outcome, some observers here believe January’s ruling might mark a new era of judicial involvement in ensuring proper environmental review of investment projects.

“The [Third Court of Appeals] applied environmental law with a rigor and level of understanding that we have never before seen,” says José Ignacio Pinochet, executive director of Fima, Chile’s first and largest public-interest law firm. “We are hopeful that soon we will see more [rulings] like this and that correct application of environmental law will be the general rule and not the exception in our country.”

Celco officials could not be reached for comment. The Forestal Itata project—planned for the Itata Valley, just north of Concepción—calls for the construction of a sawmill, a molding factory and a pulp mill that collectively would create 1,200 permanent jobs. Annual production would total 400,000 cubic meters of lumber, 80,000 cubic meters of molding and 550,000 tons of pulp made from 3.6 million cubic meters of pine and eucalyptus.

Celco’s original impact study was rejected in June 1999 by the Bío Bío regional environmental authority, or Corema Region 8. But the company successfully appealed to Conama, presenting new information to answer Corema’s concerns. In approving Forestal Itata last year, Conama stated the project “meets all of the environmental requirements set by the law, since all of the measures initially demanded by the Bío Bío Corema will be implemented.”

In the past, the Conama approval might have marked the end of the matter. But the appeals court decision has put authorities on notice, says Rosario Vial, legal director of the Terram Foundation, a sustainable-development think tank. “For the first time under Conama’s environmental-impact evaluation system, the judges stopped a project and questioned the decisions and ability of Conama to approve an EIS,” says Vial, whose group prepared technical studies used by project opponents.

Underlying opposition to Forestal Itata are concerns shared by Itata Valley wineries, municipalities and citizens groups. They charge the Celco impact study failed to evaluate key questions, among them the effects pulp operations might have on farms, vineyards and fishing resources that provide livelihoods for some 60,000 valley residents.

In its January decision, prompted by a lawsuit filed by the valley community of Portezuelo and officials and residents from five other communities, the Santiago Court of Appeals ruled the EIS had numerous failings.

One, it said, was that the study did not “propose adequate mitigation or compensation measures for the significant adverse effects on the quality and quantity of Itata River waters and marine waters at the mouth of the river, and consequently on the diverse hydro-biological species that inhabit them.”

Says Alex Quevedo, lead attorney for the plaintiffs: “If you consider the low volume of water flowing in the Itata River, even a tiny amount of industrial toxic waste could have serious consequences.”

The court cited concern that Forestal Itata will use chloride and produce dioxins. It pointed to a lack of baseline studies in areas that will supply wood to Forestal Itata, both from native forests and tree plantations. And it found that two people with a conflict of interest participated in Conama’s consultative council, an appointed advisory panel that recommended approval of the project.

The court also said Conama failed to ensure adequate opportunity for public input in the impact-review process, as is required in Chile’s 1994 Environmental Base Law. Said the court: “…[E]vidently in many aspects [Conama] did not permit citizen participation.”