* Waste storage tanks at refinery risk overflowing due to cyclonic rains
* Refinery's owner says plant open for business after report of closure
* Gov't regulators fear more rain will create new environmental problems
By James Regan
SYDNEY, April 15 (Reuters) - Australia's Queensland state said it has run checks on a nickel refinery owned by mining and real estate magnate Clive Palmer to determine if operating in heavy rains recently caused it to spill hazardous waste into public waterways.
Queensland State Environment Minister Andrew Powell said the 35,000-tonnes-per-year refinery was experiencing problems with run-off from a waste storage facility due to a deluge caused by a cyclone that hit Australia late last week.
Powell told a local radio station his department was informed by the refinery that the storage tanks were "overtopping" with tailings, or hazardous ore refuse, prompting an inspection by government environmental regulators on Monday.
"We have taken samples and they are obviously off at labs at the moment to check if any of the contaminant has found their way into those local waterways," Powell said.
"But certainly there is no denying the fact the facility is now at capacity... So if the refinery continues to operate and place further tailings into that facility, then clearly that's going to continue to overtop," Powell said.
Palmer, who bought the refinery from BHP Billiton in 2009, issued a statement saying the plant was still producing nickel after The Australian newspaper on Tuesday reported operations had been suspended as a result of toxic sludge spilling over tailings dams designed to contain the material.
"Queensland Nickel is compliant with environmental standards and the plant is open for business," Palmer said in the statement.
Powell said his department has been talking to Queensland Nickel for more than twelve months over the need to upgrade waste storage practices used at the 40-year-old refinery.
"If it rains again then we have a serious issue again," Powell said.
Cyclone Ita dumped more than 150 millimeters of rain in the region of the refinery after making landfall further north on Friday and tracking south. Australia is most prone to tropical cyclones between November 1 and April 30.
A spokesman for the refinery, Andrew Crook, said recent increases in the traded price of nickel, a metal used to help make stainless steel, was keeping the refinery in the black.
The London Metal Exchange three month nickel price hit a 14-month high of $17,917 a tonne, or $8.12 a pound this week, which the spokesman said was more than $2 per pound above the refinery's break-even point.
Nickel has staged a near-uninterrupted rise since January after the Indonesian government banned exports of nickel ore, cutting off a key supply source for Chinese steelmakers. (Editing by Muralikumar Anantharaman)