Indonesian govt "gives up" on stopping mud volcano

JAKARTA (Reuters) - Indonesia's vice president said on Friday the government had given up all hope of halting a mud volcano in East Java which has displaced thousands of people, hurt businesses, and destroyed the local environment.

The disastrous mud volcano, which started erupting in May 2006 near Indonesia's second-biggest city of Surabaya, has proved a huge problem for the government.

The hot, noxious mud has displaced more than 50,000 people, submerged homes, factories and schools and is now flowing at a rate of more than 100,000 cubic meters a day. Various attempts to halt the flow have all failed.

"The government has given up in terms of efforts to stop the mudflow, but will never give up when it comes to taking care of the people," Vice President Jusuf Kalla told reporters.

"There have always been people that said stopping the mudflow is not an easy task," he said, adding the government had spent "trillions of rupiah every year" trying to solve the problem.

Some scientists have said that energy firm PT Lapindo Brantas' drilling for a gas exploration well set off the mud volcano, but Lapindo has denied it is to blame, saying the mud disaster was triggered by tectonic activity.

Lapindo is linked to the Bakrie Group, controlled by the family of Chief Social Welfare Minister Aburizal Bakrie, who was recently ranked by a local business magazine as Indonesia's richest man.

The government has ordered Lapindo to pay 3.8 trillion rupiah, or about $400 million, in compensation to the victims and to cover the damage.

($1 = 9,435 rupiah)

(Reporting by Telly Nathalia; Editing by Sara Webb and Paul Tait)