Update 1-Expert asks Ecuador court to fine Chevron up to $16 bln

(Repeats with new headline)

(Adds plaintiff's comments, Chevron reaction)

QUITO/NEW YORK, April 2 (Reuters) - An independent environmental expert told a court in Ecuador that oil company Chevron Corp (CVX.N) should pay $7 billion to $16 billion in compensation for environmental damage in the country.

In a report to the court, geologist Richard Cabrera said the low end of the range represented the cost to remediate soils and pay for health care costs, a water system and infrastructure improvements.

The high end of the range was based on an "unjust enrichment" penalty.

The lawsuit, which peasants and Indians in Ecuador brought in the early 1990s, contends that Texaco, which Chevron bought in 2001, polluted the jungle and damaged their health by dumping 18 billion gallons (68 billion liters) of contaminated water from 1972 to 1992.

Chevron General Counsel Charles James disputed the findings of the report, saying the case had become a political issue in Ecuador.

"This is no longer a private lawsuit; it is a working partnership between the government and plaintiffs," he told Reuters. "This is more extortion that a real lawsuit. We will protest this report."

He did not rule out reaching an out-of-court settlement with the plaintiffs, but said the company would not be "blackmailed."

The company said later it would petition the local court to dismiss the report.

Steven Donziger, a U.S.-based lawyer advising the plaintiffs, said the report was "a complete rejection of everything that Chevron has been saying since the case began 15 years ago."

He said Cabrera's report validates the plaintiffs' arguments, and added that he expects a court ruling in 2009 "knowing that Chevron will try to delay the process."

Chevron has argued that it was released from any liability because it paid $40 million for an environmental cleanup in the 1990s, and blames state oil company Petroecuador for much of the pollution. (Reporting by Matt Daily in New York and Alonso Soto in Quito; Editing by Lisa Von Ahn, Toni Reinhold)