Czech, Polish leaders reach deal to end Turow mine dispute

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PRAGUE/WARSAW, Feb 3 (Reuters) - The leaders of the Czech Republic and Poland agreed a deal on Thursday to end a long-running dispute over expansion at the Turow open-pit coal mine on the Polish side of the border, a row that reached the European Union's top court.

The agreement, which Polish Prime Minister Mateusz Morawiecki and his Czech counterpart Petr Fiala signed in Prague, seeks to end to a rare legal battle between EU members which had damaged the neighbours' relations and raised questions about the environmental costs of coal.

The Czech Republic says Turow sucks up underground water in nearby Czech villages and resorted to legal means a year ago, after bilateral talks faltered following Poland's decision to allow state-run power group PGE (PGE.WA) to expand operations at the massive lignite mine.

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The EU's top court, the Court of Justice (ECJ), ordered Poland last May to halt mining pending an outcome to Czech challenges and later imposed a daily fine for failing to do so.

Warsaw, already locked in disputes with the EU over rule of law, sought more bilateral talks in hopes of ending the Czech suit.

Under the deal reached on Thursday, the Czech Republic will withdraw the legal complaint in exchange for compensation of 45 million euros ($50.8 million) for infrastructure upgrades and other environmental safeguards and pledges.

Czech leader Fiala, speaking in a joint news conference with Morawiecki, said Prague got guarantees an underground barrier under construction would work in protecting water sources. Oversight on the deal would last five years, he said.

"This deal undoubtedly brings advantages and benefits and results to communities affected (by Turow)," Fiala said.

Environmental and civic groups, though, have questioned the deal. Greenpeace said it set no limits to mining and doubted the planned underground wall would be effective.

The Czech Environment Ministry has said no conclusions on the wall could be drawn until it was finished being built.

EU BATTLE

Talks between the allies broke down last November but resumed after Fiala's new government took over in December.

Warsaw has sought to keep open the mine, set to run for another two decades and which feeds an adjacent power plant, because of its economic and energy importance.

"The Turow mine and power plant will continue their operations without any obstacles and will provide electricity to several million," Morawiecki said.

Warsaw was ordered to pay 500,000 euros ($564,000) per day for not halting Turow but refused to pay the fines now totalling over 68 million euros. Morawiecki said on Thursday the government was considering various legal measures to address that.

Earlier on Thursday, an adviser to Europe's top court said Poland breached EU law when extending the life of Turow without assessing the environmental impact. read more

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Reporting by Joanna Plucinska, Anna Koper, Marek Strzelecki and Pawel Florkiewicz in Warsaw, and Jason Hovet and Robert Muller in Prague; Writing by Jason Hovet; Editing by Simon Cameron-Moore, Clarence Fernandez and Tomasz Janowski

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