The steaming sludge swamped entire villages in Sidoarjo, near Indonesia's second largest city of Surabaya, displacing 15,000 people last year. Workers are still struggling to staunch the flow, which could continue for years.

Some 13 people died when a gas pipeline burst following subsidence blamed on the mud eruption.

Judges assessed the lawsuit and ruled it qualified to be heard, said a lawyer for the Indonesian Consumer Protection Foundation, which is behind the move.

"This is a welcome ruling. It sets a new precedent that the legal standing of suits filed by organisations or groups ... can now also cover human rights violations," the lawyer, Taufik Basari, told AFP.

President Susilo Bambang Yudhoyono issued a decree establishing a team to tackle the mudflow some 102 days after the first eruption, Basari pointed out.

The lawsuit also names PT Lapindo Brantas, whose exploratory gas drilling in May 2006 is blamed for causing the mud to ooze to the surface. The government has ordered it to foot the compensation bill.

Drilling by PT Lapindo Brantas pierced an underground chamber of hydrogen sulphide, forcing hot mud to the surface. The toxic sludge then swamped an area of 440 hectares (1,087 acres).

The hearing into the case will resume next week. Another Indonesian watchdog has filed a separate suit against the same defendants alleging environmental damage from the mudflow, but it has yet to be given the court's green light.

The attempt to plug the crater, divert steaming mud to the sea and hold some back behind dykes is set to cost the government 3.4 trillion rupiah (371 million dollars), Public Works Minister Joko Kirmanto said earlier Monday.

The separate bill for compensating the victims of the disaster stood at 4.2 trillion rupiah, he said, according to a report from the detikFinance news website.

PT Lapindo Brantas has said it can pay only 3.5 trillion rupiah, leaving a compensation gap that has yet to be filled.

A team trying to plug the oozing crater with chains of heavy concrete balls said it had dropped 108 chains into the 50-metre (165-feet) mud hole up to Sunday, from an initial target of 375.

The audacious plan, devised by a local expert, aims to slow the flow by 50-70 percent, but some experts are sceptical about its chances of success and others worry it could cause new fissures.

Satria Bijaksana, a team expert, said so far "no noticeable changes have been monitored on the surface."

The chains have fallen deeper than expected into the crater, raising the prospect that many more than the 375 planned will be needed to staunch the flow.

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