By Heri Retnowati

SIDOARJO, Indonesia, Feb 22 (Reuters) - More than 1,000 Indonesians displaced by a mud volcano on Java island blocked a main road and a railway on Thursday to demand cash compensation for their submerged homes. The eruption of hot mud that has inundated entire villages since last May followed an oil-drilling accident in Sidoarjo, an industrial suburb on the eastern part of Java island.

Numerous efforts to cap the flow have failed and it has become a hot political and environmental issue, amid arguments over whether the drilling or a deadly earthquake two days before, or both, triggered the disaster.

Thursday's protesters were those who lived in a middle-class housing complex about 4 km (2.5 miles) from the mud crater. Their homes were inundated after dykes holding the sludge collapsed following a gas pipeline explosion in November.

The company blamed for the mud flow, PT Lapindo Brantas, has agreed to resettle the residents but they have refused, demanding cash instead.

One protester, Siti Hamimah, carried a banner reading "We're ready to fight".

"Why should we be treated differently from Jatirejo residents? We too want the freedom to choose where to live and what our house should look like," said the 36-year-old housewife, referring to villagers first affected by the disaster.

The blockage paralysed traffic from East Java's southern towns to Surabaya, Indonesia's second-largest city.

CONCRETE BALLS

Separately, the team tasked with handling the mud flow said it would begin dropping 1,500 concrete balls in clusters linked by metal chains into the mouth of the volcano on Friday.

Two towers have been built to launch the 375 chains of balls into a 50-metre hole from where the mud has been gushing, with each chained cluster consisting of four balls.

"This method is intended to reduce the mud flow by choking the hole. Our simulation showed the flow rate could be reduced by between 50 percent to 70 percent," said Satria Bijaksana, a scientist from the Bandung Institute of Technology.

He said the balls were expected to reach 150 metres deep or deeper.

Some experts have expressed doubt about the method, saying pressure from below could push the balls back to the surface. But Bijaksana said a similar method had been successful in braking a bigger mud volcano in Azerbaijan.

Scientists agreed at a two-day workshop this week that the eruption was the result of an extremely complex natural phenomenon that could not be fully explained scientifically.

Lapindo has been required by the government to pay $420 million to victims and for efforts to stop the mud.

An environmental group has sued Lapindo and Indonesian President Susilo Bambang Yudhoyono over the volcano, demanding the firm bear all the costs.

Lapindo has agreed to pay 2.5 million rupiah ($275) per square metre for swamped land and damaged buildings, and 120,000 rupiah ($13.20) per square metre for inundated rice fields.

However, Lapindo and PT Energi Mega Persada Tbk <ENRG.JK>, which indirectly controls it, dispute whether the mud flow was caused by its drilling and whether Lapindo alone should shoulder all costs related to the disaster.

The firms are ultimately controlled by the Bakrie Group, the business group of the family of Welfare Minister Aburizal Bakrie. ($1=9085 Rupiah)

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