MELBOURNE (REUTERS) - Australia's Great Barrier Reef watchdog is to decide by Friday whether to allow millions of cubic metres of dredged mud to be dumped near the fragile reef to create the world's biggest coal port and possibly unlock US$28 billion (S$36 billion) in coal projects.

A dumping permit would allow a major expansion of the port of Abbot Point for two Indian firms and Australian billionaire miner Gina Rinehart, who together have US$16 billion worth of coal projects in the untapped, inland Galilee Basin.

The Galilee Basin could double Australia's thermal coal exports and see it overtake Indonesia as the world's top coal exporter, further fuelling China's power plants and steel mills that have underpinned Australia's decade-long mining boom.

If the permit is not granted it would add to uncertainty over US$28 billion in proposed Galilee Basin projects, already delayed due to difficulty raising funds with coal prices down.

The plan has sparked protests from environmentalists and scientists who fear the sensitive marine park will be damaged by the dumping and an expanded port, would nearly double shipping traffic through the reef, increasing the risk of accidents.

"The corals could stop growing or potentially die, depending on how long the mud stays there," said Ms Louise Matthieson, a campaigner for Greenpeace Australia.

Enough mud will be dredged from Abbot Point, that if dumped on land, it would be bigger than the Great Pyramid of Giza.

Approval to dump 3 million cubic metres of mud within the marine park could place at risk the World Heritage-listing of the Great Barrier Reef, one of Australia's major tourism drawcards with an estimated economic value of US$5.7 billion.

WORLD HERITAGE LISTING AT RISK

UNESCO, which awarded the reef its heritage listing, last year postponed a decision to June 2014 on whether to put the Great Barrier Reef on its "in danger" list or even cancel its World Heritage listing. It is awaiting a report from the national government on steps taken to address its concerns.

Australia's conservative government, elected last September, has already approved limited dredging to deepen Abbot Point on the northeast coast to spur development of coal resources.

But the Great Barrier Reef Marine Park Authority, an independent government agency charged with protecting the reef, needs to issue a permit to North Queensland Bulk Ports Corp to dump its dredged mud within the marine park.

In 2006, the authority allowed triple the amount of dredging waste from the port of Hay Point to be dumped in the reef.

The North Queensland Bulk Ports Corp says there have been no adverse effects from the Hay Point dumping.

Green groups fear political pressure to allow the Abbot Point dumping will be too great, with the Queensland state government keen to expand ports.

"The real politics of the situation is they have a new environment minister who expects them to toe the line," Ms Matthieson said.

The Abbot Point expansion would add two new terminals for Adani Enterprise's and GVK-Hancock, a joint venture between India's GVK conglomerate and Rinehart's Hancock Prospecting, which have long term plans to export 120 million tonnes a year of coal all together.

Plans for a third new coal terminal at Abbot Point are on hold after BHP Billiton , Australia's biggest exporter of coal for steel mills, cancelled a port project as it cut capital spending as coal prices fell.

If allowed, North Queensland Bulk Ports Corp plans to conduct the dredging in two or three campaigns spread out over five years. But dredging is unlikely to start anytime soon, because the disposal site has yet to be designated and because Adani and GVK-Hancock have yet to line up funding.

"What would be a travesty is if they went ahead with the dredging and the companies didn't build the terminals," said Ms Felicity Wishart, Barrier Reef Campaign director for the Australian Marine Conservation Society.