(Reuters) - SQM, the world´s No. 2 lithium producer, said on Friday it “regrets” a ruling by a Chilean environmental court that it should be prosecuted over excessive water use in the country´s northern Atacama Desert.

FILE PHOTO: An aerial view shows the brine pools of SQM lithium mine on the Atacama salt flat in the Atacama desert of northern Chile, January 10, 2013. REUTERS/Ivan Alvarado

SQM said in a statement sent to Reuters that it was considering whether to take further legal action over the finding by the First Environmental Court in the nearby city of Antofagasta, which upheld a complaint by indigenous communities bordering SQM´s operations.

“The company regrets this decision and remains convinced that its plan - which was meticulously evaluated by the competent authorities - safeguards the protection of the environment,” the company said.

“SQM is evaluating the range of options available to it before the law,” it added.

The court ruling calls into jeopardy SQM´s $400 million plan to expand its lithium carbonate production plant to feed appetite for the ultralight battery metal.

Water has become a key sticking point for the expansion plans of both SQM and top competitor Albemarle, both of which operate in the salt flats of the Atacama, the world’s driest desert, which supply more than one-third of the global supply of lithium needed for the batteries that power electric vehicles.

Soaring demand for lithium has raised questions about whether Chile´s deserts can support current and future levels of production along with the needs of sprawling nearby copper mines, a booming tourism industry and indigenous communities.

The court ruled that a compliance plan presented by SQM in response to a multi-year investigation by Chile´s SMA environmental regulator that found the miner had overdrawn lithium-rich brine was “insufficient.”

The plan included a new online system to monitor extraction rates of brine, which holds lithium in suspension, and the shutting down of one of its freshwater wells.

The court said its decision took account of the “particular fragility” of the Atacama´s ecosystem and the “high level of scientific uncertainty” about the behavior of its water table.

It said SQM had no way of proving that the measures it had proposed were capable of “containing and reducing or eliminating the negative effects generated by the breaches of the company.”

The SMA must now resume its sanctioning of SQM for the original infractions, the court said, which could involve fines of over $3 million, the closure of operations or revocation of environmental permits.

A spokesman for the SMA told Reuters it would announce its plans in the coming days.