UPDATE 2-India's GVK cleared to build Queensland coal terminal

* Clears major environmental hurdle for $10 bln coal project

* Project still needs mining lease, financing

* First coal output scheduled for early 2016

(Adds comment from GVK) By Maggie Lu Yueyang and Sonali Paul

CANBERRA, Oct 10 (Reuters) - India's GVK Power andInfrastructure cleared a major hurdle for a A$10billion ($10.2 billion) coal project in Australia, winningfederal government approval for the construction of a new exportterminal in Queensland state.

The green light allows GVK and its Australian partner, thecountry's richest person Gina Rinehart, to expand the Port ofAbbot Point for the planned Alpha coal project.

The project, now awaiting a mining lease from the state, iskey to meeting the coal ambitions of GVK, a conglomerate withinterests in airports, hotels and transportation. The projectcould help meet India's huge appetite for coal, which feedstwo-thirds of the country's power production.

The Alpha project in the untapped Galilee Basin inQueensland has a mine life of more than 30 years and wouldproduce 32 million tonnes a year, with first output targeted forearly 2016.

Alpha is one of five major coal projects in the basin,together aiming to produce more than 180 million tonnes by theend of the decade and doubling Australia's thermal coal exports.

All of those projects are seen potentially at risk of beingshelved or delayed due to soaring costs and a weaker outlook forcoal demand in the near term.

But BGVK said in an email the group was not concerned abouta demand slowdown, as Asian utilities had confirmed theirrequirements and willingness to enter into offtake agreements.

"From a supply viewpoint, Alpha is by far the most advancedproject that will supply incremental quality coal to theseutilities over the medium to long term," the email said.

Approval from Canberra for the project had been seen as abig obstacle after environmentalists expressed worries aboutcoal burning, port dredging and ship traffic along the GreatBarrier Reef.

The Labor government had rejected a rail line and portproposal for a rival project, now owned by another Australianmining magnate, Clive Palmer.

The authorities cleared the GVK plan after imposing 60conditions to protect the Great Barrier Reef World Heritage Areaand the marine area.

"We are the only coal developer in Australia to possessenvironmental approvals at a state and federal level thatintegrate the mine, rail and port ... that will significantlyassist in the facilitation of opening up the Galilee Basin," GVKVice Chairman Sanjay Reddy said in a statement.

($1 = 0.9801 Australian dollars)

(Reporting by Maggie Lu Yueyang and Sonali Paul; Editing byRyan Woo)