* Italy swamped by requests to plant vines
* New EU rules came into force in 2016
* Companies say they want to grow to meet rising demand
NIPOZZANO, Italy, Oct 4 (Reuters) - In the Italian valley where his family has made wine for 30 generations, Lamberto Frescobaldi says his growth plans are being hampered by new European Union rules.
He asked to extend the vineyards where he produces Chianti, Sangiovese and Vermentino wines by 50 hectares (500,000 square metres) this year, but was granted only 9,000 square metres by the Agriculture Ministry in Rome.
"My market is healthy, I have land, I want to plant more vines and I can't. It's as if we have put a cork on growth for companies," Frescobaldi said.
He is not alone. This year, Italy, the world's biggest wine producer, received requests to expand vineyards by 25 times the area permitted under regulations that were introduced in 2016 and capped growth in land under cultivation to just 1 percent per year.
The rules were the fruit of years of negotiation and ended a system in which a fixed stock of planting rights was traded between producers.
Countries including Italy asked for limits to avoid the oversupply which produced "wine lakes" in the mid-2000s. The European Commission says the new system allows a controlled increase in vineyards and is more transparent than before.
Italy still supports curbs on supply, but the Unione Italiana Vini (UIV), representing companies who make up 70 percent of the 6 billion euro ($7.1 billion) export market, says the revised process is too rigid.
Part of the issue is that Italy's prodigious wine output - expected to reach 40 million hectolitres this year - comes from a patchwork of relatively tiny, family-run vineyards.
The average area of each holding is two hectares, compared with 10.5 hectares in its main rival France, making it harder to achieve growth by acquiring competitors, and contributing to the rush for permits.
Frescobaldi said there was enough demand to justify a growth threshold of up to 4 percent per year in Italy, without jeopardising quality or pricing, adding that local bodies should take a stronger role in managing expansion.
"The information should go from the producers up to Europe. Maybe an area of Sicily needs 10 percent and that would be a terrific opportunity for creating jobs as well."
Both France and Spain, the world's two other wine powerhouses, set tighter quotas in some regions to preserve prices and quality, leaving some applicants disappointed, but outside of those areas requests were fewer.
"This system suits France," said Eric Tesson, director of French wine confederation CNAOC.
There are concerns in Spain about companies in popular areas struggling to plant new vines, said Jose Luis Benitez, director of the Spanish Wine Federation, but overall it can meet current global demand for Spanish wine while staying within the limit.
Another reason for the rush to plant in Italy is a growing market for sparkling prosecco and still pinot grigio from the northern regions of Veneto and Friuli Venezia Giulia, where more than 70 percent of this year's applications were made.
In the hills north of Venice, Luca Ferraro asked to develop more than one hectare of prosecco vines and was given 1,000 square metres.
"Those of us in prosecco are probably more pessimistic because there is so much growth and they are not letting us plant," he said.
Adding to his frustration, half of the rights available are assigned proportionately to the amount requested, meaning bigger landowners got more. At the same time, Italy has tried to give something to every applicant. But this has left people with unfeasibly small parcels of land, said Domenico Mastrogiovanni, wine expert at the Italian Agricultural Confederation (CIA).
"If you give me 1,000 square metres what can I do with it? A hundred bottles? A thousand bottles? That's nothing," said Mastrogiovanni. "They tried to make everyone happy and disappointed everyone."
Winemakers agree production of prosecco in particular must be kept in check to prevent a sudden flood of produce onto the market that would drive down prices.
"We aren't saying abolish all controls on the capacity to plant vines, but let's make rules that are up to the task of governing the sector," said Mastrogiovanni. ($1 = 0.8342 euros) (Additional reporting by Sybille de la Hamaide in Paris; Editing by Hugh Lawson)