(Adds reaction from Economic Affairs Ministry and gas extraction company NAM and more background)
By Bart H. Meijer
THE HAGUE, Nov 15 (Reuters) - The highest Dutch administrative court has rejected the government's plan to cap production at a major gas field that has caused damaging earthquakes, saying it might be possible to cut output further without endangering supplies.
The decision adds another chapter to the long fight over gas production in the northern Dutch province of Groningen, where citizens accuse the government of endangering their lives while protecting gas revenues.
The government had proposed capping production at the Groningen gas field at 21.6 billion cubic metres (bcm) per year over the next five years, after a 2015 report found production was risking lives. That would be down from 24 bcm in the production year just ended and 39.4 bcm in 2015-16.
But the Council of State said on Wednesday the government had failed to properly substantiate its decision, describing it as "unacceptable" to potentially keep production unchanged for five years when it might be possible to further reduce demand.
The Council ordered the government to review its decision within the next 12 months, but production could be maintained at 21.6 bcm for the year through Oct. 1, 2018.
The Economic Affairs Ministry called the verdict a "tough decision", but accepted it has to come up with a new plan in the coming year.
The drafting of a new plan will be the responsibility of Economic Affairs minister Eric Wiebes, whose predecessor Henk Kamp left office when the new government was installed last month. Kamp lowered gas production in Groningen several times in response to earthquakes, but was still seen by residents as neglecting the risks of ongoing production.
Wednesday's decision was met with jubilation from Groningen citizens, many of whom have seen their houses damaged by the thousands of small earthquakes triggered by the gas extraction.
"We won on all fronts. All lousy excuses the government used to justify production have been tossed out the window," said Dirk Kleijer, a spokesman for the Groninger Bodembeweging campaign group.
"The minister now needs to put the safety of residents first. He now needs to come up with a good plan: to lower production and to guarantee our safety".
NAM, the Royal Dutch Shell and ExxonMobil joint venture that operates the Groningen field, also found support in the court ruling, saying it affirmed its view that the safe level of production can be determined by using the right models.
The NAM had contested the government's new production cap, saying it ignored earlier agreed safety norms.
Reporting by Bart Meijer. Additional reporting by Anthony Deutsch and Toby Sterling.; Editing by Mark Potter and Louise Heavens