A specially appointed government commission gave the green light for work to begin on the first of five mines earmarked for development on the Isla Riesco, near the regional capital of Punta Arenas.
The city and its environs have seen frequent unrest this year over consumer prices, energy rates that are higher than in northern Chile and other projects seen as potentially harmful to the area's ecology, its scenic beauty and a vibrant tourism industry.
The area is also a popular destination for tourism to the South Pole.
Supporters of the coal mine expansion plan say making the most of the area's fossil fuel reserves is critical to Chile's energy security. Up to 30 percent of Chile's coal needs may be met by coal extracted from the mines, officials say. Several thermo-electric power generation projects essential to the national electricity grid will benefit from the Isla Riesco coal.
Critics say Pinera, a billionaire, will profit from the enterprise, a charge denied by the president. The country's chief national oversight body, the Comptroller General, last month cleared Pinera of any conflict of interest in the deal but couldn't silence critics, who vowed to fight on.
Environmental campaigners say the low-quality coal from the deposits will adversely affect the air and the land assets valued by the tourism industry and defended by the local population. Local residents fear pollution will harm residents' health.
Campaigner Chile Sustenable, a non-government organization, said the mines would increase carbon emissions by 360 percent. No less than 59 percent of planned new power generation capacity in Chile is set to be coal-based.
National Energy Commission data indicated Chile is already the third largest CO2 emissions polluter in South America.
The coal power project is a multimillion-dollar undertaking with estimates of a $530 million joint investment by the companies Ultramar and Copec, which has the president as a major investor.
Pinera holds about 800,000 shares in Copec but has argued his stock is held in a blind trust. Critics say the president will still profit from any appreciation in the stock price, as he has done in previous stock movements in Copec since he came to power last year.
Despite the Comptroller General's ruling in the president's favor, the battle isn't over. Opponents of the project plan to appeal to the Supreme Court. A Facebook campaign is building, in a follow-up to a 2010 viral video that forced Pinera to consider relocation of a thermoelectric plant in Punta de Choros, a scenic village famous for its tourist attractions of bottle-nosed dolphins, sea otters and Humboldt penguins.