Ontario has ordered a full environmental review of a proposed mega-quarry backed by one of Boston's best-known hedge funds, a move that may threaten a project that has already raised local opposition.

The project, which would supply crushed limestone for Toronto's booming construction industry, has counted value investor Seth Klarman's Baupost Group as one of its investors.

Highlands Cos, the company behind the quarry, plans to carve out the huge pit on thousands of acres of potato fields it has bought up about 100 kilometers (62 miles) north of Toronto.

A review announced late Thursday by the Canadian province's environmental ministry could complicate those plans.

After reviewing the company's application for a quarry, it became clear that more work needs to be done to demonstrate that the project would be fully protective of the surrounding environment, said a ministry spokeswoman in an email.

The project is already subject to a multi-year review by the Ontario Ministry of Natural Resources. As part of that process, the Environment ministry expressed serious concerns, especially with the project's impact on groundwater.

Minister of the Environment John Wilkinson said his counterpart in Natural Resources had agreed that a comprehensive environmental review was needed.

The Ontario Stone, Sand & Gravel Association said the environment review was politically motivated. Ontario's closely contested provincial election is this October.

The government has, once again, undermined its own land use approvals process and sent another message that will hurt business and investment in Ontario, said President Moreen Miller in a release on Friday.

Highland will now have to submit an environmental assessment, which the ministry, technical experts and the public will then review.

The quarry would extend below the water table, and its operators would have to pump 600 million liters of water each day to keep the mine, and later rehabilitated farmland, from becoming a lake.

The development has faced opposition from the area's wealthy retirees, local farmers and the environmental lobby.

Highland Cos could not immediately be reached for comment.

Baupost, which was reported last year to have $23 billion in assets, does not often publicize its investments and returns.

Klarman's reported double-digit returns over more than two decades and his celebrated book on value investing - Margin of Safety - mean investors closely track his portfolio picks.

His investment in Highland is in line with recent efforts by hedge funds to seek profits beyond traditional investments such as stocks and bonds.

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