why is the mud, spewing from the Java drilling mishap, toxic.?

Answer 1

I refer you to a United Nations report. It did not find definite toxicity. It indicated that when the eruption first began, there was a release of a toxic gas, most likely hydrogen sulfide. But the study team also found that subsequent air samples and measured air quality do not show concentrations of toxic gasses. Normal levels of organic compounds (including phenols) have been found in the muds.
Excerpt discussion of Toxicity levels:
"Due to some conflicting results of analyses conducted by local authorities, local universities and the UNDAC team, the main conclusion is that more research and monitoring of the quality of the mud is needed before final statements can be made on
the toxicity of the mud. It is not determined whether the elevated levels of pollutants found by the local authorities are due to the natural composition or due to secondary
pollution by, for example, the flooded industrial facilities in the affected area.
Some results that can be reported are:
• Media reports indicated the presence of phenols in the mud. None of the samples examined showed levels of organic compounds, including phenols, above normal expected background concentrations. Although the samples are not representative for the entire area of mud, there are no indications of significant deviations.
• Air samples and measured air quality do not show concentrations of organic compounds and specific toxic gasses (including hydrogen sulphide) above expected background concentrations.
• Based on samples and analysis, combined with existing data, indications exist that the mud content is not homogeneous. However, results of analysis performed by the UNDAC team and RIVM do not confirm this.
• Some samples taken and analyzed by the local authorities (and university) show elevated levels of toxins, such as heavy metals, including mercury. Samples and analysis performed by the UNDAC team and RIVM do not show elevated levels of
organic compounds or heavy metals.
• Radiation has been measured at RIVM and proven to be of background level for all types of radiation (alpha, beta and gamma). "

http://www.un.or.id/upload/lib/Indonesia%20hot%20mud%20flow%20East%20Java%20final%20report.pdf