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An oil worker holds raw oilsands near Fort McMurray, Alta. Alberta's energy regulator has recommended approval of Shell Canada's plan to expand oilsands production. (Jeff McIntosh/Canadian Press)

Alberta's energy regulator has recommended approval of Shell Canada's plan to expand oilsands production, even though it acknowledges the environmental impacts will likely be so severe and "irreversible" that new protected areas should be created to compensate for the damage.

A 413-page report contains an extensive list of recommendations and conditions for both governments and Shell  and contains some of the most strongly worded language yet on the industry's growing environmental toll.

"It is clear that critical issues about oilsands development are increasingly not project specific," the report says.

"Many of the concerns and issues related to this proposal have to do with the pace of development of the mineable oilsands and the capacity of the regional environment to absorb these developments."

Permanent loss of wetlands

But critics point out most of the report's recommendations are non-binding suggestions to government, which has the ultimate say on the project.

The report concludes the Jackpine project would involve the permanent loss of thousands of hectares of wetlands, which would harm migratory birds, caribou and other wildlife and wipe out traditional plants used for generations. It says Shell's plans for mitigation are unproven and warns some impacts would probably approach levels that the environment can't support.

It concludes that the effects of the development, which would allow Shell to increase its bitumen output by 50 per cent to 300,000 barrels a day, would be so heavy they couldn't be fixed. The only answer would be to set aside relatively undisturbed land, says the report.

"The panel believes the use of conservation offsets may be necessary."

Previous attempts by the Alberta government to create protected areas in the oilsands area have been strongly opposed by industry.

Shell welcomes decision

Shell spokesman Stephen Doolan said the company welcomes the decision. Doolan said Alberta's new management plan for the oilsands area will provide more concrete data to assess and mitigate environmental impacts.

"New frameworks, such as the Lower Athabasca Regional Plan, will be based on actual monitoring of data and development in place and operating. With frameworks across all key environmental areas, LARP will ultimately ensure the oilsands resource is development in a sustainable manner."

Shell has also bought about 730 hectares of former cattle pasture in northwestern Alberta to help compensate for the 8,500 hectares of wetland that would be forever lost.

The report now goes to federal Environment Minister Peter Kent. A decision on whether to accept, reject or modify it is expected from the federal cabinet within the next four months.

The Alberta government will ratify the report through an order in council.

Jackpine in limbo since 2007

The report has been a long time coming. The Jackpine expansion has been before regulators since 2007 and company officials say they have submitted over 18,000 pages of information and evidence.

Still, the panel expressed doubts about Shell's environmental work.

"The panel concluded it could not rely on Shell's assessment of the significance of the project and cumulative effects on terrestrial resources."

The report contains 22 conditions that would be binding on Shell if it were accepted by Ottawa.

There are concerns over the company's plans to cap tailings ponds with a layer of fresh water into so-called end-pit lakes. The panel requires Shell to conduct and release new research on such ponds, as well as alternatives to them.

There are also 88 non-binding recommendations that the panel asks the federal government to impose on Shell before final approval — the wrong approach, said Simon Dyer of the environmental think-tank Pembina Institute.

"We pleaded with the panel, 'Please don't make recommendations that will never be enforced,"' he said. "Either make them binding conditions or reject the project."

Dyer pointed out that previous projects with similar suggestions have been approved with no accountability as to whether they ever come into effect.

"The way to get accountability for fixing these policy gaps is to recommend not to approve the project until these recommendations have been met," he said.

First Nations opposition

Athabasca Chipewyan Chief Allan Adam, whose band turned to the courts to try to stop the hearings over issues of poor consultation, said in a release that the report doesn't adequately address the effects that development would have on the lives of area aboriginals. The panel is handing responsibility for regulating development off to government, Adam said.

"Many of the panel's recommendations are likely to continue to fall upon deaf government ears."