B.C. Energy Minister Richard Neufeld says exploration work will be bound by some of the toughest regulations for unconventional gas development in North America. (Chuck Stoody/Canadian Press)

Environmentalists are upset over the B.C. government's approval of a contentious coalbed methane project in the East Kootenay.

BP Canada has been awarded tenure for its Mist Mountain project near Fernie, Energy Minister Richard Neufeld announced Friday.

Neufeld said BP will be bound by some of the toughest regulations for unconventional gas development in North America.

But the exploration work will pose a threat to the natural habitat in the region, said Casey Brennan of Wildsight, an environmental group that advocates the protection of biodiversity and encourages sustainable communities.

"We are concerned about the impact to everything from grizzly bears to trout and all sorts of species in between," Brennan said.

Fernie city council passed a resolution earlier this year condemning the project, saying BP Canada did not build a sufficient dialogue with the community or fully consider the short-term and long-term environmental impacts.

Allan Chabot, council's chief administrative officer, said Friday the community is also concerned about the project's economic and social effects.

"The city was looking for baseline inventory data, socioeconomic impact analysis and environmental prior to the grant of tenure," Chabot said.

Klappan project halted

Meanwhile, another controversial coalbed methane project in northwestern B.C. has been put on hold.

Shell Canada will halt its exploration activity in the Klappan and carry out more discussions with First Nations and the community, Neufeld said.

Shell was awarded tenure for the Klappan Coalbed Methane Exploration Program in 2004.

"Government is facilitating this by specifying no activity for two years," Neufeld said.

"I commend both Shell Canada for showing leadership in making this decision and the Tahltan [First Nation], who have expressed their concerns and their interest in having more information."

With files from the Canadian Press