The federal government and the Dene Tha' First Nation in northwestern Alberta said Monday that they have signed an agreement resolving concerns related to the proposed Mackenzie Valley natural gas pipeline.

The deal removes one stumbling block for the consortium, led by the Calgary-based Imperial Oil, that wants to build a 1,200-kilometre pipeline from the N.W.T. community of Inuvik on the Beaufort Sea to Alberta.

In November 2006, a federal court judge ruled that Ottawa failed to consult with the Dene Tha' First Nation (DTFN) over the pipeline, which would run through a small portion of their traditional territory. The judge ordered that social and environmental hearings be put on hold until the Dene Tha's concerns could be addressed.

The deal announced Monday clears the way for the Joint Review Panel examining social and environmental issues to issue a final report after it wraps up hearings in November.

"With this agreement, we have demonstrated that Canada is committed to meaningfully consult with aboriginal groups and, where appropriate, to accommodate their concerns with respect to how the Mackenzie Gas Project (MGP) may affect their communities," Indian Affairs Minister Jim Prentice said in a news release.

"In turn, we have generated greater certainty around the project — ensuring that if it is approved it may proceed unimpeded."

Under the agreement, the DTFN will receive $25 million from the federal government to help address possible economic and cultural impacts resulting from the construction and operation of the pipeline.

"This settlement agreement is a signal that, going forward, governments and industry will work with us to ensure our treaty and aboriginal rights, and our rights as First Peoples of this great land, are respected," Chief James Ahnassay of the Dene Tha' First Nation said in a release.

The DFTN has agreed to end any further litigation to prevent or delay development of the pipeline.

The agreement also sets out a time frame for the federal government's review of the Dene Tha' land claim and outlines how the First Nation is to be consulted on the Mackenzie and future projects.

Victoria-based lawyer Bob Freedman, who represented the Dene Tha', told CBC News that the settlement is a major win.

"It's time for the federal government to work with First Nations in developing processes to include First Nations, rather than fighting virtually every single request by First Nations to be included in these processes," Freedman said Monday.

In 2004, the Dehcho First Nations in the Northwest Territories was entangled in a similar dispute with the federal government. The Dehcho, which represents 10 communities on land constituting 40 per cent of the proposed pipeline, argued that they had been left out of the environmental review. They settled out of court, with the Dehcho receiving a $32.5 million.

The pipeline is a joint venture between Imperial Oil, Shell Canada, Conoco Phillips, ExxonMobil and the Aboriginal Pipeline Group.

It has been hampered by massive cost overruns, regulatory delays and opposition from some native and environmental groups.

With files from the Canadian Press