Nunavut regulators have given the OK to the proposed Nanisivik Naval Facility near Arctic Bay.
The Nunavut Impact Review Board says the project can go ahead without a full environmental review but the Department of National Defence must fulfill 38 terms and conditions, and 24 other requirements aimed at minimizing the impact on Arctic Bay's municipal water system and waste management, and wildlife.
The decision also lays out detailed monitoring and reporting procedures.
Prime Minister Stephen Harper first announced the project in 2007. It's to be a deep-water refuelling port for Arctic offshore patrol and Coast Guard ships.
Last year, plans for the project were significantly scaled back but the estimated cost has swelled to $116 million from the original $100 million estimate.
Construction is expected to begin next year. The facility should be operational by 2016.
The federal ministers of Northern Development and National Defence still need to authorize the NIRB's decision.