Parks Canada is standing by its decision to sign a cooperation agreement with a company developing a zinc mine near the Nahanni National Park Reserve, but the federal agency insists that it will still demand environmental scrutiny of the mine's proposal.

Parks Canada's agreement with Canadian Zinc Corp. comes after years of dispute over the Prairie Creek mine site, which Canadian Zinc wants to reopen. The mine is located on a tributary of the South Nahanni River.

Park officials have been working with the Dehcho First Nations to expand the park boundaries to include the entire South Nahanni River watershed.

The agreement, signed late last month, spells out how Parks Canada and Canadian Zinc will work to respect each other's interests and ensure an operating mine can co-exist harmoniously with an expanding park.

"What we wanted to show is that, yes, Parks Canada and Canadian Zinc are not butting heads. We're working together," Canadian Zinc vice-president Alan Taylor told CBC News on Wednesday.

But Doug Stewart, Parks Canada's director-general of national parks, told CBC News the agreement simply recognizes that the park and the mine will be neighbours once the park expands and the mine opens.

"We don't really envision ourselves committing to anything through this MOU [memo of understanding]," Stewart said Thursday in an interview.

Could be first national park with mine inside

In a news release, Canadian Zinc said the memorandum was signed on July 29. The document has not been made public, and it is not considered to be legally binding.

When it expands, the Nahanni National Park Reserve could become Canada's first national park to have a mine within its boundaries.

That historic possibility hinges on whether Canadian Zinc obtains all the permits it needs to reopen the Prairie Creek mine.

Stewart said Parks Canada had looked at buying out Prairie Creek, then shutting the mine down.

But the agency decided that would cost too much, opting instead to direct the money towards conservation efforts.

"If you think of ways in which millions of federal taxpayer dollars could be used to achieve conservation outcomes, it would seem that acquiring the mine is not that sensible," Stewart said.

'Ticked off,' says Dehcho grand chief

The July 29 agreement between Parks Canada and Canadian Zinc does not include the Dehcho First Nations, a key player in the Nahanni park expansion.

As part of its land claim talks, the Dehcho had negotiated interim protection of the land affected by the park expansion. As well, the First Nation has been working with Parks Canada officials on proposed new park boundaries.

"And that's what I'm pretty ticked off about, because we need to be part of these things," Dehcho Grand Chief Jerry Antoine said.

The Canadian Parks and Wilderness Society said it supports Antoine's concerns about Dehcho's exclusion from the agreement.

The society said the fundamental question remains of how a mine can exist comfortably within the national park, which includes the pristine South Nahanni watershed.

"CPAWS recognizes the existing rights of Canadian Zinc to proceed, but long term, ultimately, we have major concerns," said Jennifer Morin, the society's interim director in the Northwest Territories.

Morin said her society continues to be concerned about the quality of water that will be discharged by the Prairie Creek mine, as well as about the access road that will run through the park's fragile rock formations.

The memorandum was signed weeks after Canadian Zinc applied for operating licences for the Prairie Creek mine.

In the past, Parks Canada has insisted that all of the company's licences be subjected to environmental assessment.

Stewart said the new agreement will not compromise the environmental scrutiny that his agency has demanded from the Prairie Creek proponents.

"Our expectation would be that both now and in the future, that the highest standard of environmental assessment would be applied," he said.