The NDP government has given permission to the NewPage paper company in Port Hawkesbury, N.S., to cut down trees on Crown land to use for fuel rather than fibre.

The approval removes one obstacle to the company's plans to build a multimillion-dollar power plant that burns wood and generates steam to help run machinery.

"What we would be looking to do is develop a biomass-fired cogeneration plant, so that is using some existing boiler capacity we have to burn biomass to produce steam," said Bill Stewart, director of woodlands at NewPage.

He said the steam would run through a turbine to generate electricity, while the exhaust waste steam generated from the process would be used to help manufacture paper.

Premier Darrell Dexter said the cabinet's approval does not guarantee the project will go forward.

"It doesn't do anything except provide the consent for them to take the wood fibre if they can get a deal that they can agree on, and that's really the sum and substance of it," he said Tuesday.

Stewart said the company is negotiating with partners to get the project off the ground.

A larger project that would have also generated electricity for sale to Nova Scotia Power was turned down earlier this year by the Nova Scotia Utility and Review Board.