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Muskrat Falls, on the Churchill River in Labrador.Paul Daly/The Globe and Mail

The proposed Muskrat Falls hydroelectric project in Labrador has passed federal and provincial environmental assessments, a step towards proceeding with the $6.2-billion development.

In their formal responses to a joint panel report on the project, the federal and provincial governments reiterated their past assertions that Muskrat Falls is justified on both economic and environmental grounds.

They also rejected a recommendation to conduct further analysis to determine the project's viability, concluding that sufficient information has already been provided to the panel.

"Today's release from the environmental assessment process represents another important milestone and a major step forward as we move towards our decision on final project sanction," provincial Natural Resources Minister Jerome Kennedy said in a statement Thursday.

Ottawa and the province say they will now proceed to issue the required federal authorizations for the project while trying to finalize a promised federal loan guarantee.

Released last August, the joint panel report concluded that Nalcor Energy, the province's Crown utility company, had not proven the need for the project. At the time, Premier Kathy Dunderdale said she couldn't see how the report came to its conclusions.

The panel also said Muskrat Falls would likely have several "significant adverse" effects on fish, wetland and terrestrial habitats, as well as the Red Wine Mountain caribou herd.

The governments say they will implement measures to address some of those concerns, adding that overall, the project's benefits outweigh any risks.

Nova Scotia Premier Darrell Dexter, who has also supported the development of Muskrat Falls, welcomed Thursday's announcement.

"It confirms our belief that this is a good project both environmentally and economically and we're pleased to be partners in making it happen," he said in a statement.

Both Mr. Dexter and Ms. Dunderdale have faced criticism in their provinces from opposition parties which say Muskrat Falls should undergo greater scrutiny before it is sanctioned.

Under the conditions of a term sheet announced in 2010 to develop the project, Nalcor Energy would spend $2.9-billion to build a power generating facility at Muskrat Falls capable of producing 824 megawatts of electricity.

A transmission link from Labrador to Newfoundland would cost $2.1-billion, $600-million of which would be provided by Nova Scotia-based private utility Emera Inc. It would include a 30-kilometre subsea connection across the Strait of Belle Isle.

Emera would also fund a 180-kilometre subsea link between Cape Ray, Nfld, to Lingan, N.S., at a cost of $1.2-billion.

If it proceeds, the project would provide Nova Scotia with 170 megawatts of energy annually – about 8 to 10 per cent of that province's total power needs – for 35 years.

Proponents say they hope to have energy flowing by 2018.

The project has been on the drawing board in one form or another for decades. In 1980, it passed an environmental assessment but was set aside due to concerns over market access and financing.

Concerns over the loss of habitat that would result from the development of the project have also stalled its progress in the past. But Nalcor Energy has promised to develop a compensation plan to make up for that.

The idea of building more power plants on the Churchill River in central Labrador can be traced back to 1972, when the Churchill Falls hydroelectric dam was finished.

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