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Heavy machinery operates at the Shell Albian Sands north of Fort McMurray, Alta.Kevin Van Paassen/The Globe and Mail

The federal Conservative government has approved plans to expand an oil sands mining project, despite the environment minister saying the effort is likely to cause significant "adverse environmental effects."

The government on Friday gave its blessing to Royal Dutch Shell PLC's expansion plans at its Jackpine mine project, about 70 kilometres north of Fort McMurray, Alta. The approval comes with a list of conditions tied to wildlife, the environment and First Nations.

The expansion will allow Shell to increase bitumen production by 100,000 barrels per day. The provincial and federal regulators approved the idea in July, with conditions attached. The Jackpine mine expansion is part of Shell's Athabasca Oil Sands project, which currently produces 255,000 barrels a day – oil it shares with partners Chevron Corp. and Marathon Oil Corp.

Federal Environment Minister Leona Aglukkaq said she reviewed "mitigation measures" she considers appropriate when she made her decision on Jackpine. "I determined that the designated project is likely to cause significance [sic] adverse environmental effects," she said in her decision statement. Ms. Aglukkaq referred to the Tory cabinet which "decided that the significant adverse environmental effects that the designated project is likely to cause, are justified in the circumstances," her statement said.

Prime Minister Stephen Harper is a fierce proponent of Canada's energy industry, arguing it is key to the country's economic prosperity. His lobbying extends beyond Canada's borders as he pushes hard for the Obama administration to approve the controversial Keystone XL pipeline project.

Because cabinet said the environmental concerns tied to the Jackpine mine proposal are justified, Shell's expansion aspirations can proceed "in accordance with the conditions" issued by Ms. Aglukkaq.

Shell must, for example, implement an "aquatic ecosystem monitoring plan," take certain steps to protect fish and their habitat, and "avoid migratory bird mortality." Shell must also "notify Aboriginal groups of the process for accessing project lands not under construction, operation, or restoration, including the Muskeg River." Further, the company must provide annual updates to First Nations groups on issues including aquatic health and water quality. Shell also needs an "odour management plan," which is listed under a section about protecting "Aboriginal Health – off road emissions and odours."

Should Shell fail to meet these conditions and the others Ms. Aglukkaq outlined, it could face penalties of up to $400,000 per day in the case of a conviction for a continuing offence, the government noted.

A joint review panel, appointed by the federal environment minister, ruled in favour of the project in July, despite its own environmental concerns.

"The panel finds that the project would likely have significant adverse environmental effects on wetlands, traditional plant potential areas, wetland-reliant species at risk, migratory birds that are wetland-reliant or species at risk, and biodiversity," the panel wrote. "There is also a lack of proposed mitigation measures that have been proven to be effective."

Ms. Aglukkaq reviewed the JRP report before issuing her decision. Her office said media spokespeople were unavailable for comment Friday afternoon.

The JRP's summer decision immediately disappointed environmental groups.

Shell and joint ventures partners have not made their financial decision on whether to proceed with the project.

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