Updated 3:20 PM PST

CALGARY – A review panel has recommended that the proposed Northern Gateway pipeline that would carry bitumen from Alberta’s oilsands to tankers on the British Columbia coast go ahead.

But the panel has attached 209 conditions, which cover everything from protecting caribou habitat to research into how the oil would behave in a marine environment.

The controversial proposal has pitted Calgary-based Enbridge (TSX:ENB) against environmental groups and First Nations, who have raised concerns about potential oilspills on land or in the water off the B.C. coast. The panel says any environmental effects can be mitigated effectively if its conditions are met.

Supporters say the pipeline is critical if Alberta is to get its oil to emerging markets in Asia. The panel’s report says that opening up that market is important to the Canadian economy and the benefits far outweigh the risks.

The panel did suggest that Enbridge must be able to prove it would have the financial resources immediately available to respond to any cleanup of a spill or other damage.

“Northern Gateway must file with the (National Energy Board) for approval, at least nine months prior to applying for leave to open, a financial assurances plan … capable of covering the costs of liabilities for … cleanup, remediation and other damages caused by the project during the operation phase,” the report says.

The final decision rests with the federal government, which has roughly six months to respond.

Federal Natural Resources Minister Joe Oliver said the government will thoroughly review the report and consult with aboriginal groups before making that decision.

The cost of the pipeline appears to have sky-rocketed. It had been pegged at more than $6 billion, but the report released Thursday used a $7.9-billion price tag, which includes pre-development costs and marine navigation enhancements.

Enbridge said in a news release that it will work toward meeting the conditions.

“We will closely analyze the panel’s conditions — many of which reflect commitments we put forward at the hearings — and continue to listen and be open to change,” project leader Janet Holder said.

B.C. Environment Minister Mary Polak said the province wants to assess whether the panel’s report addresses five conditions B.C. has set out before it will support the pipeline.

[quote]We are not yet in a position to consider support for any heavy oil pipeline in B.C.[/quote]

The Alberta government welcomed the panel’s recommendation that the pipeline go ahead. Environment Minister Diana McQueen called it a “critical milestone toward getting Alberta’s oil to new international markets.”

Reaction from opponents was swift.

The Raincoast Conservation Foundation said political and corporate agendas won out over the interests of the public. And David Miller of the World Widlife Fund questioned how the panel could acknowledge the environmental risks, but still support the pipeline.

“I think the case is very clear that there is a real risk to the environment, the local economy and the social well-being of people who live in this region,” Miller said. “The (joint review panel) agrees with that yet it’s full steam ahead.

“I think that decision is very unwise.”

Miller suggested it’s still important for people to voice their concerns.

[quote]It’s in the political arena now and it’s up to people to continue to speak up. Our First Nations friends have legal rights as well, and I’m quite certain that coastal First Nations and others will be looking to ensure that their legal rights are respected.[/quote]

If approved by the federal government, the pipeline will probably be just the first to put billions of dollars into the coffers of Alberta, Ottawa and other provincial governments — not to mention the bank accounts of Enbridge and the international companies with a stake in the project.

The pipeline faced an uphill battle in B.C. where the environmental movement was bolstered by a decades-old “War in the Woods” against old-growth logging.

Enbridge and the oilpatch drastically underestimated the power of Green Corp., the older, wiser and better-funded modern version of the tie-dyed denizens who were arrested trying to save trees in the 1990s. Flush with cash from green philanthropists largely from south of the border, groups such as Forest Ethics Advocacy, the Dogwood Initiative and Rising Tides mounted a relentless campaign in Canada and abroad.

Growing concern over climate change has been a factor.

Northern Gateway and other pipeline projects — Keystone XL to the U.S. Gulf Coast, the reversal of Enbridge’s Line 9 through Ontario and Quebec, and Kinder Morgan’s proposed expansion of its Trans Mountain line to Metro Vancouver — mean production in the Alberta oilsands could triple by 2035, also increasing greenhouse gas emissions.

But protests in B.C. have been more of the grassroots, not-in-my-ocean variety.

There are also concerns that the heavy, molasses-like diluted bitumen coming from the oilsands is more corrosive and difficult to clean up in the event of a spill.

But perhaps the toughest hurdle for the project has been the simmering tension between B.C. First Nations and the federal government.

Unlike the rest of Canada, most First Nations in the westernmost province never signed treaties with the Crown. Decades of treaty negotiations have largely gone nowhere and aboriginal rights have been left to the courts.

Before Enbridge ever filed its application for the pipeline, Ottawa made the decision to let the joint review by the National Energy Board and Canadian Environmental Assessment Agency stand for its duty to consult with First Nations.

“The federal government would not support a process for aboriginal consultation separate from the (joint review panel) process…,” said an internal Aboriginal Consultation Plan obtained by The Canadian Press using an Access to Information request.

That didn’t go well.

“We’re treated as a stakeholder in this process,” Carrie Henchitt, a lawyer for the Heiltsuk Nation, said as the panel hearings became increasingly adversarial earlier this year. “We are not just stakeholders. We have specific rights very different from other interest groups.”

Many aboriginal groups opposed to the pipeline refused to take part in the review. Several indicated they were preparing court action should the project get the nod.

The political backlash was not limited to First Nations.

The Conservative government became defensive over oilpatch expansion and Oliver branded opponents as “foreign special interests groups” that threatened to “hijack our regulatory system to achieve their radical ideological agenda.”

The government changed the rules to give cabinet the final say on approval and rewrote rules around waterways and environmental protections.

It wasn’t until after the project was mired in controversy that Oliver announced rules that began to address some of the concerns around tanker and pipeline safety, and over liability in the event of a spill.

— With files from Dene Moore in Vancouver