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B.C. Hydro's $340-million Georgia Strait pipeline project cleared a major hurdle Wednesday with federal regulators concluding in a report that the project is not likely to have any adverse environmental impacts.

The report now goes to federal Environment Minister David Anderson, who has 60 days to decide if Hydro will get authorization to proceed with construction of the natural gas pipeline to Vancouver Island.

Written by a joint review panel comprising representatives of the National Energy Board and the Canadian Environmental Assessment Authority, the report suggests that Hydro undertake 26 sets of studies on environmental impact during construction, covering everything from groundwater testing to clearing of vegetation.

Hydro vice-president Bev Van Ruyven was happy with the report, which set aside arguments from opponents who warned of everything from impacts on crab breeding to air-quality degradation.

Once Anderson has rendered a verdict on the report, it will go back to the National Energy Board for final disposition. By October, Hydro hopes to have a certificate to commence the project.

"We're really happy with the decision, it's timely and we're working on a pretty critical timeline here," said Elisha Moreno, media relations manager for B.C. Hydro. She said the utility believes the pipeline needs to be in operation by October 2005, which would require construction to get under way this fall.

Hydro says the 136-kilometre project is necessary to lessen Island residents' dependence on failing undersea power lines from the Lower Mainland by giving them a local source of electricity generation.

It would carry natural gas from the Sumas/Huntington trading hub near Abbotsford to Vancouver Island, including a 44-kilometre section along the Strait of Georgia seabed.

The gas would supply a 265-megawatt gas-fired generation plant near Nanaimo. Hydro has a separate application before the B.C. Utilities Commission for an operating certificate for that proposed $370-million project.

U.S. regulators approved the American portion of the pipeline in September 2002.

Hydro's partner in the enterprise is Oklahoma-based Williams Cos.

Williams Northwest Pipeline vice-president Allison Bridges called the joint review panel's report an important milestone in finalizing the regulatory and permitting processes.

The cost of the pipeline is now almost double its original 1999 estimate of $180 million.

During hearings over the last two years, it was repeatedly criticized by local environmental groups and by Hydro industrial customers on the Island as a heavy-handed solution.

Former B.C. Utilities Commission chair Mark Jaccard attacked Hydro's decision to tie the Island's energy future to fossil-fuel resources rather than explore alternative generation such as biomass and small hydro.

It has also been challenged by Terasen Gas, a private-sector utility that contends it can deliver all the necessary gas to the Island by boosting compression in its existing transmission lines.

However, the panel concluded that those arguments either did not fall within its mandate or said that based on the information it collected in public hearings, the Georgia Strait pipeline was the most suitable project to satisfy the Island's requirements.

It said that supposed impacts on benthic or bottom-dwelling marine species such as crabs would be limited and that "long-term effects would be minimal."

Opponents expressed disappointment about the joint panel's recommendations.

"They failed to consider alternative on-island generation and a new electrical transmission line, which means its decision is uninformed and fundamentally wrong," said Tom Hackney, president of the GSX Concerned Citizens Coalition.

"We blame this disappointing finding on the panel's refusal to consider the most important problems with the pipeline, including the economic and the greenhouse gas implications of locking Vancouver Island into a natural gas energy future," said coalition director Arthur Caldicott.

Peter Ronald of the Georgia Strait Alliance called Hydro's Georgia Strait Crossing/Duke Point projects "the wrong energy plan for Vancouver Island."