The National Energy Board has given a conditional green light to the Northern Gateway pipeline project, handing off to Prime Minister Stephen Harper a crucial decision that threatens to intensify aboriginal opposition and become a political flashpoint in the next federal election.

In a report Thursday, an NEB review panel recommended that Ottawa approve the $6.5-billion pipeline and crude supertanker terminal in Kitimat,. B.C., once the government and Enbridge Inc. have addressed the 209 environmental, safety and financial conditions set down by the panel. The pipeline would deliver 520,000 barrels a day of oil sands bitumen to the British Columbia coast, opening new markets for the Alberta-based oil industry.

“Opening Pacific Basin markets is important to the Canadian economy and society,” the panel said in a news release. “After weighing all the oral and written evidence, the panel found that Canada and Canadians would be better off with the Enbridge Northern Gateway project than without it.”

Despite the conditions – including a requirement that the project take on $950-million in liability insurance – the NEB decision is a victory for Enbridge and the wider energy industry. But now that Gateway has cleared its environmental hurdle, an even bigger challenge looms for the project: securing the support of the aboriginal bands in B.C. who live in the areas where the pipeline would pass. That support has remained elusive even as First Nations and governments remain at an impasse over broader treaty talks. With the NEB decision, aboriginal bands are already warning of a legal challenge.

The federal cabinet now must make a final decision on the pipeline within six months, and the government promised Thursday to consult extensively with First Nations in an effort to accommodate their concerns.

But the Prime Minister will encounter challenges not only from aboriginal communities across British Columbia but from environmental activists, the B.C. government and his parliamentary rivals. Opponents vow to take the pipeline battle to the electoral hustings in 2015 and to the courts, with aboriginal leaders challenging Ottawa’s right to override their adamant opposition.

Chris Genovali, executive director of Raincoast Conservation Foundation, said the federal government should prepare to deal with “potentially the biggest environmental battle we’ve ever seen in Canada.”

Aboriginal leaders vowed the pipeline will not be built. No amount of consultation will result in the First Nations’ support for the Enbridge pipeline, said Art Sterritt, the executive director of Coastal First Nations, an alliance of First Nations on the B.C. coast.

If the project is approved by Ottawa, “there is absolutely no doubt that there will be many First Nations who will actually launch court cases on this,” Mr. Sterritt said.

Mr. Harper and Natural Resources Minister Joe Oliver have insisted they remain neutral on the Gateway project, saying they will make a decision only after considering the recommendations of the “fact-based” and “scientific” review panel. But they have declared it to be a matter of national interest that Canada diversify its energy exports away from a sole dependence on the United States to fast-growing Asian markets. The urgency of the issue has been heightened by the delay in a U.S. decision on the proposed Keystone XL pipeline from Alberta to the U.S. Gulf Coast. Mr. Oliver in particular attacked some opponents of energy pipelines as foreign-funded radicals who would stop all development.

Mr. Oliver said the government will review the NEB report and consult with affected aboriginal groups before making a final decision. “No project will be approved unless it is safe for Canadians and safe for the environment,” the minister said in a release.

First Nations leaders quickly condemned the panel’s conclusions that the economic benefits to the energy industry outweighed the environmental impacts, which include damage to grizzly bear and caribou populations and the risk of a major spill in coastal waters.

B.C. Environment Minister Mary Polak said government remains committed to its five conditions, which include accommodation of aboriginal concerns and ensuring financial benefit for the province, and that so far they have not been met. Alberta Energy Minister Diana McQueen said the two provinces have agreed on the need to meet those five conditions, and she welcomed the panel’s recommendation. Opening Asian markets for Alberta’s energy exports is “critical to our continued economic success,” she said.

Federal New Democratic Party Leader Thomas Mulcair and his Liberal rival Justin Trudeau have both come out in opposition to the Gateway pipeline, which has become a lightning rod for opposition to the government’s broader energy and environmental agenda.

NDP MP Peter Julian, who represents the B.C. riding of Westminster, said the Conservatives will face an electoral battle if they approve the project. “If the Harper government thinks it can ram this through without any political consequences, it’s got another think coming,” he said.