(Adds details on NGTL system, analyst comment)
By Nia Williams
CALGARY, Alberta, Oct 31 (Reuters) - The Canadian government on Monday approved the C$1.3 billion ($968.78 million) expansion of a natural gas gathering pipeline in western Canada belonging to a wholly owned subsidiary of TransCanada Corp TRP.TO , with 36 conditions attached.
The NOVA Gas Transmission Ltd (NGTL) expansion project will create up to 3,000 jobs during construction and involve building and operating new gas pipelines facilities in northern Alberta, Natural Resources Canada ministry said in a statement.
TransCanada was not immediately available for comment.
The current NGTL System is a 23,500-km (14,600-mile) pipeline that gathers natural gas from the fast-growing Montney and Duvernay shale plays in northern Alberta and north-eastern British Columbia.
The system is one of the largest in North America and gathers 66 per cent of the natural gas produced in western Canada.
The Canadian government is in the middle of reforming its regulatory process for major energy projects, and in January announced a set of interim principles to help make decisions on projects already under review, which the NGTL expansion was assessed under.
"The twin imperatives of economic prosperity and environmental protection guided us in our decision-making and I am confident the right decision was made in the interest of Canadians and that this project supports the principles of sustainable development," Jim Carr, Canada's Minister of Natural Resources, said in a statement.
Key conditions include engaging indigenous communities and developing a caribou habitat restoration plan.
Dirk Lever, an energy infrastructure analyst with AltaCorp Capital in Calgary, said the approval had been "absolutely expected" as natural gas gathering pipelines attract far less scrutiny and controversy than major crude oil export pipelines.
TransCanada's Keystone XL oil pipeline to the United States was rejected by U.S. President Barack Obama last year, while its Energy East crude pipeline to Canada's Atlantic coast is facing fierce opposition from environmentalists.
Western Canadian natural gas tends to trade at a discount to U.S. benchmark prices because of distance to east coast markets and congestion on the current NGTL system as production in the region has ramped up.
"That's where all the growth has been in the Montney and Duvernay and that's why it needed to be expanded," Lever said, adding that once completed the NGTL project should help support gas prices. "Eventually it will allow more gas that is produced in the field to find a home."
($1 = 1.3419 Canadian dollars)