Resources giant Woodside's (ASX:WPL) proposed liquefied natural gas plant (LNG) for the Burrup peninsula in Western Australia's north has failed to meet marine standards set by the state's environmental watchdog.

The Environmental Protection Authority's report says the predicted coral loss caused by the $A10 billion ($US8.57 billion) Pluto LNG plant would greatly exceed accepted levels.

Deputy EPA chairman Dr Andrea Hinwood said Woodside's current offset program was inadequate to address the potential loss of coral.

"The EPA concluded the proposal did not meet the EPA's objectives for the marine environment in that it was going to substantially increase the cumulative loss of coral within the port area and was also going to have an impact on the adjoining proposed marine park," Dr Hinwood said.

However, the plant could go ahead if Woodside agreed to a more substantial offset package and a range of other conditions, the report noted.

A Woodside spokeswoman said the company was satisfied with the EPA's recommendations but would not say whether it would agree to watchdog's conditions.

"That's an issue we'll have to work through with the government and understand their expectations. Generally we're satisfied," the spokeswoman said.

The report was unlikely to affect the project's timing or significantly increase the total cost of the plant, she said.

The report has been handed to WA's Environment Minister David Templeman who will make the final decision on whether the project can proceed.

Mr Templeman has declined to comment.

The EPA's report is now subject to a two week appeals period. Woodside said it was still considering whether to make an appeal.

Last week, federal Environment Minister Malcolm Turnbull announced 241 square kilometres of the Dampier Archipelago, which includes the Burrup peninsula, had received National Heritage listing.

That included 99 percent of the land where ancient rock art is known to exist, but not include the sites for the Pluto plant.

Woodside, which has been criticised by green groups over the plant's impact on the rock art, has already moved carvings from the Pluto A site to accommodate its development.

(C) 2007 Asia Pulse Pte Ltd.

Related Project
Pluto LNG Project
Facility Type: LNG Owner: Woodside Petroleum Ltd.; Tokyo Gas; Kansai Electric
Scope: New Construction Location: Burrup, Western Australia Australia