CALGARY - Suncor Energy Inc. (TSX:SU) says it has received approval from Alberta's energy regulator to expand its Firebag oilsands project near Fort McMurray.

The oil and gas producer, refiner and fuel retailer - which merged with former Crown corporation Petro-Canada last August - said Thursday the Alberta Energy Resources Conservation Board has approved its application to develop three additional stages of the project.

Each of the three new stages has a planned production capacity of approximately 62,500 barrels per day, Suncor said.

"Regulatory approval for further expansion of Firebag is an important milestone for Suncor," stated chief operating officer Steve Williams. "This expansion keeps us on target for continued production growth, while at the same time reducing the overall environmental intensity of the barrels we produce."

The company said cost estimates for the expansion will be detailed when it receives final approval from Suncor's board of directors.

The planned facilities will use steam-assisted gravity drainage, or SAGD technology. In SAGD, oil producers inject steam via pipelines to melt tar-like heavy oil located deep underground and then pump the oil through another pipeline to the surface.

The first two stages of Firebag have been in operation since 2003 and 2005, respectively. Together, they produce approximately 60,000 barrels per day.

The $3.6-billion third stage is expected to begin production in the middle of next year with planned production capacity of approximately 62,500 barrels per day.

Preliminary work is underway on a fourth stage, with production set to begin in late 2012.

A report by an environmental think-tank released Wednesday looked at the environmental performance of nine in-situ oilsands producers, concluding those types of projects aren't necessarily greener than the open-pit mines most associate with the oilsands.

The Pembina Institute's study said Firebag ranked ahead of the rest of the pack in its environment performance, with a 60 per cent grade - suggesting there was still room for improvement. The average grade was 44 per cent. The report called for stricter oversight to ensure in-situ oilsands producers across the board use best industry practices.

Shares in Suncor were virtually unchanged at $32.13 on the Toronto Stock Exchange Thursday.