The federal government's newest port authority has approved a controversial ethanol plant slated for Oshawa's port lands, raising the ire of municipal politicians and accusations of cronyism from the NDP.

The Oshawa Port Authority, created earlier this year, voted in a private meeting on Thursday to approve FarmTech Energy Corporation's bid to build a $200-million facility that will turn corn into ethanol, an alcohol added to gasoline to reduce carbon monoxide emissions.

Construction of the plant, one of the largest ethanol facilities proposed in Canada, is expected to begin this summer and be completed by 2014. FarmTech expects to generate 50 permanent jobs, 210-million litres of ethanol annually, and economic opportunities for businesses and farmers in the region.

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"There's tens and tens of millions of dollars of economic opportunity that this creates," said Gary Valcour, chair of the port authority. "At the end of the day, the economic advantages to the port, to the port users, to the larger regional community of the project was just too overwhelming for us to turn away."

But the industrial ethanol plant, first proposed in 2006, has been staunchly opposed by Oshawa City Council, which wants to create more space for residential development along the waterfront in the city east of Toronto. Oshawa is now exploring whether it can challenge the port authority's approval, said Mayor John Henry.

"You should be able to sit at the harbour at the end of the day with friends and family and enjoy a sunset and watch people come in and out in their boats," Mr. Henry said. "That's not going to happen if they build an ethanol refinery."

Environmental activists have also raised concerns over the site's proximity to a sensitive wetland.

Mr. Henry questioned why the project was approved so early in the port authority's mandate and before a provincial representative was appointed to the seven-member board. Although the port's board includes a municipal representative, the federal government has a say in who fills the other positions.

New Democrat MP Olivia Chow, her party's transport critic, accused the government – which has been hit by controversies involving other port authorities – of stacking the Oshawa board with Conservative insiders.

Mr. Valcour is the past president of the Conservative riding association in Finance Minister Jim Flaherty's Oshawa-Whitby riding, while Chris Kluczewski, part of the port's board of directors, was also a member of the riding association.

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Mr. Flaherty's riding association also included Tim O'Connor, a former director of FarmTech and brother of the company's president, Dan O'Connor.

Both Mr. Valcour and Dan O'Connor rejected allegations that politics and cronyism played a role in the port authority's decision, saying the accusations are groundless.

"Comments like that are absurd and they're made by people who know absolutely nothing about the process we've been through," Mr. O'Connor said. "Anybody with any business sense would look at this case and say it makes perfect sense for the port authority to approve and to want a project like ours that is going to utilize the existing port facilities."

FarmTech's project proposal has passed a federal environmental assessment. The facility will be located next to an asphalt plant and near a sewage treatment plant. The Greater Toronto Area is the largest market for ethanol in Canada.