The environmental watchdog has conditionally recommended the development of the $US2.7 billion ($A3 billion) Collie urea operation by private company Perdaman Chemicals and Fertilisers.
The operation is planned to be built at the Shotts Industrial Park, about 7.5km east of Collie, and will process coal mined from Griffin's coal operation north of the park.
The urea will be transported by rail to Bunbury Port, under an agreement with WestNet Rail which has yet to be finalised.
EPA chairman Paul Vogel said the urea plant was unlikely to compromise the watchdog's objectives, should recommended conditions be properly implemented.
"The Collie Urea Plant would be a minor contributor of emissions to the Collie airshed, however, the fact that there are predicted exceedances of national standards means the EPA's objectives will only be met provided the emissions from the Muja A/B powerstations are appropriately addressed during its refurbishment,' Dr Vogel said
"The Plant would be a significant emitter of greenhouse gases and with the continued uncertainty over a Commonwealth carbon market, the EPA has recommended greenhouse gas abatement conditions addressing carbon capture and storage.
"The Shotts Industrial Park will have five development areas available so to prevent the Collie Urea Plant from constraining future industries within the Shotts Industrial Park, the EPA has recommended a condition specifying noise criteria at the buffer boundary.
"Black Cockatoo nesting trees which are removed during construction are recommended to be replaced with artificial nesting boxes on a six-for-one basis."
The EPA recommendation is subject to a two-week public appeal process.
The operation will need final approval from the state environmental minister.
