Perdaman Chemicals and Fertilisers says it has received Federal environmental approval for its $3.5 billion urea project near Collie.

The Federal Department of the Environment, Water, Heritage and the Arts approval covers offsite environmental impacts but not the project site itself, which is subject to a separate Federal referral by site owner, LandCorp.

Perdaman chairman and managing director Vikas Rambal said receiving Federal environmental approval marked an important milestone for the project.

The project, which is expected to generate annual export earnings of more than $800 million, will be Australia's first gasification plant, turning Collie coal into urea (fertiliser).

Perdaman said the approval marked the first of several milestone announcements anticipated over the coming weeks.