INDIANAPOLIS (AP) — State regulators on Thursday issued the final environmental permit needed for BP PLC to start work on a planned $3.8 billion expansion of its oil refinery along Lake Michigan.

The air emissions permit still needs approval from the U.S. Environmental Protection Agency, but the state action allows BP to start construction work at the Whiting refinery.

An environmental group that has been fighting the project called the state's review "drive-by permitting" and said it was considering its options for appealing the decision.

Project foes have raised concerns about increases in carbon dioxide and other pollutants coming from the expanded refinery about 20 miles southeast of downtown Chicago.

But Indiana Department of Environmental Management calculations are that the refinery expansion will result in improved air quality and that the refinery's emissions will meet all state and federal clean air laws, said Dan Murray, an IDEM assistant commissioner.

BP spokeswoman Valerie Corr said company officials were reviewing the state permit but did not know of any immediate objections to conditions included by regulators.

Some site work was to begin immediately, with completion expected in up to four years, Corr said.

BP has said the expanded refinery would be the nation's top processor of heavy high-sulfur Canadian crude oil, boosting its annual production of gasoline, diesel fuel and jet fuel by 15 percent to about 4.7 billion gallons annually. Some 1,700 people work at the 119-year-old refinery.

Ann Alexander, senior attorney at the Natural Resources Defense Council's Chicago office, said the pollution estimates by state regulators and BP failed to take into account all the expected emissions from three new flares that would be added at the refinery. Those tall chimney-like structures burn off waste substances.

"IDEM is apparently trying to set the land speed record for issuing permits, but they're running roughshod over the public interest in the process," Alexander said.

BP officials have said that since 2001, the refinery's overall air emissions have declined 68 percent from an ongoing modernization project that has cut sulfur dioxide, nitrogen oxide, particulate matter and other emissions.

The company has projected emissions of some pollutants, such as sulfur dioxide and particulate matter, will increase when the refinery project is completed in 2011. But officials say levels of those pollutants will remain below currently authorized limits.

Philip Hoffman, a spokesman for the EPA's Chicago office, said that agency had been working closely with state regulators on the refinery permit, but would be reviewing it in the coming weeks to ensure it meets all federal laws.

BP officials promised last summer to cut the projected discharges into Lake Michigan of ammonia and suspended solids — tiny particles of pollution that elude the current treatment methods. That came after Indiana regulators approved a new permit allowing higher discharges, sparking complaints from Chicago residents and leaders.

"IDEM is unfortunately refusing to learn from its past mistakes," Alexander said. "Last summer, they faced an enormous public outcry over an inadequate permit issued with insufficient public input. They had an opportunity to do things right this time, and they didn't take it."