Empire Energy has won full environmental approval to begin fracking in the Northern Territory’s Beetaloo Basin, despite an ongoing legal challenge to its receipt of $21m in commonwealth grants to help fund the work.

The gas company has come under scrutiny in recent months, including by a Senate inquiry exploring its links to the Liberal party and its receipt of $21m from a $50m federal grants program.

The grants, awarded through the Beetaloo cooperative drilling program, also sparked a federal court challenge by environmental activists, who argue the decision to give Empire the money was unlawful because the federal resources minister, Keith Pitt, failed to properly consider the risks to global heating.

On Wednesday, the company announced it had secured crucial environmental approval from the Northern Territory government, which gives it the green light to drill new wells in the basin.

The state environment minister, Eva Lawler, said the company had “done all the right things” to secure the approval and suggested the greenhouse gas emissions from the exploration phase were “manageable”.

In an announcement to the ASX, Empire said “we expect to be drilling by the end of this month”. The company said it had approval for up to seven horizontal wells.

Environmental groups condemned the decision, particularly given the looming Cop26 climate conference in Glasgow.

Protect Country Alliance spokesperson Graeme Sawyer said history would “not look kindly on the Gunner government” in the NT.

“We are just weeks away from the most important climate meeting since the Paris agreement was forged,” he said. “We need immediate action to halt the worst impacts of the climate crisis.”

The federal Greens leader, Adam Bandt, also criticised the decision to open up new gas fields on “the eve of the climate’s last chance global summit”.

“This new Labor climate bomb threatens our chance of stopping global warming. Scientists say no more coal and gas but [NT] Labor isn’t listening,” Bandt said. “Gas is as dirty as coal and the Betaloo gas project will be worse for the climate than the Adani coalmine.”