Director James Cameron warned Canadians Wednesday that Alberta's oilsands "will be a curse" if not enough is done to prevent devastating environmental damage from their development.

Cameron has spent three days in Alberta, touring oilsands projects and meeting with stakeholders, including government and aboriginal leaders, to better understand a system he once called Canada's "black eye."

After a meeting Wednesday morning with Premier Ed Stelmach, Cameron told reporters that the oilsands will yield great benefits for Alberta and Canada, but only if efforts are made to better understand where energy comes from, how it's extracted and the social and environmental costs of its production.

"(The oilsands) will be a curse if it's not managed properly, (but) it can also be a great gift to Canada and to Alberta if it is managed properly," Cameron said.

"Personally I believe that this is an incredible resource, and I certainly understand why everybody is stampeding toward it with this desire to exploit it as rapidly as possible, because it's the single largest reserve of potential crude oil next to Saudi Arabia.

"In an energy-starved future, that's going to…put Canada in a different position and help with energy independence in North America."

After arriving in the province Monday, Cameron toured a Syncrude facility, including a reclaimed mine that is now a wetland known as Bill's Lake.

He then travelled to the community of Fort Chipewyan, where he listened to the concerns of people living downstream from the oilsands, including fears over the safety of the drinking water and fish.

Cameron said he was presented with a study during his meeting with Stelmach that refuted the claims of environmental damage by the residents of Fort Chipewyan.

But the Oscar-winning director said residents told him they are afraid to swim in or fish the Athabasca River.

"I think we need to respect the First Nations communities for having their finger on the pulse of what's happening to mother nature," Cameron said. "And if they say the fish taste different and they're being affected and something's going on, I think it would behoove us to listen to that and find out for sure what these causal links are."

Cameron said because the oilsands development is still in its infancy -- only between 2 and 3 per cent of tar sands deposits are being mined -- the true environmental impacts are years away.

Therefore, Cameron said, greater regulatory controls must be placed on the industry, including caps on sulfur and carbon dioxide emissions, and a moratorium on tailings ponds, the dump sites for toxic waste from the oilsands. Cameron said the technology to mine via a so-called dry finds process, which does not require tailings ponds, is only about five years away.

"I think it's impossible to imagine a refining process and an extraction process on this scale that did not have negative environmental impacts. That would have to be some kind of Immaculate Conception," Cameron said. "So it's important for us to embrace the fact that there will be negative impacts, they need to be understood, and they need to be mitigated at the source to the extent possible."

During his own post-meeting press conference Wednesday, Stelmach would not comment on Cameron's suggestion to place a moratorium on tailings ponds.

But he said his meeting with Cameron was worth his time for the healthy discussion about the oilsands' economic and environmental impacts.

Federal Environment Minister Jim Prentice said the oilsands need to be developed for economic and national security reasons, but agreed that it must be done in an environmentally responsible way.

"Let's be clear about what our national objective is," Prentice told CTV's Power Play Wednesday evening. "We intend to produce the oilsands, but we have to do it in an environmentally responsible way. We have to be the most environmentally responsible producer of all forms of energy, and that includes the oilsands."

But Green Party Leader Elizabeth May said the federal government has to do more to develop the oilsands in an environmentally sound manner.

"What James Cameron has done has been to help a lot of Canadians take the tour with him, to see the massive scale, to see the devastation of the environment, to understand more of the science and to see where we really are right now on this planet in terms of our overall imperative to get off fossil fuels," May told Power Play in an interview from Victoria. "And using oilsands crude, tar sands crude in the meantime, but how do you do that responsibly?"

Cameron called for independent research, not funded by industry, into how land can best be reclaimed after the extraction process is over, and on the true environmental impacts of the oilsands industry. He also urged oil executives, government and aboriginal leaders to work together.

"The world is looking at what you here in Alberta do," Cameron said, "and the decisions that are made here are really going to shape the energy policy of the future."