The Ulster Canal starts and ends in Northern Ireland, but about half of its 93-kilometre length is in Co Monaghan. It was closed more than 50 years ago but consultants have now described it as an "invaluable" heritage resource, which could be "lost altogether" unless reopened to navigation.

Designed by the great Victorian engineers Thomas Telford and John Killaly, it was infamous in its day for having the narrowest gauge of any navigation in Ireland. But if restored it would link the Erne and Shannon systems with Lough Neagh, bringing benefits to many towns along the route, according to an EU-funded feasibility study, jointly commissioned in May 1997 by the Department of Arts, Heritage, Gaeltacht and the Islands and the North's Department of Agriculture.

The two departments, however, have made it clear that they are "not in a position to make any commitment to proceed with the restoration project at this time".

Although they agreed the study "could open the way to an imaginative joint restoration project with benefits to communities on both sides of the Border", they said there were "major financial, legal and environmental considerations to be addressed" as well as "current constraints on public expenditure".

The study - carried out by ESB International and Ferguson and McIlveen with inputs from Price Waterhouse and Tourism Development International - examined a number of options before recommending a £79.5 million scheme, making greater use of natural rivers to bypass some of the original locks.

It confirms the technical feasibility of reopening the Ulster Canal, describing this as "a large engineering project which would provide significant direct and indirect benefits in the areas of tourism, heritage and economic development" as well as providing a "key link with Ireland's existing inland waterway network".

The study points out that the canal passes through a significant number of towns and villages, including Charlemont, Co Armagh; Moy, Benburb and Caledon, in Co Tyrone; and Monaghan, Smithborough and Clones, Co Monaghan, where moorings could be developed to broaden the area's tourism infrastructure.

In Monaghan, the navigation "would open up a major tourist facility through the town". Ironically, however, the town's current development plan proposes using part of the canal route for a section of an inner relief road (a fate once intended by Dublin Corporation for the Grand Canal) though this is "under review".

The study also notes that many stretches of the Ulster Canal have been filled in, with some locks and bridges removed. But it says 60 per cent of the original route is intact, including 56 masonry arch bridges and an assortment of other structures including lock-keepers' cottages recognised for their heritage value.

An "extensive" market research programme found that, apart from the obvious cruise-hire market, there was potential to attract activity holiday-makers, including walkers, cyclists and anglers. Direct spending could amount to £2 million a year in the third year of operation, ultimately rising to £7.5 million a year.

Among the factors which would influence sustained growth, according to the consultants, are political stability in Northern Ireland, the development of navigation in Lough Neagh and rebuilding the canal towpath as an amenity. They calculated that the restoration project would take at least four years.

The biggest single cross-Border project, apart from the upgraded Dublin-Belfast mainline rail service, was the restoration of the Ballinamore-Ballyconnell Canal to link the Shannon and Erne systems. Completed at a cost of £33 million, with ESB International as project managers, it is regarded as a success.