The federal government says budget concerns are behind cuts to a planned Arctic naval facility.

A defence department official says downgrades to plans for the Nanisivik station on the eastern gate of the Northwest Passage were necessary because of the unexpected high costs of building in the North.

Kim Tulipan says the cuts were made to keep the project within its $100 million budget.

Defence Minister Peter MacKay said last week the cuts wouldn't make any difference to northern military operations.

MacKay says the facility will still be an improvement.

Original plans included office, accommodation and workshop buildings as well as improvements to the wharf. They've now been reduced to an unheated warehouse and a small tank farm.

Improvements to the aging 1970s-era jetty have been put off for years.

"Any infrastructure work in the Arctic poses a number of unique challenges due to the remoteness of the location and various other difficulties, such as a shorter construction season and permafrost. Therefore, the original scope of [Nanisivik] had to be reduced to ensure the project remained on budget," Tulipan wrote in an email.

Nanisivik was a centrepiece of Prime Minister Stephen Harper's Arctic "use it or lose it" speech in 2007.

Dennis Bevington, the New Democrat MP for the Western Arctic, said last week that the downgrade is an example of a plan that wasn't well thought out in the first place.

Tulipan said the costly challenges couldn't have been foreseen in 2007. She said knowledge about the challenges has been gained only through the work that was undertaken in the years since 2007 as project officers became more familiar with the site.

MacKay noted the Harper government has invested more in Arctic infrastructure than any in recent history.

Tulipan said the primary role of the station will be to refuel the navy's arctic offshore patrol ships as well as other government vessels. The berth also allows government ships to conduct some alongside repairs, and will provide the Canadian Coast Guard with a cargo laydown area to support their Arctic re-supply mission.

In addition, she said it will allow the navy and coast guard to transfer a modest amount of stores and provisions as well as facilitate the transfer of small numbers of personnel using the airport at Arctic Bay.