A report commissioned by former Environment Minister Jim Prentice asked whether the Canadian government had a monitoring system in place for oil sands.
"In the view of the panel, the answer is no -- but ... we are convinced that the current activities could be transformed into a system that will provide credible data for decisions," the panel said in its 49-page report.
The panel said that "visionary leadership" is needed to address environmental concerns as there is a "significant shortcoming" in current monitoring mechanisms.
Aboriginal Canadians have expressed concern that there were major health and environmental risks associated with metals tied to oil sands in the region.
Environmental groups, meanwhile, worry about the potential for an oil spill from a planned pipeline and expressed concern about the damage caused to land, air and water during oil sand operations.
Canadian Environment Minister John Baird said he heard the issues raised by the panel "loud and clear."
"The oil sands are important to Canada's economic future but they cannot -- and will not -- be developed in a way that damages our environment," he said in a statement. "We can and will balance prosperity and stewardship."