The long-planned Lagoon Ridge subdivision in Oak Bluffs got a green light from the Martha’s Vineyard Commission Thursday night, with a number of strict conditions aimed at mitigating the effect of wastewater in the Lagoon Pond watershed.

More than five years in the making, the 32.5-acre, 23-lot subdivision off Barnes Road has accumulated a long list of conditions — related to construction, affordable housing, open space, wastewater and other features. If built, it will be the first project to make use of an Oak Bluffs bylaw that provides flexibility for developments with a cluster design.

Much of the discussion before the commission has focused on wastewater and nitrogen entering the Lagoon Pond watershed. The project met all the MVC wastewater requirements, but came as a wakeup call for the commission to rethink its policies in light of the declining health of the Lagoon and other Island ponds.

The Massachusetts Estuaries Project, which has issued detailed reports on most coastal ponds in the state, recommends a 47 per cent annual reduction in wastewater nitrogen entering the Lagoon. The Lagoon Ridge project will add 110.4 kilograms of nitrogen per year to the watershed.

On the other side of the pond, the Tisbury board of health is considering adopting a bylaw that would impose fees on new developments that add nitrogen to the watershed. Public hearings begin this month on what is being called a no-new-nitrogen bylaw.

At Lagoon Ridge, the commission will require the use of denitrifying septic systems, as well as regular effluent testing. Other requirements include the presemnce of an on-Island technician to handle problems with the septic systems, education of prospective homebuyers as to how the systems work, and the submission of a site-specific operation and maintenance manual for commission review.

And marking a first, the MVC will require landowner and developer Davio Danielson to post a bond to insure the septic system functions as planned. The bonding amount will depend on the final design of the system.

Commission executive director Adam Turner, who proposed the conditions on Thursday, said the bonding requirement was fairly common in the regulatory world, and he compared it to an insurance policy.

“We definitely want to have belts and suspenders for the first few years as we evaluate whether this thing works or not,” Mr. Turner said, although he agreed the project as designed would likely meet the requirements.

Commissioner Linda Sibley said she supported the measure since Island ponds affect the region as whole. “I think we have to take responsibility for this,” she said.

But commissioner Doug Sederholm reiterated his concerns about the commission lagging in its own policies when it comes to protecting coastal ponds. “Even though this applicant is adhering to our nitrogen policy, our nitrogen policy is grossly out of date,” Mr. Sederholm said.

After tying up a few loose ends, including some related to walking trails and draft covenants for a homeowners association, the commission voted unanimously to approve the project as conditioned over the past few weeks. The project now goes to the Oak Bluffs planning board for review at the town level.

In other business, the commission partly hung tough on a request to loosen restrictions attached to the Barn Bowl and Bistro in Oak Bluffs, which opened last year.

When the MVC approved the bowling alley, hours were restricted and live entertainment prohibited out of concern from neighbors in the mixed-use area off Uncas avenue. Bowling alley owners now want to lengthen business hours and allow live entertainment in an upstairs space.

But the owners have yet to comply with more than one of the original conditions attached to the project.

The owners had agreed to offer two affordable apartments, but only one has been certified by the Dukes County Regional Housing Authority. And two of the air-handling units on the bowling alley faced into residential areas, also violating the conditions. The owners asked for 90 days to certify the second apartment; the commission gave them 60. The commission also required that the two air-handling units be moved away from the residential area.

And the commission said it will not allow large amplified bands as requested by the owners, but will allow smaller trios.

Commissioners disagreed over whether owners should add a layer of plywood to an existing wooden fence to dampen noise, but agreed to allow it on a trial basis.

The owners want to open an hour earlier (8 a.m.), with last call an hour later (11:30 p.m. Monday through Thursday and 12:30 a.m. on Friday and Saturday). Commissioners agreed to an 8:30 a.m. opening time, but struggled with the last call. Some felt the later hours would create more of a bar atmosphere, while others argued it would help keep the business afloat. The commission finally agreed to let the town selectmen decide.

A single lamppost will also be allowed in the bowling alley parking lot, although a final plan for that lighting will need to return to the MVC land use planning committee. All but the lighting and compliance issues were approved on a trial basis and will need to return to the commission by the end of January or else revert to the prior conditions.

In a packed-agenda night, the MVC also voted unanimously not to review the demolition and reconstruction of the Katama General Store as a development of regional impact (DRI). Owners Jackie and Doug Korell plan to raze the familiar red building and replace it with a larger barn-style structure. Parking, storage and office space have been major concerns over the years.

The project will require approval from the Edgartown planning and zoning boards, along with the board of health and selectmen.

“There is plenty of authority at the town level to deal with all the issues that are important,” Ms. Sibley said.