Hello, new to the website and chats. BUT I NEED HELP!

I need help with my 14 year old sister in law. I am 21, I have a 8 month old son. Very happy with my life right now. I am a previous drug and alcohol user ( I will always struggle mentally, this does not concern my sister in law though). My sister in law is not aware of my struggles, except for smoking and drinking. Never have I made it sound OK to do either. She lives with her mother, who is very concerned how she would react in certain situations with peer pressure. She strongly believes that she has done nothing but suspects her friends of drinking. I have put hints out there, which is why she thinks her friends have 'tried' alcohol.

She is 14 years old. Going into 9th grade. Shes a beautiful girl who has been in pageants, but does not have a good self image of herself. I am constantly telling her how pretty she is, due to the fact she compares herself all the time to friends (including me, very short, very petite) I always use positive words, and try to keep her energy focused on other things so there are no lingering thoughts on negative things.

We were talking the other day and she told me that she has been drinking. (has came home drunk a few times, never drunk enough that my mother in law has noticed though)- not that it makes it OK, which I have made that known to my sister in law. She also has smoked a few times. hasnt in a while, but has smoked.

I am worried that she believes this is OK. And I am telling everyone this because I need help on how to handle the information that has been given to me.
i do not want to betray her by telling her mother, my mother in law. I want her to be able to talk to me. She knows she can trust me and that i'd do anything for her. I do NOT want to turn my back on her, or make her feel like shes alone. She does not have a sister so i'd be more then happy to fill that role for her.
But what exactly should my boundries be??
Where do I draw the line between sister in law you can trust, and my obligation as a daughter in law, trusted to make the right decisions???

I know if its damaging her, or if shes hurting herself, I would take actions immediatly. I am just unsure of what to do. I do not want her to go down the path I went on. I do not want to gorify drugs or give her the impression that its not a big deal.
I welcome questions, concerns, or just thoughts. Please, anything will help me!!!
Thanks,
Cait