SAN FRANCISCO -- A long-discussed Imperial Valley canal lining project expected to bring billions of gallons of water a year to San Diego County for the next century has the go-ahead to proceed after the U.S. 9th Circuit Court of Appeals dismissed an environmental challenge.

The same court in August stopped all work on the then $219 million, 23-mile-long project because Mexican businesses, farmers and California environmental groups said lining the canal would kill Mexicali farming and wetlands. The project is designed to help reduce the amount of water California takes from the Colorado River.

However, the court dismissed the injunction in a ruling dated Friday but released Monday morning, based upon the fact that Congress passed a law in December saying the project should proceed and the courts had no authority over the matter.

San Diego County Water Authority officials said they were pleased with the ruling and that they could start building June 1. However, they also said that the delays had escalated the project's cost to $296 million, of which the state is paying $153.05 million.

The project, which could start delivering water by 2009, is expected to bring San Diego County residents enough water to sustain 154,000 households a year, every year for 110 years.

Lawyers representing the unusual coalition of Mexican business and California environmentalists could not be reached Monday by telephone for comment.

However, one lawyer wrote in an e-mail that they might try to appeal the ruling to the U.S. Supreme Court.

"This case is no longer about water but about whether Congress can take away the environmental rights of a few Americans when powerful lobbyists pay them off," wrote Malissa McKeith, attorney for Citizens United for Resources and the Environment. "Anyone who opposes liquified natural gas, nuclear power, the Green Path or any other politically popular project should be alarmed -- whatever they think of the All American Canal."

Water officials have been planning the canal lining project for nearly 20 years.

In 2003, it -- and a similar canal-lining project in nearby Coachella Valley -- became part of a complicated series of agreements among San Diego County, Imperial Valley, Coachella, the Metropolitan Water District of Southern California, the state of California, the federal Bureau of Reclamation, and, indirectly, the six Western states that share the Colorado River.

The project would create a concrete-lined, 23-mile replacement section of the All American Canal. Water that seeps through the now earthen bed would be "conserved," reducing the amount of water that California takes from the Colorado River each year.

The 82-mile canal runs from northeast of Yuma, Ariz., down along the U.S.-Mexico border into Imperial County east of San Diego, delivering water from the Colorado River to the desert.

The water that would have percolated through the canal's earthen bed will now be shipped to San Diego County residents through Metropolitan Water District pipelines.

The coalition of Mexican businesses, farmers and California environmental groups went to court to stop the project because they said lining the canal would kill off groundwater supplies feeding Mexicali farmers, wetlands and endangered animals.

Dan Hentschke, the Water Authority's top lawyer, said Monday that the ruling was a good one.

"It's a good decision, obviously, for the U.S. and for San Diego, and for California," Hentschke said Monday. "This is the green light to go forward.

"I've know that (McKeith) has said they're going to 'take it all the way,'" Hentschke said of a possible continuation of the legal challenge. "But as far as I'm concerned, she has taken it all the way -- and lost. Further appeal of this, in my opinion, would be a waste of their time and their money. But that's up to them."

Water officials, and even the environmental coalition, were surprised in August when the 9th Circuit Court issued the injunction and banned all further work on the project until it could revisit the issue.

Before that, a Superior Court judge ruled against the challenge twice in 2006.

Then, in December, Congress passed an omnibus bill containing several proposed laws -- including a portion pushed by the Water Authority. That portion said the project was so important that it should be built "without delay."

The bill also said that Congress, not the courts, has sole authority to deal with international treaties and whether water seeping out of the All-American Canal belongs to Mexico or the United States.

The court ruling released Monday stated that the environmental challenges were rendered legally "moot" -- meaning the issue no longer needed to be debated by the courts -- because of the new law.

Contact staff writer Gig Conaughton at (760) 739-6696 or gconaughton@nctimes.com.