"This will cause irreversible damage to our city," said Federico Prieto Gaxiola, president of Mexicali's Economic Development Council, in announcing the lawsuit in the Baja California capital.

The council, a business-oriented planning group, has joined forces for the legal action with two California environmental organizations, Citizens United for Resources and the Environment (CURE) and Desert Citizens Against Pollution.

The lawsuit comes as rapidly growing communities on both sides of the U.S.-Mexican border put pressure on limited water resources, and the United States and Mexico confront unresolved issues about water rights.

The water saved through the lining project could supply 134,000 households in San Diego County, according to the San Diego County Water Authority.

But farmers in the Mexicali Valley who have relied on seepage from the All-American Canal to irrigate their crops for five decades say the project would hurt them badly.

"We firmly believe that we have the right to use this water," said Victor Hermosillo, a former Mexicali mayor.

Hermosillo, who owns one of Baja California's leading construction companies, is spearheading the Mexican Development Council's campaign against the canal lining.

R. Gaylord Smith, a San Diego attorney who is the lead trial lawyer in the lawsuit, said the project violates the constitutional rights of users in Mexico. "In the western part of the United States, we have a rule about water called 'first in time, is first in right.' That law applies here," he said.

The lawsuit also claims the project would harm wildlife on both sides of the border by drying up Mexican wetlands that are fed by canal seepage.

The U.S. government "never looked at the socioeconomic impacts of what will occur by this action in Mexico," said Bill Snape, a Washington, D.C., environmental attorney for CURE.

U.S. officials have steadfastly maintained that the water carried by the All-American Canal belongs to California, part of California's annual 4.4 million acre-feet under the 1922 Colorado River Compact among seven western U.S. states.

"The water that we're saving through lining the canal is water that is allocated to California, not water that is allocated to Mexico," said Gordon Hess, director of imported water for the San Diego County Water Authority. "We believe that each side has the right to manage its resources as efficiently as possible."

For years, the lining issue has been discussed by the U.S. and Mexican federal governments through the International Boundary and Water Commission (IBWC). The talks continue, he said, and the United States has been offering to reduce the effects of the canal's lining on Mexico. One suggestion is to help Mexico find financing to improve irrigation techniques in the Mexicali Valley.

The lawsuit does not affect the talks, Hess said. Nor does its filing affect the timing of the lining project, currently in the design phase. Construction is expected to begin early next year. Costs are estimated between $180 million and $293 million.

The lawsuit was filed in Las Vegas because the U.S. Bureau of Reclamation -- an agency of the U.S. Department of Interior that owns the All-American Canal -- has its regional office in Nevada.

A spokesman for the agency said yesterday it was premature to comment on the lawsuit.

The lining dispute has forced discussion of border groundwater issues that were never clearly defined when Mexico and the United States signed a water treaty in 1944, said Steve Mumme, a Colorado State University political science professor who studies border-water issues.

"In the area of water, there's one enduring lesson: Where you don't have understanding, you have conflict. This is one of those areas, going back to treaty negotiations, where understanding was not achieved."