A United States court has rejected Manitoba's challenge to a North Dakota water diversion project.

North Dakota wants to drain water from Devils Lake. It is a body of salt-laden water that is prone to flooding. Its water level has risen by 9 metres since 1993.

Manitoba and People to Save the Sheyenne, a North Dakota group opposing the $28-million US outlet, believe that salt water from the lake could contaminate the Red River, which flows through Winnipeg, if allowed to drain through the Sheyenne River.

Three Minnesota agencies also joined in the lawsuit.

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The plaintiffs are also concerned the diversion may introduce alien fish species into Canadian, North Dakota and Minnesota waters.

They argued Monday that the North Dakota Health Department did not give enough notice before issuing a water discharge permit.

But Southeast District Judge Richard Grosz rejected both arguments.

He said evidence showed North Dakota's water quality laws hadn't been broken.

Work on the diversion channel started last fall. It's due to be completed as early as late this fall or by next spring.

"It's a disappointment and a setback," admits Dwight Williamson, spokesman for Manitoba's Department of Water Stewardship. "We will be pursuing and discussing with our colleagues in this case whether or not there's opportunity for appeal, " he said.

Milt Sauer, one of several members of People to Save the Sheyenne who attended Monday's hearing, said his group plans to take the issue to the North Dakota Supreme Court.