Fernley (United States) (AFP) - Fixing a crucial but leaking, century-old canal that severely flooded the city of Fernley might have seemed like a no-brainer.

But when federal officials stepped in to do just that, residents sued.

In a situation that highlights the complex, competing claims to water in the US West, this high desert city says water seeping from the dilapidated waterway's earthen base is essential for its very survival.

Residents say a new concrete lining -- intended to safeguard the city from future breaches -- would cause wells they have relied upon for decades to dry up.

"It would be like if we went into the emergency room with a broken ankle, and the doctor's fix was to cut off our leg," said lawyer David Rigdon, who represents the city of Fernley.

"The cure is worse than the disease."

Nobody disputes that canal repairs are needed.

Its levees breached in 2008 -- not for the first time -- flooding hundreds of homes. The canal's operator was sued for negligence, and settled for around $20 million. 

The federal government wants to fix the safety issue urgently, and believes lining the canal would reduce wasteful seepage of water that it says does not belong to the city.

But Fernley homeowners and farmers point to the reason the canal exists in the first place.

For some 120 years, it formed part of the very first project under President Theodore Roosevelt's Reclamation Act, intended to irrigate the US West.

The act encouraged Americans to move to formerly arid lands and cultivate lush fields. This particular canal takes water originating in Lake Tahoe, and irrigates vast alfalfa and melon fields.

Fernley itself was established midway along the waterway in 1904, some 30 miles (50 kilometers) east of Reno, as farms and ranches sprung up to make use of the canal's irrigation systems.

Leaking water has since created a reliable underground aquifer, allowing Fernley's population to boom, to nearly 25,000.

'Devastating'

Now, Fernley finds itself at odds with the very same Bureau of Reclamation that first built the canal.

"The agency that created it -- they're the ones yanking the rug out from underneath us," said David Stix, a local rancher and former Fernley mayor.

"We're having our lifeline cut off," he said.

Using a legal device known as "estoppel," lawyers argue that if people are induced to rely on a resource, such as water, then the entity that first provided it cannot later remove it.

Still, attorney Rigdon admits it is a "pretty unique situation."

The Bureau of Reclamation said it would not comment while the matter is being litigated.

Despite Fernley's efforts to delay it, the work to concrete-line the canal is already well under way, and the canal has sat empty for months due to construction.

Groundwater levels have begun to decline.

"The project has to finish -- we have to get water back into the Truckee Canal, we have to move forward," said Stix, who like much of the community wants its design modified, so it can continue replenish the groundwater just as before.

Otherwise, "the lining of the canal will destroy our environment," said Stix.

"Maybe not in my lifetime, but my children's lifetime. It'll be devastating."