TORONTO, OCT. 22 -- In an important test of the Canadian government's authority to enforce its environmental laws, federal officials in Ottawa and the province of Saskatchewan are locked in a legal battle over the future of a nearly completed flood-control and irrigation project that straddles the border with North Dakota.

The Saskatchewan government is defying officials in Ottawa by rushing to complete construction of a dam on the Souris River, near the U.S. border. Provincial officials say the dam is needed to relieve drought in the southeastern corner of the province and reduce the risk of flooding in the North Dakota city of Minot.

Work on the $140 million project near Estevan, Saskatchewan, is proceeding around the clock despite a stop order by federal Environment Minister Robert de Cotret, who is seeking a court injunction to back his authority, claiming that a federal environmental impact study has not been completed. Environmentalists say that the project could be harmful to wildlife on both sides of the border.

Saskatchewan Premier Grant Devine, in turn, has gone to court to try to block federal intervention, saying that to stop the project would be a breach of a contract with North Dakota and the U.S. government, which already have contributed $17 million for the dam and invested $50 million in flood control work on the U.S. side of the border.

U.S. officials maintain that Saskatchewan is legally obligated to complete the project as outlined in a 1989 U.S.-Canada agreement, regardless of whether or not it is found to be environmentally sound.

In Canada, federal and provincial environmental impact studies are often conducted after the start -- or even the completion -- of major construction projects. Environmental groups contend the outcome of the Saskatchewan-Ottawa battle is important as a bellwether of the federal government's ability to insist on environmental reviews of other major projects, such as the $62 billion James Bay hydroelectric project in northern Quebec, which is being opposed on environmental grounds by Eskimos and Cree Indians.