Minnesota wrapped up its environmental review of a proposed $2 billion Red River Valley flood control project Wednesday and is moving on to the make-or-break question of whether to permit a dam across the Red to protect Fargo from floods.

The end of Minnesota's environmental review clears the way for Fargo to start work on the first phase of construction — including possibly buying up Minnesota properties in the path of the diversion and breaking ground on a ring dike around the North Dakota towns of Oxbow, Bakke and Hickson.

The construction had been under a court-ordered freeze while the Minnesota Department of Natural Resources (DNR) conducted its review. But the end of the environmental study simply kicks off the next step for the DNR — a review of North Dakota's request for a permit to dam the Red upstream from Fargo and another bustling city — Moorhead, Minn.

"It's not an approval of the project, it's not an endorsement of the project," DNR Commissioner Tom Landwehr told reporters Wednesday.

The Red River Diversion project has been a source of tension between Minnesota and North Dakota.

Spring floods along the north-flowing Red spill across the tabletop prairie, sending residents scrambling to form sandbag brigades to protect homes and business.

But protecting Fargo means flooding more than 2,000 acres in Minnesota that currently sit safely above the flood plain.

The massive U.S. Army Corps of Engineers project would protect fast-growing Fargo from frequent, destructive spring floods by damming the Red to back up floodwater onto Minnesota and North Dakota land south of the city. A 36-mile trench would channel even more water around Fargo to the west.

Minnesota's greatest concerns focus on what would happen to the lands that would be flooded by the diversion and whether the project would encourage development in current flood plains on the North Dakota side of the river, Landwehr said.

Costs vs. benefits

The DNR has noted "serious concerns" about the project. This state would shoulder about $100 million of the project's estimated $2.1 billion price tag.

The final permitting decision will weigh the costs of the project — to the environment, to the state, and to the communities and farmers on the wrong side of the flood walls — against the benefits.

Diversion supporters say Minnesota has plenty to gain from the project, including added flood protection for Moorhead and for the thousands of Minnesotans who cross the river every week to work in Fargo.

20 percent of N.D. at risk

"We're not trying to steamroll anybody," said Cass County (N.D.) Administrator Keith Berndt, a member of the Diversion Authority. "But the project protects 20 percent of North Dakota's population that's at risk currently. It's been a long, long time coming, and it's time to start moving it forward."

Landwehr did not set a timetable for Minnesota's permitting decision. It's unclear what would happen to the multibillion-dollar federal project if Minnesota does not issue a permit for a dam across the Red.

"I can say that this permit application is quite complex and will require careful consideration of both policy and technical questions," he said.

The permit process will determine whether the project can comply with environmental regulations.

If issued, permits would establish the requirements needed to avoid, minimize or mitigate environmental damage.

Staff Writer Josephine Marcotty contributed to this report.