The lining of the All-American is a key part of IID's plans to conserve water for transfer to areas such as the San Diego County Water Authority, the Metropolitan Water District of Southern California and the Coachella Valley Water Authority.
Ron Hull, IID's public affairs manager, said the lining is a key part of water agreements such as the 75-year quantification settlement between IID, MWD and Coachella.
He said if the lining does not go through it could lead to the unraveling of the agreements.
Horne said state officials understand the importance of the agreements and the role the lining plays and he does not think the state will allow the project to die.
Hull said the state tapped into the canal funding after first approving legislation to spend $400 million to purchase more energy to meet the state's power needs.
He said that money was spent in nine days and at that point the state started looking for other funding sources. It was then the state dipped into the canal-lining money.
For the past 15 days most of the state has faced a Stage 3 energy alert, with power reserves so low the state is implementing blackouts in some areas.
IID officials said for now the district's customers in the Imperial Valley and Coachella areas will not be affected by the blackouts.
IID has contracts in which it receives energy from providers in areas such as Arizona and has its own power plants.
During the winter, the need for energy in the Valley is low, which means IID has no need to turn on its power plants. During the summer the district must turn on its plants.
Still, officials say the district has plenty of power to meet local needs.
However, there is a growing concern that as the state's energy crisis continues, state officials could start to look at public utilities such as IID to help solve the crisis.
Officials have said it is difficult to determine what actions the state will take and they will have to continue to monitor the issue to protect the district's interests.
In regard to the canal-lining project, IID Executive Officer Brad Luckey said there is no proof the money will be replenished.
"They don't care about the lining of the All-American," he said. "They are consumed by the energy crisis. The All-American is not even a blip on the screen."
Staff Writer Darren Simon can be reached at 337-4082.