TERRE HAUTE, Ind. (AP) _ Terre Haute's mayor says a project to convert sludge from the western Indiana city's wastewater treatment plant into diesel fuel is now on hold until a federal lawsuit is resolved.

Mayor Duke Bennett said Wednesday the lawsuit needs to “go away one way or another'' before the city can decide if its sludge-to-diesel partnership with Powerdyne Renewable Fuels is still possible.

The Tribune-Star reports Highland TH LLC and Overseas Lease Group Inc. sued Terre Haute and other parties last month in federal court, alleging breach of contract and fraud.

That suit includes a request for an injunction to prevent the removal of sludge-drying equipment from the wastewater treatment plant. The plaintiffs claim ownership of that equipment.

Bennett says the city has an agreement with Powerdyne but no formal contract.