SAWS claims breach of a water-sharing contract. A judge in February rejected the lawsuit.
The Austin American-Statesman reports the appeal hinges on whether San Antonio can convince the judges that LCRA had waived its right to sovereign immunity.
The arrangement would have sent water from the Colorado River to San Antonio for 80 years. In return, the Colorado River basin would get money to fund long-term storage projects and conservation.
LCRA dropped the deal in April 2009, saying it did not have enough water to share with San Antonio