Irish Water says planning is ongoing for the new wastewater treatment plant in Virginia.
It was announced almost three years ago that a new treatment plant would be built in the town after concerns over untreated water being discharged into Lough Ramor.
An Bord Pleanála last week refused permission for eight new houses in the town after concerns over the lack of capacity at the plant.
Inland Fisheries Ireland had objected to the development as it said it had concerns over the quality of water in Lough Ramor.
Irish Water told Northern Sound News this week that work on the new plant is at "detailed design stage".
It says the new plant will "increase capacity for social and economic development, reduce storm overflow frequency, and improve the level of treatment to comply with the EPA discharge licence".
However, it says the plant "has some capacity to accept a small number of new connections" for the time being.
