SALT LAKE CITY — Utah gave its final approval Wednesday for the first commercial tar sands project in the U.S., handing a victory to a Canadian company that aims to start producing 2,000 barrels of oil next year in the start of what could grow into a larger operation.

The Water Quality Board upheld the decision of state regulators and turned back an appeal from a Moab-based environmental group that vows to take up its fight in the state courts.

Living Rivers has fought the project every step of the way, arguing that tar sands mining will contaminate groundwater in a largely undeveloped area of Utah's Book Cliffs region that drains into the Colorado River.

State regulators and the company insist the eastern Utah desert is so dry there is no significant groundwater to pollute. An administrative law judge agreed, sending a recommendation for approval to the Water Quality Board, which held hours of arguments before upholding a crucial state permit Wednesday by a 9-2 vote.

U.S. Oil Sands Inc. has said it was raising the money it needs to start digging after working since 2005 to obtain or defend its state approvals. Executives said they planned to produce oil from a 62-acre mountaintop pit starting in late 2013. The Calgary, Alberta-based company holds leases on 50 square miles of Utah trust lands sprinkled with gooey bitumen, a tar-like form of petroleum.

"This is a good project that U.S. Oil Sands wants to do," company attorney Christopher Hogle said Wednesday, adding that a citrus-based solvent will leave the oil-soaked sands as clean as beach sand. "It's generally regarded as safe in food."

Skeptics said the company had refused to divulge its secret recipe and that the solvent could release petroleum toxins into the ground. Living Rivers said snowmelt and infrequent rain can saturate the project site at times during the year, in a region that receives 12 inches of precipitation a year.

"This mine is the first of its kind," Living Rivers attorney Rob Dubuc said. "Nobody really knows what the impacts will be. This is not the time to rush ahead without knowing what we're doing."

Both sides argued over Utah's definition of groundwater — and how much needs to exist to qualify for protection. State regulators assert no groundwater exists in the area except at extreme depths isolated from the demonstration pit, and they issued the company a groundwater discharge permit without requiring active monitoring of any trace of water.

U.S. Oil Sands said its mining process will extract 96 percent of solvent from tailings for recycling, making the project environmentally friendly.