RTÉ News has learned that Dublin City Council is to pay out €35.6m to the operators of the sewage treatment plant at Ringsend.
The Minister for the Environment, John Gormley, has said he is ordering an independent investigation into why the financial over-run occurred.
Dublin City Council has said it will co-operate with the independent investigation.
In a statement, the council said it has been a priority to resolve the issue of odours and that substantial remedial work will be completed this autumn on time and within budget.
The Ringsend facility has dramatically improved water quality around the capital and led to blue flags for bathing quality.
However, it has also been mired in controversy since it opened in 2003 because of a putrid odour.
Last month, 34 individual complaints were received by the council.
The council is to pay the €35.6m to the consortium because of a variety of problems they have experienced.
Minister Gormley has said while it is clear water quality has significantly improved, the financial over-run needs to be investigated.
He said he will not sign-off on the planned expansion of the plant until he is sure the lessons of the past have been learned.
Speaking on RTÉ Radio's Drivetime, Mr Gormley said the population growth in Dublin had not been anticipated when this plant had been planned.
He said the investigation he has ordered will establish why the need for the remedial action was not foreseen.
He also said that the extra payout to the contractors ABA had been through an arbitration process.
