State officials allowed the popular Lutsen Mountains ski resort for years to violate permits restricting how much water it could pull from a North Shore stream to make snow for its groomed hills.
Officials for the Department of Natural Resources acknowledge that the resort's economic significance in northeastern Minnesota was a big factor in the decision not to cite Lutsen for permit violations.
DNR employees say their oversight was a failure that may have threatened the health of a state-protected waterway and that raises questions about state's willingness to crack down on businesses that threaten the state's water. They also say they would not allow such a situation to occur again.
Lutsen solved its water demand problem for now, when the Legislature this year approved and Gov. Mark Dayton signed a law allowing it to draw substantially more water from the Poplar River than it could take under a 1964 permit.
That law expires in five years, during which time the DNR and Lutsen are expected to study the river and make long-term decisions.
Ninety miles up the North Shore from Duluth, the Poplar River rushes right through the middle of the Lutsen Mountains ski area on its way to Lake Superior. A pump house pulls water from the river and sends it to the Lutsen's snow-making system.
Each year for the past 10 years, the resort has been taking more and more water as Lutsen has added runs. Co-owner Charles Skinner said new ski equipment requires wider runs, and terrain parks for snow boarders need more snow. Also, even in the snowiest of Minnesota winters, skiers' expectations are higher than they once were.
"People want to have a nice groomed surface without rocks or bare spots throughout the entire ski season," Skinner said. "So we've had to gradually increase how much water is appropriated for the ski area."
Like all Minnesota ski areas, Lutsen needed a DNR permit to take water from a Minnesota river, and in 1964, the DNR granted Lutsen a permit to take 12.6 million gallons from the Poplar River each year.
But shortly after Skinner and his partner took over the North Shore resort in 2000, the company's water use jumped — to 60 million gallons a year in 2001 and to a little more than 100 million in 2010.
Skinner applied for an increased permit level, but he ran into a complication: In 1977, 13 years after Lutsen received its original permit, the Legislature passed a law that said no one could take water from any trout stream, except temporarily.
Lutsen's permit was grandfathered in, but DNR officials could not justify increasing the amount allowed under the permit. But instead of saying no, the DNR chose to negotiate with the company. The company continued to increase the amount of water it took from the stream.
The water withdrawals have done no harm to the river or its fish, Skinner said. He said there are no fish in the stretch of water where Lutsen gets its water.
"We now know from scientific studies that this river just lacks the natural characteristics to support trout or any fish on a year-round basis," Skinner said.
The DNR says Skinner is wrong. Studies have shown fish in that stretch of water.
"We have found adult fish and we have also found and observed young-of-year fish," said Steve Persons, DNR fisheries supervisor based in Grand Marais. "That section of the river is a trout stream."
The lower stretch, closer to Lake Superior, is important spawning habitat for salmon and trout, Persons said. Steelhead trout, salmon and the rare native coaster brook trout all use North Shore streams for spawning and require consistent flows of water through the winter months.
Documents on file with the DNR show the agency knew all along that Lutsen was increasing the amount of water it took from the river. And the documents show the DNR was trying to persuade Lutsen to get its snow-making water from Lake Superior, across Highway 61 from the ski area.
But Skinner and his partner said taking Lake Superior water would be too expensive. The ski area is two miles from the lake, and the pipes to pump water to the snow-making equipment would need to be protected from freezing.
Skinner said it would cost $3 million or $4 million for a lake system, money that "would be better spent on other infrastructure up here, such as a new lift or other infrastructure, that skiers would appreciate and that would hopefully bring more visitors and help support the economy."
North Shore tourism officials say Lutsen Mountains is an anchor in the region's economy, especially in the winter. They say it provides nearly half of Cook County's tourism jobs and income during the winter months.
In the case of Lutsen Mountains, the DNR did what it often does when a business violates a permit: rather than cite the business, it attempts to negotiate a settlement.
Persons said he suggested imposing a cease-and-desist order on Lutsen Mountains which would have stopped the mountain from taking river water. But he was overruled by other members of the agency, who said it was better to negotiate a solution.
Persons acknowledges no one at the DNR wanted to be the one responsible for closing down a successful and popular industry in northeastern Minnesota.
"We all recognize that the ski hill is an extremely important economic asset for Cook County," Persons said.
Dale Homuth, in charge of enforcement at the DNR Division of Ecological and Water Resources in St. Paul, said, "We're realistic. There's only certain things you can do with the authority you have, and in this case our authority is limited. "
He said the fine for exceeding a water use permit is small — perhaps $50 or $100 — and taking a violator to court is time-consuming and expensive. For several years the DNR has asked without success for the Legislature to grant authority to boost fines to $10,000 a day.
Homuth said the Poplar River and its double role, as a fishery and supplier for snow-making water, shows the inherent contradiction in state law.
"If you were fishing in the Poplar River and caught one too many fish, you could lose all your fishing equipment and get a substantial fine," Homuth said. "But if you take all the water out of the river you get a $50 fine, probably."
DNR Commissioner Tom Landwehr, who took office in January, said the department let the Lutsen permit situation to drag on too long. He said it would not be allowed to happen again.
"It just sends the wrong message to the public to know that there is a violation that's going on for years and years and years, and that is fundamentally a failure in the system," said Landwehr. "I agree. It should not go on so long, something should have happened, and I can't explain why it didn't."
At the beginning of the 2011, Lutsen found its own solution. It went to the Legislature asking that state law be changed to allow it to take even more water from the Poplar River.
Two northern Minnesota legislators — Democrats David Dill of Crane Lake and Tom Bakk of Cook — drafted bills to protect the company's access to the Poplar River. One bill was attached in an amendment to an omnibus policy bill signed by Dayton. It allows Lutsen to take up to 150 million gallons a year from the river — one-and-a-half times as much as it's been taking in recent years. The law expires in five years.
Both legislators say five years is enough time to figure out what to do next. Options include further studies to determine whether removing the water is harming the trout stream, removing that section of the river as a trout stream or installing a system to draw water from Lake Superior.
Dill and Bakk say if Lutsen is forced to take water from the lake instead of the Poplar River, they will ask taxpayers to underwrite the cost.