The Minnesota Pollution Control Agency repeatedly failed to regulate a Twin Cities manufacturer that violated its air permit for more than 15 years and spewed tons of a carcinogen into the air, according to the state's internal watchdog.

A report out Thursday by the Office of the Legislative Auditor (OLA) slammed the state agency for "significant weaknesses" in its permitting and enforcement activities at Water Gremlin Co.

The MPCA didn't issue an air pollution permit to Water Gremlin for five years after the company first applied, the report said. So Water Gremlin operated with no air emission limits during those years as it emitted very large amounts trichloroethylene, or TCE, a degreaser classified as a hazardous air pollutant.

Water Gremlin, in White Bear Township, is a major manufacturer of lead battery terminals and fishing sinkers.

Even after it secured a permit, the company went for eight years at one point without an MPCA inspection, a violation of federal law, according to the report.

The MPCA didn't require the company to periodically retest its pollution control equipment, which kept breaking down.

When Water Gremlin reported TCE emissions for 2000 through 2002 at levels that "far exceeded" its permit, the MPCA didn't fine it, the audit found.

And inspectors didn't check to see if the company's self-reported emissions matched on-site observations.

The audit quoted an MPCA inspector saying: "That sounds silly, doesn't it? We really should. We make sure they submit the emissions inventory … but we don't take it with us and verify [that] what's on site matches. That's not part of our practice."

Water Gremlin's air pollution permit limited how much TCE it could purchase, but it did not limit the overall amounts the company could use or how much it could capture and reuse.

"This is a pretty concerning report," said its author, Joel Alter, director of special reviews for the auditor's office.

Lead dust exposure

The report focuses on the MPCA's handling of the company's TCE air pollution, but it also discussed the buildup of hazardous lead dust in the plant.

The company's practices were so lax that employees were tracking lead home from work and poisoning their children, a discovery that led the state to an emergency shutdown in 2019. Ramsey County conducted the hazardous waste inspections at the facility until 2019 when the MPCA stepped in.

"An unclear division of hazardous waste enforcement responsibilities between MPCA and Ramsey County may have contributed to Water Gremlin's lack of compliance," the report concluded.

The OLA recommended that the Legislature require the MPCA to have agreements with all metro-area counties to clarify hazardous waste responsibilities.

Katie Crosby Lehmann, an environmental trial lawyer at Ciresi Conlin in Minneapolis, called the audit "an interesting and terrible read."

"It's crazy for a state agency to fall down for decades on such an important issue," she said.

Local residents near the plant, many of whom formed the Neighborhood Concerned Citizens Group and pressed lawmakers and the state for answers, welcomed the report.

Leigh Thiel, a White Bear Lake resident who lives a few blocks from the plant, called the report a "vindication." She has lived near the plant since 2001, and raised three children there. Her family is healthy, but she worries about what could develop.

"We are incredibly grateful that our voices were listened to," she said. "It makes us afraid and worried for communities that don't have that kind of time, resources and empowerment available."

The report included an MPCA response letter in which Commissioner Laura Bishop acknowledged "inadequacies" that occurred before her tenure. She described how the agency has improved its permitting and inspections, and said talks are underway with counties about jointly inspecting hazardous waste handling at certain facilities.

But she also noted that "a pillar" of environmental regulation is honesty from permit holders, a point she reiterated in House testimony Thursday.

"Water Gremlin broke the public's trust and put the neighboring community at risk," she said.

"The Legislative Auditor's review brings new urgency to proposed policy changes that protect taxpayers and impacted communities when a facility violates its permit and the public's trust, and budget requests for additional inspectors and new air monitoring equipment," she said. "The MPCA needs the Legislature to enact these common-sense, and now validated, measures this legislative session."

Water Gremlin issued a statement saying it has stopped using TCE and is developing "reduced and solvent-free manufacturing capabilities."

"Water Gremlin has been working with state and county officials and made significant changes in facilities, staff and processes to provide a safe and environmentally sustainable operation," said Mary Gail Scott, the company's environmental, health and safety director.

Water Gremlin investigation

Water Gremlin's pollution history came to light in early 2019 when the MPCA disclosed it had asked the company to shut down part of its operation and was investigating the high TCE emissions.

Ultimately, it was found that the company's median yearly level of TCE from 2002 through 2017 was about 64 tons — six times more than its authorized annual maximum.

In a March 2019 agreement with the state, Water Gremlin agreed to stop using TCE and pay a $4.5 million penalty.

That fall, the state Department of Labor and Industry and state Health Department ordered an emergency shutdown at Water Gremlin after finding it was failing to control workers' exposure to lead dust. Health officials have found that at least 15 children were poisoned by the lead workers tracked home.

Water Gremlin has been operating under a court order to cut lead levels and protect workers. Most steps are complete, but a lead cleanup program for workers' homes still hasn't started.

Jennifer Bjorhus • 612-673-4683