Owners of a resort near Ely, Minn., said they've ended plans for 49 new cabins on an entry lake to the Boundary Waters Canoe Area Wilderness after the state sued them and the Lake County Planning Commission over shoreline protection rules.

Sandy Hoff, a co-owner of the Silver Rapids Resort, said by email that he and his partners don't have any additional plans for the site yet and are still waiting for a judge to formally dismiss the state's lawsuit.

The Planning Commission had given the century-old fishing resort on Farm Lake a permit this fall to build the cabins as part of a $45 million expansion project that also would renovate a motel and restaurant on-site and increase the size and number of docks.

The Minnesota Department of Natural Resources (DNR) repeatedly objected to the project, warning the planning board that it would violate the county's own shoreline development rules that restrict the resort to a smaller footprint.

The agency asked a district judge in a suit filed Oct. 3 to throw out the resort's permit for the construction.

A few weeks after the lawsuit was filed, Hoff and Silver Rapids "surrendered" the permit, entering into an agreement with Lake County to relinquish it and all development rights it granted. Now they have asked Judge Eric Hylden to dismiss the lawsuit.

But the DNR wants the case to continue.

The agency argued that merely surrendering the permit is not enough to make sure the issue won't come up again should Silver Rapids or another developer try to exceed the county's density limits. The county and Silver Rapids have not committed to following shoreline development rules and have not conceded that the proposed expansion project would have broken those rules, the agency said.

"Without the court's intervention, defendants will repeat its arbitrary and capricious decision making and errors of law," DNR lawyers wrote.

Planning Commission members did not return messages seeking comment.

Hoff said he doesn't understand why the DNR won't accept the voluntary withdrawal of the permit.

"We are waiting for the judge to make a ruling," he said.

Hylden is expected to make a decision on whether the case will continue by the end of the month.

Silver Rapids opened in 1919 as a fishing resort on a stretch of shore where White Iron Lake meets the western edge of Farm Lake. It has 12 small cabins on-site, an 11-room motel, a restaurant and 21 campsites. The Boundary Waters begins on Farm Lake's eastern shore a couple of miles from the resort.

The proposed expansion would have increased the total number of dwelling units on the site from 13 to 62 and added 12 docks with space for 75 boats. The county's shoreline protection rules, which were written with the DNR in the 1990s, allow the resort a maximum of 29 dwelling units and docks that could fit a maximum of 14 boats, the DNR argued.

Exceeding those numbers could threaten the stability of the shoreline and the aquatic environment of both White Iron and Farm lakes, according to the agency.

The lawsuit was the third time since last year the DNR sued a local government for failing to enforce shoreline development rules. It sued the city of Fairmont in 2023 after City Council members tried to issue a permit for a restaurant to build a new dock and lakefront patio over the objections of the DNR. The city agreed to withdraw the permit a few months later.

In January, the agency sued the city of Minneapolis after it gave permission to a homeowner to build on a bluff of the Mississippi River. That case is still in court.