Minnesota regulators have denied a key permit for a massive flood diversion project around Fargo, bringing the controversial $2.1 billion project to an abrupt halt after years of planning.

In an announcement Monday morning, Natural Resources Commissioner Tom Landwehr said his agency identified major concerns about the proposed project on the Red River of the North that have not been sufficiently addressed by the local planning authority.

"The DNR has great empathy for people who experience flooding," Landwehr said. "We agree that enhanced flood protection is warranted for some places in the project area. However, the proposed project is not the right way to achieve that enhanced protection, and the project cannot be permitted under Minnesota law."

The flood diversion project would redirect a portion of the Red River around Fargo to mitigate flooding, which has become a near-annual event recently. But it requires Minnesota's participation because a dam across the river, linking Minnesota to North Dakota, would be a key element.

The issue has been contentious for some time because Minnesota officials say the project would harm their state while allowing Fargo to divert the river around flood-prone land on three sides.

Opponents said Monday that the long-awaited decision will force officials from Fargo and the U.S. Army Corps of Engineers to go back to the drawing board and come up with a better plan.

"It's a very good day for us," said Cash Aaland, a Fargo attorney whose home south of the site would be inundated by water backed up by the proposed dam.

But Fargo Mayor Tim Mahoney said that while he wasn't surprised by the move, he was disappointed.

"But we will keep moving forward," he said, because Fargo does not want the same kind of flood damage as other cities on the Red have seen. "We offer a lot of jobs here. It would be hard if we had a flood and could not defend it."

Mahoney said the Flood Diversion Authority, which manages the project, will meet this week to decide what to do next. Members could appeal Landwehr's decision in the Minnesota courts, or the Army Corps could take action in federal court by attempting to declare it a federal project that supersedes Minnesota's authority.

"Right now, what I can say is that we are deeply disappointed with this determination after having worked with the state of Minnesota on this project for more than eight years," said Col. Sam Calkins, commander of the St. Paul District of the Army Corps of Engineers. "We will continue working with the sponsors to get this project completed."

Huge ditch

The Fargo-Moorhead Diversion would be the largest public works project in the country: a 36-mile ditch around Fargo, coupled with two dams across the Red River that could control floodwaters, plus embankments, a 38,400-acre flood staging area, in-town levees and flood walls.

In a severe flood threat, the project would divert water from the Red River and its five tributaries away from Fargo and into miles of North Dakota and Minnesota farmland and prairie. But protecting Fargo would mean flooding more than 2,000 acres in Minnesota now safely above the flood plain.

Supporters such as Mahoney say the diversion is the best way to protect the region from an inevitable flood that could cost lives and billions of dollars. Opponents say the diversion's main purpose is to allow fast-growing Fargo to expand into the flood plains on the city's three sides and argue that the project would sacrifice century-old farms for the sake of urban sprawl.

North Dakota would foot 90 percent of the remaining cost of the project — about $900 million — in part through a proposed sales tax on the November ballot there. Minnesota would cover 10 percent of the nonfederal cost, or about $100 million. In 2014 Congress authorized $846 million in federal support, though the money would come in later legislation.

But Gov. Mark Dayton has made it clear for years that he didn't like the plan, and Landwehr on Monday reiterated Dayton's concerns.

More than half the land that would be spared from flooding is now sparsely developed and rural. Minnesota regulators point out that Fargo and Moorhead already have extensive flood protection infrastructure, with additional levees planned.

Briefing reporters Monday morning, Landwehr said existing and planned infrastructure, in combination with emergency measures like closing flooded roads when necessary, is a better solution for Fargo and Moorhead during large floods and is thus more consistent with Minnesota law.

Landwehr also concluded that the concerns of affected upstream communities have not been addressed, and the effects are likely to be severe and irreversible. Moreover, a long-term funding source for operation of the dams and flood control mechanisms has not been identified.

More details can be found in the DNR's Findings of Fact document at dnr.state.mn.us/waters/fm-flood-risk.html.