A mill dam was built in Cloquet in 1899, and the Thomson water project was built in 1907. This left a 5.3 mile segment of the St. Louis River with a 70 foot drop that was prime for development of hydro power. The city of Scanlon felt that having a city-owned source of hydro power would give them a competitive edge. An ideal spot was located on a rapids just a mile and a half south of the Cloquet dam.

At that spot, the river divided into two channels and fell over a small rapids. A set of gates and a power house was installed on the west channel, and a set of gates and an overflow spillway were installed on the east channel. Two additional plug dams were installed to block natural channels in the rock between the two main dam segments. The east channel dam is visible from the CSAH-61 bridge, while the west channel dam is visible from a trail that runs north along the river from the whitewater kayak park in Scanlon.

The resulting powerplant is able to generate 1.6-megawatts of power on an ongoing basis. Since the dam does not have a large storage pool, it operates as a run-of-the-river plant. That is, all water that flows downriver passes through the dam. If there is not enough water flowing, there is no reservoir to draw from. The dam structure is reinforced concrete. It sits on pilings driven into the rock in the rapids. The dam depends on its weight to keep it anchored in place.

Shortly after the dam was built, control was passed onto Minnesota Power, who operates the dam to this day under the Allete family of companies.