Pretty little Blue Lake has a dirty little problem.

Its aging sewage treatment plant, built in the 1950s for a mostly residential town, is at risk of being seriously overworked by the effluent from newer, bigger users, including a casino and a brewery.

Even worse, that effluent burbles through a few treatment ponds that are uncomfortably close to the Mad River, a waterway already afflicted by logging, cattle grazing, gravel mining and other human foibles.

Water regulators want Blue Lake to follow a new, tougher set of rules -- eventually. The state has been working for two years and still is months away from writing the draft permit that would spell out those new requirements.

Meanwhile, the environmental group River Watch warned earlier this year that it plans to sue, because it sure looks like the city is discharging pollutants that are making their way into the Mad River.

That threatened suit is now clanking toward settlement in closed-door talks with attorneys and the Blue Lake City Council.

One likely feature of the settlement: more study and more monitoring, according to River Watch attorney Jerry Bernhaut.

What's missing, so far, is a full accounting of just what Blue Lake is letting drift toward the Mad, how it plans to fix that, and how much it all might cost.

The information gap comes partly because technically, Blue Lake's sewage treatment plant doesn't put any treated sewage into the river. It puts it into the ground -- sandy, gravelly ground close to the river.

Right now Blue Lake's sewer system -- which is probably leaky but nobody knows how leaky -- collects the city's nasty stuff and delivers it to the first of four ponds. There, the sewage is aerated, microbes start breaking some of it down, and heavier sediment settles toward the bottom. Over the next 45 days, progressively less gunky effluent moves to ponds two, three and four. Then it's chlorinated and released into a percolation basin, where it gradually seeps into the ground, according to John Berchtold, Blue Lake‘s city manager.

"Overall, the plant functions very well. We have no citations from the regional water board," Berchtold said.

That's true in the narrow sense -- the state Water Resources Control Board doesn't use the term citation, and Blue Lake city records show no fines going back at least 20 years. Still, the state water board's database shows more than 40 Blue Lake violations between the early 1990s and 2005, and it's unclear whether later actions might yet be waiting to be uploaded.

"Right now, I'd say they're really doing a good job with a small staff and limited funding," said Roy O'Connor, an engineering geologist for the state's North Coast Regional Water Quality Control Board.

"I wouldn't say they're doing nothing wrong."

O'Connor described Blue Lake's violations of state water quality rules as minor and occasional -- but he also acknowledged that there would be different, tougher rules if Blue Lake were discharging directly into the river.

No one knows for certain whether Blue Lake's treated sewage heads riverward once it's below ground, but there are some telling signs.

"Just to be real here," O'Connor said, "if you go back to an old aerial photograph of that floodplain, that plant was built in an old drainage channel that went to the Mad."

Blue Lake's closest treatment pond is 350 feet from the Mad River.

Based on the lay of the land and contaminants found in nearby soil, there's a "reasonable likelihood" that some pollutants are reaching the river, said River Watch attorney Bernhaut.

Nitrate and total coliform, both components in treated sewage, have been detected in soil near the ponds, River Watch said in its claim against the city. It alleged that for at least five years, from April 2006 to April 2011, the city has failed to adequately police big users, including the Mad River Brewing Co. and the Blue Lake Rancheria and Casino.

Both businesses have started to monitor themselves to provide more data to the city.

The rancheria, with its new hotel that opened in 2009, has been trapping fats and grease from two casino restaurants to keep them out of the sewer system, and it is sampling its effluent to measure components that could strain Blue Lake's ponds, said Bruce Ryan, construction manager for the Blue Lake Rancheria Tribe.

"River health is a critical issue to us," Ryan said. "The Mad River is the lifeblood of the tribe." Among its string of agreements with the city, the rancheria has pledged roughly $300,000 to help with sewage-treatment improvements, and offered another $700,000 in zero-interest loans.

While the hotel and casino generate a lot of sewage, it's pretty diluted with plain old shower water and other low-strength uses. By comparison, the Mad River Brewery puts out much less overall effluent, but it is considered "high-strength," full of sugars and other nutrients that feed microbes that can compete with fish for oxygen. Many sewage treatment plants make restaurants and other industrial users pay more for effluent with a high biological oxygen demand, or BOD. In the city of Eureka, rates go up for effluent with BOD above 500 milligrams per liter.

The Mad River Brewery has a BOD between 1,000 and 2,000 according to Neal Carnam, the brewery's engineer. (By comparison, Ryan said, the rancheria's BOD runs between 350 and 400 milligrams per liter.) Blue Lake doesn't charge the brewery more for this higher-strength sewage.

Carman thinks the brewery already pays too much for city sewage service, and he suggests that River Watch's claim is basically a shakedown.

"Are they really looking out for the fish, or are they just trying to create money for themselves?" he asks. "When you look on balance, is this discharge having an impact? ... The water district downstream looks at the river, and they're not seeing an impact."

That's true, but pretty much meaningless.

Even if the Mad River were fairly filthy, the Humboldt Bay Municipal Water District says it wouldn't see an impact. It draws water from perforated pipes 60 to 90 feet below the river bed, and natural filtration keeps that water largely free of anything from stray sewage to the passing defecation of dogs, deer or cattle.  By the time the district starts treating that water for eventual distribution to about 80,000 Humboldt County residents, there would be no evidence, one way or the other, of river contamination, said district General Manager Carol Rische.

In high enough amounts, partially treated sewage can spur algae growth in rivers and support microorganisms that gobble up oxygen, leaving fish gasping for air. If things were bad enough, there would be noticeable fish die-offs.

"There are enough eyes out there, that if there were anything dramatic, we'd know about it," said Terry Roelofs, an emeritus professor of fisheries biology at Humboldt State University.

But if smaller, more subtle problems were occurring, it's possible no one may have noticed.

The city knows it's going to have to do something about sewage treatment, said Blue Lake's mayor, Sherman Schapiro. He said the proposed settlement with River Watch isn't aimed at extracting money from the city.

"From my understanding, the things we're looking at really aren't unreasonable," he said. "A lot of things we'd be doing anyway. They're just making us be a little more vigilant, perhaps."