|Title:||Role of the City in the Mt. Ashland DEIS as Affected by the Mt. Ashland Ski Area Special Use Permit and the Lease with Mt. Ashland Association|
|Date:||September 22, 2003|
|Submitted By:||Paul Nolte|
|Gino Grimaldi, City Administrator|
|Synopsis:||The issuance of the Draft Environmental Impact Statement for the expansion of the Mt. Ashland Ski Area has raised some legal issues regarding 1) the city's role and responsibilities for reclamation of the ski area should it cease to operate under the Ski Area Special Use Permit issued by the Forest Service and 2) the city's rights under the Mt. Ashland Ski Area Lease with the Mt. Ashland Association. As explained below, the city is responsible for reclamation of the ski area should ski operations cease but this responsibility has been transferred to the Mt. Ashland Association. The city has no right to operate the recreational facilities or to control the activities in the ski area. The role of the city in the Ashland Creek watershed is addressed in a separate memo.|
|Recommendation:||Recommendations for the DEIS Process
1. A comment should be submitted to the Forest Service on the DEIS that the EIS should address and quantify the reclamation costs for both the existing ski area and the selected alternative. The Forest Service should require from the city, as the permit holder, written assurance that it has agreed with the ski area operator that sufficient assets exist to cover the quantified reclamation costs.
2. A comment to the DEIS should be made that the EIS specify the reclamation requirements for the ski area.
The following recommendations are not part of the DEIS process:
|Background:||1. Reclamation Requirements for Mt. Ashland Ski Area
1.1. Reclamation Standards. The city, as permittee under the 1992 Forest Service Ski Area Special Use Permit, must perform certain reclamation measures in the Mt. Ashland Ski Area upon termination of the permit in the year 2017 or upon revocation of the permit should the ski area cease to operate prior to that time. The source of this requirement is in section X.A of the permit which requires the city to:
"remove within a reasonable time as established by the authorized officer, the structures and improvements and shall restore the site to a condition satisfactory to the authorized officer, unless otherwise waived in writing or in the authorization. If the holder fails to remove the structures or improvements within a reasonable time period, as determined by the authorized officer, they shall become the property of the United States without compensation to the holder, but that shall not relieve the holder's liability for the removal and site restoration costs." (Emphasis added.)
Prior to the establishment of reclamation requirements for the ski area, the Forest Service will conduct a "needs assessment" in consultation with the city to consider whether the operation should be continued or modified "to best serve the public interest." Forest Service Manual (FSM) 2341.23. (The Forest Service Manual is utilized by officers and staff of the Forest Service to provide direction, responsibilities, objectives, policies and instructions regarding programs and activities under the jurisdiction of the Forest Service.)
The ski area has already been the subject of a needs assessment which was completed in 1992. This assessment addressed the work necessary to achieve an "accelerated natural recovery process to protect resource values from degradation."See p. 1, Environmental Assessment, Mt. Ashland Ski Area Restoration, April 1992, USDA Forest Service, Rogue River National Forest. An environmental assessment was made at this time in order for the Forest Service to determine what reclamation activities should be implemented should the ski area close as a result of the then permittee, Ski Ashland, Inc., a Washington corporation, dismantling the facilities if it failed to find a buyer.
The goals and objectives of the reclamation requirements were summarized in the environmental analysis as follows:
"To protect the resource values of the area within a reasonable time i.e., to deter environmental degradation until natural forces of erosion are stabilized.
"To get the area to a stage that vegetation will stabilize the area if the existing facilities are dismantled i.e., to reduce the erosion rate to a more natural rate once the man-made facilities are removed.
"To have disturbed sites dominated by native vegetation in the long term, and to minimize the spread of exotic plant species beyond their point of introduction.
"To restore the site to a level that meets the Forest Service Standards and Guidelines in the Rogue River National Forest (RRNF) Land and Resource Management Plan, 1990 (Forest Plan).
"To accomplish the restoration phase of the project in a cost effective and reasonable manner, i.e., to adhere to Forest Service Best Management Practices (BMP's) for similar kinds of activities."
The 1992 needs assessment is consistent with other reclamation requirements imposed or proposed in terminated ski areas elsewhere. Within the last decade several ski areas in Colorado have closed, including Hidden Valley, Geneva Basin, Cuchara Valley and Conquistador. The requirements of both the National Park Service and the Forest Service in those areas are consistent with the 1992 needs assessment completed locally. The reclamation projects in Colorado include both rehabilitation and restoration aspects. Rehabilitation, in this context, includes the removal of all structures and equipment and regrading of slopes, while restoration includes revegetation of native plant species and removal of any exotic species encroachment. The 1992 needs assessment process ultimately resulted in an alternative that required the removal of structures and equipment, regrading of slopes, and revegetation of cleared areas. This alternative would have restored the ski area to a level that protects water quality, and it met State water quality standards, stabilized the site, reduced surface erosion rates and mass wasting. The alternative was never implemented, of course, since the ski area never closed.
1.2. Reclamation Responsibility. While the city is the entity ultimately responsible for the performance of the terms and conditions of the Forest Service Special Use Permit, Mt. Ashland Association (MAA) has assumed all responsibility of the city under the permit pursuant to a 1992 lease between the city and MAA. Section 2.2 of that lease provides that MAA, as lessee, assumes all permit liabilities:
"The terms, covenants, provisions and conditions of the Permit are incorporated into this Lease and Lessee assumes responsibility for payment and performance of all obligations of the City of Ashland under the Permit. Lessee agrees to hold harmless, defend and indemnify Lessor from and against any loss, claim or liability suffered by or asserted against Lessor as a result of Lessee's failure to fully pay and perform the obligations of the Permit."
Ultimate responsibility remains the city's, however. If MAA were to default under the lease and fail to indemnify the city, the city must answer to the Forest Service. Section VII.A of the permit explicitly provides that the city (as the permit "holder") remains liable even though MAA is operating the facility:
"The holder may sublease the use of land and improvements covered under this permit . . . . The holder shall continue to be responsible for compliance with all conditions of this permit by persons to whom such premises may be sublet . . ."
In the event that MAA failed to perform to the satisfaction of the Forest Service, should there be a termination, the city would be required to meet the full obligations and costs for the rehabilitation and restoration of the ski area.
To that extent, the city ensured that sufficient ski resort assets would be available to the city for reclamation in its requirement for a minimum liquidation value under the lease. This concept is more fully explained in Lee Tuneberg's memo to the council dated September 15, 2003.
1.3. Post Reclamation Responsibilities. If the permit terminates at its stated term (the year 2017) or is revoked prior to this date, reclamation is required to be performed to the satisfaction of the Forest Service. Once the reclamation has been completed and accepted by the Forest Service, the liability of the city as the permit holder ends. The city would have no legal or financial responsibility for further rehabilitation or restoration projects.
Post reclamation responsibilities then lie with the Forest Service. How those responsibilities are exercised is addressed partly through agreements that currently exist between the Forest Service and the city. Those agreements include the 1929 Cooperative Agreement between the City of Ashland and the Forest Service for the management of the Ashland Watershed, and a Memorandum of Understanding (MOU) drafted in 1996, and updated in 1999. This MOU and its update define the roles and responsibilities of both the City of Ashland and the Forest Service in the management of the Watershed.
Under these agreements, the Forest Service has the responsibility to administer the Ashland Watershed consistent with conserving and protecting the city's water supply, and to communicate and coordinate watershed management activities with the city. This includes involving the city in planning and implementation of projects in the Ashland Watershed and providing resource specialists on a contractual basis to the city for projects influencing the Ashland Watershed.
The City agreed to make staff available to provide input to the Forest Service during all project planning, implementation, and management reviews and to make staff and personnel available to work in coordination on projects that achieve mutual objectives. Thus, as it did in the development of the HazRed and Ashland Watershed Protection projects, the city can play a very influential role in determining future uses of the former ski area.
2. The Rights and Responsibilities of the City and of the Mt. Ashland Association under the Mt. Ashland Ski Area Lease.
2.1. Rights and Responsibilities Transferred to MAA. All rights and responsibilities of the city under the Forest Service Special Use Permit have been transferred to the Mt. Ashland Association (MAA). The Mt. Ashland Ski Area Lease transfers all rights of possession and control by the city in the Mt. Ashland Ski Area to MAA.
2.2. MAA Responsibilities. The permit contains a multitude of provisions comprehensively addressing access, improvements, conditions of operation and maintenance, insurance, fees, payments, liability, etc. For instance, paragraph I.G of the permit addresses the requirements for compliance with the Master Development Plan:
"G. Master Development Plan. In consideration of the privileges authorized by this permit, the holder agrees to prepare and submit changes in the Master Development Plan encompassing the entire winter sports resort presently envisioned for development in connection with the National Forest lands authorized by this permit, and in a form acceptable to the Forest Service. Additional construction beyond maintenance of existing improvements shall not be authorized until this plan has been amended. Planning should encompass all the area authorized for use by this permit. The accepted Master Development Plan shall become a part of this permit. For planning purposes, a capacity for the ski area in people-at-one time shall be established in the Master Development Plan and appropriate National Environmental Policy Act (NEPA) document. The overall development shall not exceed that capacity without further environmental analysis documentation through appropriate NEPA process."
Other provisions require protection of habitat for endangered and threatened species with protection being the responsibility of the permit holder (the city) as directed by the Regional Forester. (Paragraph IX.M)
2.3. Role of City in Operation of Ski Area. In conjunction with the city obtaining the permit, the city leased the assets it acquired from Ski Ashland, Inc., the former operator of the ski area, and the ski area (with consent of the Forest Service) to Mt. Ashland Association (MAA), an Oregon nonprofit corporation formed solely for the purpose of operating the ski area. As an aside, during the campaign to raise funds to "save" Mt. Ashland, there was much discussion on how the ski area should be operated and what the city's role should be. From my perspective and recollection, there was never any intent that the city would operate the ski area. The city did not want to be in the ski business. The relationship between the Oregon Shakespeare Festival (OSF) and the city was used as a model for the relationship between the city and MAA. This relationship with OSF is more or less a simple landlord-tenant relationship. The city owns many of the Shakespeare improvements and much of the property upon which the improvements are located, but has no say on the operation of OSF.
2.4. MAA Rights. The MAA lease was drafted to ensure that MAA has all of the responsibility for the permit requirements and to ensure that the city was held harmless from any liability for payments required to the Forest Service or performance under the permit:
2.4.1. MAA has the "sole and exclusive possession and use" of the ski area "for the purpose of constructing, improving, maintaining and operating year-round educational and/or recreational facilities for the benefit of the general public (including but not limited to a ski area and/or winter sports resort)." MAA has the right to make changes and improvements to the leased property without seeking consent of the city.
2.4.2. MAA is required to operate the ski area, keep all the equipment and buildings repaired, maintained and insured and pay all utilities, taxes, etc. These provisions are common to "triple-net" leases and are as close as one can come to where the city incurs no costs, liabilities or responsibilities for the property.
2.5. MAA Relationship with Forest Service. The Forest Service required that the city obtain Forest Service approval before the city entered into the lease with MAA. The Forest Service gave such approval. As such, the Forest Service works directly with MAA in all aspects of the ski operation since MAA has all of the responsibility of the city under