Vail Business News

VAIL, Colo.—A change in the U.S. Forest Service ski area permit policy could have a "direct and dramatic impact" on companies like Vail Resorts by changing the way water rights are administered.

By substituting a new water rights clause in the permits, the agency is trying to force ski areas operating on National Forest lands to transfer water rights worth tens of millions of dollars to federal ownership, according to Boulder-based attorney Glenn Porzak.

Forest Service officials say the agency is merely trying to ensure the long-term viability of the ski industry by keeping water rights needed for ski area operations tied to the resorts.

Porzak said the change would prevent ski areas from  selling water rights they developed and perfected — and this violates a basic principle of Colorado water law.

He used several specific examples to illustrate impacts of the change.

The clause could prevent a ski area like Arapahoe Basin from selling unneeded water in an offsite Reservoir (Clinton Gulch) to another ski area, he explained.

Or, one of the Vail Resorts-owned areas in Summit County might decide it doesn't need all the water rights it has acquired over the years for snowmaking. Instead, the area might want to sell those water rights to be used for irrigation on private base area lands. Once again, the language could prevent such a transfer, he said.

Additionally, the change has the potential to affect municipal water districts, he added. Since most of the water for the Eagle River Water and Sanitation District originates on Forest Service land, the agency might someday in the future decide to impose a similar condition on such districts, he speculated.

The change wouldn't have much of an impact on Aspen ski resorts, according to Aspen SkiCo senior VP and legal counsel Dave Bellack. He explained that the vast majority of the SkiCo's water comes from municipal supplies and therefore isn't affected by the new clause.

No takings

While the ski industry is crying takings, top Forest Service officials say the change is aimed at linking the water originating on national forest lands to ski areas uses to ensure the long-term viability of the ski industry.

On behalf of the National Ski Areas Association, Porzak last week testified on the issue before the U.S. House Natural Resources Committee, claiming that the Forest Service is trying to make an end run around state water law. Porzak’s written statement is online here.

This week, Porzak said the Forest Service is trying get through the permitting process what it can't obtain through normal water rights channels.

"Both the Colorado and the U.S. Supreme Court have said the federal government  can't, on its own, attain that kind of water right," he said.

“All water rights owners should be concerned,” Porzak said. “Ski areas would lose the ability to control future use of those water rights … they would have no guarantee on future use,” Porzak said, explaining that ski areas collectively have invested hundreds of millions of dollars in water rights used for snowmaking, lodging, restrooms, culinary purposes and irrigation.

During the hearing last week, Forest Service Chief Tom Tidwell explained that agency wants to make sure the water rights stay with the permitted use, when water is necessary to make that use a viable operation.

"The concern is what could occur in the future and especially as water becomes more and more valuable," Tidwell said. "That water right could have more value than an operating ski area," he said, suggesting that, if a ski area were to sell off water rights, the public could lose the opportunity for recreation.

"We would have to deal with a resort that didn't have adequate resources for snowmaking, base facilities … We're trying to use the terms and conditions (of the permit) to protect the public's interest …  and to protect the resource," Tidwell said.

Background

The permitting issue is the latest twist in a decades-long struggle between the ski industry and the Forest Service over water rights. The original 1986 ski area permitting act required water rights to be acquired in the name of the United States. Those permit conditions remained effective for many years without any major problems.

That didn't change until 2004, when the water-rights clause was changed after high-level meetings between the ski industry and top-level U.S. Department of Agriculture officials in the Bush administration.

The 2004 language marked a turning point in administration of water rights, and, reversing the ski industry's argument around, could be seen as a huge giveaway of publicly owned assets — a decision made in the political arena, with no input from the public or resource experts.

Under the 2004 clause, ski areas all of a sudden took almost absolute control over certain types of water rights associated with ski area operations — to the point that a resort could potentially sell at least some of the water rights, potentially leaving a future ski area permittee without the water needed to sustain ski resort operations.

Since then, the Forest Service discovered that the language in the 2004 clause is not legally viable in Colorado, according to a water attorney with the agency's Office of General Counsel, who said Colorado water courts don't recognize the the type of joint ownership described in the language.

The substitute clause finalized this month would restrict such sales, but the ski industry claims the new clause goes far beyond that, and amounts to a takings of private property.

After the hearing, a top Forest Service official said the 2004 permit language wouldn’t stand up to a legal test in Colorado and possibly other states where ski areas operate under permit from the agency.

The agency is seeking to sustain resorts operating under permit for the long-term by ensuring that the water rights stay with the ski area even if there is a change in ownership or some other unforeseen circumstance, according to Jim Bedwell, director of the agency’s recreation and heritage resources programs.

Bedwell said the agency recognizes that the value of ski areas is tied at least in part to the associated water rights.

“If there’s a change of ownership, the buyers will know they have continued ownership of the water rights, They can’t be parted out,” he said.

The new clause would clarify and define ownership of various water rights associated with permitted ski areas, he said, adding that the language in the 2004 clause was not legally viable because ownership of the water rights was not clearly defined.

Porzak disagreed.

“In a nutshell, it takes away all the important water rights,” he said.

Via email, NSAA public policy director Geraldine Link explained it this way: “The (new) clause requires certain on-site water rights (arising on permit) applied for before 2004 to be held solely by the US, and some water rights that arise off-site as well."

“The Forest Service wants ownership of these water rights in the future so it can control them. USFS should honor state law and state adjudication of water rights rather than making this end run via permit conditions,” Link said.

Political shift?

The Forest Service and the ski industry have tussled over the issue of federal  water rights on and off for decades, and the latest shift in the tide may reflect philosophical differences between the former Bush administration and the current Obama team, according to Mark Squillace, director of the Natural Resources Law Center at the University of Colorado.

Squillace said that the issue isn’t unique to the ski industry, referring to a well-publicized case involving a federal attempt to subordinate its own water rights in the Black Canyon of the Gunnison. In the end, a judge ruled that the federal government can’t do that, he explained.

“I think it’s smart policy,” he said, referring to the Forest Service’s position on water rights.

“From the federal government’s standpoint, they need to make sure the water rights stay with the land,” he said. “It would be a disaster if the ski areas walked away and sold off the water rights separately, he added.

“This is not a takings,” Bedwell added, emphasizing that the Forest Service has been working with the ski industry on the issue for a year.

“We tried to honor the spirit of the 2004 clause,” he said, adding that, from his perspective, work on the new clause is done.

Porzak said Forest Service Chief Tom Tidwell indicated that there may be some additional room for negotiation. Failing that, the ski industry will continue to ask Congress for intervention, and as a last resort, the permit condition could be litigated, he concluded.