Forest Service Says Term Permits Must Be Put Out For Bid If There Is Competitive Interest

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In an unprecedented decision, the Forest Service recently decided that an existing recreational term permit had to be put out for bid upon its expiration because there was competitive interest by other entities in taking over the operation.  The decision was made even though the term permit holder had been operating for 32 years, owned private structures at the site and wanted to continue operating.  The agency had previously assured the permittee that it would be given an opportunity to provide continuing services under a new permit.  However, the agency suddenly changed its interpretation of existing regulations and directives and asserted, for the very first time, that the law actually requires term permits to be put out for bid upon their expiration when competitive interest exists.

The situation involves a shuttle service in Sabino Canyon within the Coronado National Forest.  The permit holder initially had a 20 year term permit, but had been operating under short term extensions for the past 12 years.  After the conclusion of his initial 20 year term, the permittee wanted to purchase new and improved shuttle equipment but, because of the repeated short term permit extensions, it was unable to invest in the high cost of the new equipment.  The permit holder complained about the agency’s delay in issuing it a new long term permit, and the agency assured it that it would be given the opportunity to continue providing services under a new long term permit if it met the “increasing and changing public demands” for new technology.

During the delay in issuance of a new long term permit, local visitors began complaining that the equipment being used by the permittee did not include the latest technology.  Also during the delay, various local entities began expressing an interest in operating at the site.  Based on this “demonstrated competitive interest,” the Forest Service reversed its prior position and stated that it was legally required to issue a prospectus seeking proposals to operate the shuttle service under the new long term permit.

The agency cited to a regulation which stated that “when there is one or more unsolicited proposals and the authorized officer determines that competitive interest exists, the agency shall issue a prospectus.”  However, the regulation actually focuses on how the agency should impose processing fees for permit applications in entirely different situations, i.e., (a) brand new operations, (b) a new applicant for a terminated operation or (c) significant amendments to an existing permit.  Similarly, the internal directives cited to by the agency refer to issuing prospectuses for brand new concession opportunities.

The agency’s decision to interpret the regulation and directives as requiring competition for an ongoing permit operation when the existing operator wanted to continue is a significant change in the agency’s treatment of term permittees.  In the past, term permit holders who had invested in private structures within their permit areas, such as ski areas, marinas and resorts, could be confident their permits would be re-issued absent extraordinary changes in local conditions.  That is no longer true.

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