Town considers geothermal water lease agreement

Geothermal leases, as spelled out in the Pagosa Springs Town Charter, are limited inasmuch as “No such franchise right or privilege shall allow or create an encumbrance on such property in favor of a third party, or be for a term exceeding ten (10) years.”

Until last week, that portion of the town charter remained a major stumbling block in the Springs Resort’s desire for a 50-year lease on the town’s effluent geothermal discharge. With a planned $250 million development project on the table, the Springs Resort has stated that it needs assurance for investors — assurances that exceed the 10-year limit on geothermal water leases, as ordained by town charter.

The current geothermal water lease for the Springs Resort is valid until January 2011, at a cost of $6,000 per year.

Following an executive session last Friday (which included Bill Dawson and Matt Mees, representing the Springs Resort), the Pagosa Springs Town Council met in open session to discuss the structure of an agreement that would effectively extend a 50-year geothermal lease to the Springs Resort, effective upon the termination of the Springs Resort’s current lease.

At the start of the discussion, council member Shari Pierce asked how the town could legally provide the Springs Resort with a 50-year lease. “I know that (geothermal) lease agreements are limited to ten years in our town charter,” Pierce said.

Council member Stan Holt responded, saying, “According to the town’s attorney (Bob Cole), the town can enter into other agreements.”

What those “other agreements” could be remains unclear. In a follow-up interview over the phone, Holt stated that, although he was unsure of the legality of the proposed lease and was not sure what “other agreements” could mean, he had the assurance of Cole that such an arrangement for the Springs Resort could be drafted.

As of press time, Cole stated that he had not talked with the mayor or council and so, “was not at liberty to discuss the agreement.” Cole also declined to comment on how the agreement was structured, how it deals with provisions of the town’s home rule charter, or what “other agreements” might mean.

What is known for the moment is that the terms of the agreement presented to the council and structured for the Springs Resort would be broken down into 10-year increments with the following fee schedule:

• 2011-2020: $12,000 per year.

• 2021-2030: $17,000 per year.

• 2031-2040: $22,000 per year.

• 2041-2050: $27,000 per year.

• 2051 and beyond: additional 10-year agreements to be capped at $30,000 per year.

Council member Jerry Jackson moved to accept the fees for the Springs Resort as proposed. The motion was unanimously approved, with the exception of an abstention by council member Darrel Cotton.

The motion, however, was not an acceptance of a formal lease agreement. That agreement will be presented for review to council at its Oct. 7 meeting when it will review the lease agreement and determine how to proceed.

jim@pagosasun.com