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2007-586-Minutes for Meeting November 20,2006 Recorded 6/7/2007DESCHUTES COUNTY OFFICIAL RECORDS NANCY BLANKENSHIP, COUNTY CLERK CJ Yd 2V0014Q6 YY COMMISSIONERS' JOURNAL 06/07/2007 04;00;55 PM IIIIIIII IIIIIIIIIIIIIIIIII VIII 2007-588 Do not remove this page from original document. Deschutes County Clerk Certificate Page . C e { If this instrument is being re-recorded, please complete the following statement, in accordance with ORS 205.244: Re-recorded to correct [give reason] previously recorded in Book or as Fee Number and Page Deschutes County Board of Commissioners 1300 NW Wall St., Bend, OR 97701-1960 (541) 388-6570 - Fax (541) 385-3202 - www.deschutes.orc MINUTE OF BUSINESS MEETING DESC1 UTES COUNTY BOARD OF COMMISSIONERS MONDAY, NOVEMBER 20, 2006 Commissioners' Hearing Room - Administration Building - 1300 NW Wall St., Bend Present were Commissioners Dennis R. Luke, Michael M. Daly and Bev Clarno. Also present were Dave Kanner, County Administrator; Mark Pilliod, Mark Amberg and Laurie Craghead, Legal Counsel; Anna Johnson, Commissioners' Office; Tom Anderson, Catherine Morrow, George Read and Peter Gutowsky, Community Development Department; media representative Keith Chu of The Bulletin, Barney Lerten of News Channel 21 and Matthew Preusch of The Oregonian; and fifteen other citizens. Chair Luke opened the meeting at 10:00 a.m. 1. Before the Board was Citizen Input. None was offered. 2. Before the Board was Consideration of Approval of the Deschutes County Sheriff Employees Association Contract through June 30, 2009. Mark Amberg presented the item and explained various wage and cost of living adjustments and a change to bereavement leave time. Dave Kanner added that the negotiations went fairly well and he feels the agreement is equitable. CLARNO: Move approval. DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 1 of 28 Pages 3. Before the Board was Consideration of Signature of Order No. 2006-160, Accepting Petition and Setting a Hearing Date for the Miller Tree Farm Annexation into Deschutes County Rural Fire Protection District No. 2. Laurie Craghead explained that the legal description needs to be adjusted, per the Department of Revenue, so this item will be addressed at a later date. 4. Before the Board was a Public Hearing and Consideration of First Reading of Ordinance No. 2006-035, Relating to Solar Setback Requirements in the La Pine New Neighborhood. Peter Gutowsky read the opening statement regarding procedure. In regard to conflicts of bias, pre judgment or personal interest, Commissioners Daly and Clarno indicated they had none; Commissioner Luke said he has none but was a member of the committee that drafted the original ordinance. There were no challenges from the public. Commissioner Luke asked what the County's jurisdiction is now that La Pine is soon to be incorporated. Laurie Craghead stated that until a city takes action, the County's' regulations will apply. She is uncertain what happens if an ordinance has not had the second reading, but this ordinance should be adopted within the appropriate time period and she recommended an emergency clause. The Board must declare the election no later than December 6. Catherine Morrow added that the solar setback ordinance was not waived for other jurisdictions; they have complied, mostly by building one-story structures. This is an applicant-driven Code amendment, so it is location specific. Commissioner Luke observed that is it hard to allow solar access with two-story homes on small lots, which they have found in the cities. Mr. Gutowsky then entered the staff report and case file into the record. The Planning Commission held a public hearing on September 28, at which there was no opposition. The applicant has recommended the text amendment exempting solar setbacks in the Neighborhood planning area on all lots 10,000 square feet or less, or if they have an average width of less than 80 feet. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 2 of 28 Pages The Planning Commission recommended that the text amendment be approved with one modification; that is, they only want to apply it to Neighborhoods 1 and 2. They are sensitive to allowing the opportunity to allow solar setbacks in Neighborhoods 3 and 4. In regard to Commissioner Luke's question about the county-wide impacts, the Neighborhood Planning Area has specific requirements based on density. The Planning Commission held a work session in August, but wanted information on how other municipalities are handling the issue. All local cities have essentially waived solar setback requirements except Sisters, which has not yet implemented one. Commissioner Daly asked if the Ordinance is needed at all. Mr. Gutowsky said that the Planning Commission wants to maintain opportunities for passive solar as well as active solar for possible future cost-effective energy reasons. Chair Luke opened the public hearing at this time. Steve Miller, E1kHorn/Palisch Homes; Dennis Pahlisch, owner of Pahlisch Homes; and Cory Bitner of Pahlisch Homes came before the Board. Mr. Miller explained the Planning Commission's findings. He said the only other land division was one at the south end of La Pine, 40 acres on the east side. The streets have been developed per Code, and probably haven't had solar setback issues. Dennis Pahlisch asked that the street orientation won't be changed for Neighborhoods 3 and 4, but the setback requirements would likely apply to them. The Planning Commission was encouraged to do all four, but they were not ready to take that step. Mr. Gutowsky said that this was framed as a public policy discussion, as there are no specific criteria regarding how the County should handle this issue. The Planning Commission has had this discussion, and they were not unanimous. Commissioner Luke pointed out that the technology has changed a lot over the past two decades. The energy usage in homes was considerably more then, and windows, insulation and other items have greatly improved over the years. He suggested the ordinance be revisited in the future, perhaps during a joint meeting of the Commissioners and the Planning Commission. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 3 of 28 Pages Vic Russell said he was disappointed that the New Neighborhood was framed under a lot of different criteria, and was to keep the area rural in nature, with winding roads and trees. He is disappointed that the Planning Commission didn't look at the original strategic plan. He fully supports this Ordinance, but feels the criteria should apply to the whole neighborhood. A solar ordinance was not addressed during the original hearings as being important to this neighborhood. Commissioner Luke asked if there are problems with placing homes because of this ordinance. Mr. Russell stated that he just does septic systems and roads, so the impact to him is limited. He agreed that energy codes have changed dramatically. Commissioner Clarno asked if Neighborhoods 3 and 4 would have to go through same process. Mr. Russell indicated he thought so. Being no further testimony offered, Chair Luke closed the hearing. Commissioner Daly said that he wants to add Neighborhoods 3 and 4 to the Ordinance. Commissioner Clarno agreed. Laurie Craghead stated that the Board would need to direct staff to come back with this change. If it is changed after the first reading, the Board will have to read the exact language at the second reading. However, references to Neighborhoods 1 and 2 could just be deleted. CLARNO: Move that the language be clarified to include Neighborhoods 3 and 4. DALY: Second. VOTE: DALY: CLARNO LUKE: Yes. Aye. Chair votes yes. CLARNO: Move first reading of Ordinance No. 2006-035 by title only, as amended. DALY: Second. VOTE: DALY: CLARNO LUKE: Yes. Aye. Chair votes yes. Chair Luke conducted the first reading. The second reading with the addition of the other two Neighborhoods will be conducted on December 4, and adoption will be by emergency. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 4 of 28 Pages 5. Before the Board was Consideration of Second Reading and Adoption, by Emergency, of Ordinance No. 2006-031, Amending and Adding Clarifying Language for Subdivisions in the Urban Unincorporated Community of La Pine. CLARNO: Move second reading and adoption, by emergency, of Ordinance No. 2006-031. DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. Chair Luke conducted the second reading at this time. CLARNO: Move adoption DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. 6. Before the Board was Consideration of Second Reading and Adoption of Ordinance No. 2006-032, Amending Subdivision Code regarding Minimum Road Design Standards and Minimum Bike Facility Standards. Catherine Morrow gave an overview of the item. CLARNO: Move second reading and adoption of Ordinance No. 2006-032. DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. Chair Luke conducted the second reading at this time. CLARNO: Move adoption. DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 5 of 28 Pages Mark Pilliod explained that the Measure 37 explanatory statement has been provided to interested parties. 7. Before the Board were Deliberations and Consideration of Signature of Order No. 2006-149, a Measure 37 Claim (continued from October 30) (Claimant: Miller). MARK PILLIOD: As a result of the Board's meeting on October 30, it is my understanding that the Board was going to leave the record open for the submittal of additional information. It was limited to just information submitted by the County; I would note, for example, that the County received a letter from Central Oregon Land Watch dated November 17. It has a number of exhibits included with the letter. There are a couple of articles; one by William Yager and another by Andrew Plantinga, articles from the Oregonian, and another article from the Sightline Institute - formerly Northwest Environmental Watch. These were all attached to the letter that was submitted. Also, there is a copy of a case entitled "La Pine Pumice Company vs. the Deschutes County Board of Commissioners", which was a decision made by the Oregon Court of Appeals back in 1985. I am only reciting these for the record. These and other matters we would have the Board include in the record. I'll continue. The County has received a copy of a draft staff report and recommendation made by the Oregon Department of Land Conservation and Development on a claim submitted by James Miller to the Department of Administrative Services under Measure 37, involving the State claim. COMMISSIONER DALY: Have we seen that yet? PILLIOD: I have not yet distributed these separately to the Board. I received a letter from Steve Scott dated July 13, 2006. He's a local Realtor. His letter indicates that he actually has an interest, presumably in the property, by virtue of some partnership interest. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 6 of 28 Pages COMMISSIONER LUKE: An inheritance from his mother, I believe. PILLIOD: Right. I have a special warranty deed from La Pine Pumice Company to LPP Resources Limited Partnership dated December 1988. This was recorded with the County. I also have a corrected special warranty deed dated January 24, 1989, between the same parties and evidently written and recorded to correct a description error. Those were not submitted as part of the original claim. We have a report from the State of Oregon Corporation Division indicating the nature of La Pine Pumice Company, and in particular that it was voluntarily dissolved in late 1988. We have a copy of the federal law that established the Newberry National Volcanic Monument. I believe this was submitted last time, but in case it wasn't I'll make reference to it. This was a lease and option agreement between Claire Williamson and La Pine Pumice Company dated May 7, 1969. I believe it describes several properties, including the subject property. Finally, I will mention other documentation that relate to this claim, because it wasn't originally submitted. We have a patent from the United States of America to Claire Williamson dated July 3, 1980. This covers the subject property. We also have a bargain and sale deed from Claire Williamson to La Pine Pumice Company dated October 31, 1980, covering the subject property. Staff has prepared a revised staff report from what had been prepared and submitted in October. I'm happy to answer any questions you might have concerning it. At this point, I would expect or would invite the Board to ask if the applicant has any additional information to submit for the record. LUKE: When did you give us the revised staff report? PILLIOD: It would have been distributed last Wednesday. LUKE: I don't think I got it. COMMISSIONER CLARNO: I'm not sure. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 7 of 28 Pages PILLIOD: I'm at a loss. I can make it a practice of delivering, if that's the better approach. LUKE: It might be on my desk. LUKE: Is there anyone else who would like to put something on the record? VICTOR VAN KOTEN: I'm an attorney for Jim Miller and LPP Resources, Inc., 305 Cascade Street, Hood River. We don't have any more evidence to put on the record. I haven't seen the revised staff report yet. We were prepared to make some comments based on the previous staff report and the form of the proposed Order, just to go through to explain what we don't agree with and why. We kind of got off the track last time onto the issue of whether LPP Resources should be a claimant, so we did file a new claim for LPP Resources last week that I think probably arrived here mid-week last week. But we never really got to a discussion of the proposed Order. I don't know what the revised staff report says because I haven't seen it yet. LUKE: We have a clock problem here, don't we? Isn't this the last Board meeting before the clock runs out? PILLIOD: I don't know. It is my understanding that the clock expires on the 271', but I might be wrong by a day or two. I think that was part of the reason for setting it today. DAVE KANNER: Mr. Chair, could I ask a question of counsel? The Board is not voting on your staff report; they are voting on the Order, correct. And the Order has not changed. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 8 of 28 Pages PILLIOD: Actually, that's not correct. The Order includes as an exhibit the staff report and a description of the property. So it is a package. In fact the Order itself, as recommended, is not the same one that was prepared for October 30. So both the Order and the staff report are different today than they were a month ago. KANNER: Do you have the revised Order and staff report with you? PILLIOD: Yes, I do. My staff notes at the bottom indicate it was delivered on the 16th, which was Thursday. KANNER: Perhaps we should take a five-minute recess to copy this. LUKE: We can recess this particular item for now and address other items in the meantime. We have to make a decision on this one. KANNER: We should also provide copies to the applicant, and have counsel walk us through all of the changes, and give the applicant the opportunity, if desired, to meet privately for a few minutes to discuss it among themselves before coming back before the Board. LUKE: I think you'll need a couple of extra copies, for the Bulletin and Forest Service and anyone else. We're going to recess the hearing for a little while, and will go the consent agenda. (The Board recessed at 10:10 a. m.) (The hearing resumed at 10:20 a. m.) LUKE: The only thing I saw that changed was the dates in the beginning of the Order. DALY: I wasn't here the last time. But go ahead. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 9 of 28 Pages PILLIOD: Perhaps we can start with the Administrator's report. On page 1, under report and recommendation, there is a reference to the claimant. We have inserted the words, "James Miller, acting in his individual capacity", to distinguish the capacity of general partner or the partnership itself. The reference to the property, also under report and recommendation, has been modified to refer to the description of the property, which is an attachment. On page 2, under the current owner, the previous report had indicated that no title report had been submitted. But of course on October 30 the claimant did come forth with a title report. So that needed to be modified. Under the second paragraph under the heading, "current owner", there is a discussion about the materials relative to the property being transferred to LPP Resources. That's been modified to at least explain that the claimant's attorney had submitted such documentation showing that La Pine Pumice Company apparently contributed the subject property to LPP Resources in exchange for partnership interests. I've also made reference to the County deed records, indicating the conveyance from La Pine Pumice to LPP Resources. Again, those materials had not been submitted with the original filing. There is a footnote at the bottom of the page that is new. Again, it refers to, in quite a summary fashion, the materials that were submitted to the Board on October 30 and the request that the claim be amended to allow the inclusion of LPP Resources as a claimant. Ultimately, I should mention that staff is recommending and the proposed Order reflects that the Board would refuse that request; that LPP Resources, as apparently has happened, is permitted to file its own Measure 37 claim. About the middle of page 2 there is a discussion about the La Pine Pumice Company being dissolved. I think the original report referred to it as having been liquidated. Corporate shares were exchanged by shareholders for partnership units. There is some slight editing in the balance of that paragraph. The previous report reflected that no original or copy of the lease option dated 1969 had been submitted. But, of course, on October 30 that had changed. The claimant's consultant and attorney submitted the lese option of October 30. That is reflected in the report. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 10 of 28 Pages I'm quickly going through the notes I made while I modified the report. The report also clarifies that James Miller has received permission from the partnership to proceed with his claim. Again, that documentation had not been originally submitted; it was submitted on October 30. With respect to the reduction in value, the report notes some questions over feasibility of development, particularly in connection with residential development. I'm referring to statements made on page 9. I'm just trying to summarize the changes made to the previous report. If the claimant's interest as it existed prior to 1980 would not have allowed residential or geothermal development, the report notes that the Board may take the position - and I think we recommend - assuming that Mr. Miller has a legally established interest in the property despite his being a general partner and/or a shareholder - that the rights he had at the time, prior to 1980, would have been no more than the right to mine aggregate. It would not have included the right, for example, to develop any residential uses or geothermal uses. This is part of the discussion that occurs at about the middle of page 9. Again, the discussion is about the value of residential development or the reduction of value because it is not permitted. It doesn't change a whole lot, except to note that access would require some kind of approval across Forest Service land, and there is no indication that such access would be available. We would not that any residential development application submitted would have to demonstrate that access is feasible. Again, we are making an assumption that such access would be forthcoming through the appropriate permits. The staff report is largely the same in terms of the recommendation. Unfortunately, because of the numerous uncertainties created by the definitions of Measure 37, particularly regarding ownership, it is impossible to say with any degree of certainty that a person who has an interest in a partnership as a general partner has an interest in property that is owned by the partnership. Likewise, whether a shareholder has any interest in property that is held by the corporation. There are statutory provisions to the effect that partners and shareholders are not owners of property held by the partnership or the corporation. But we don't know how a court would decide that matter. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page I I of 28 Pages This case is complicated in part by the fact that the original rights, if you will, go back to an unpatented mining claim in 1969, a lease and an option that were extended to La Pine Pumice Company. That company did not acquire fee title until October 1980, which would have occurred after a federal patent was issued to Claire Williamson, and after County zoning went into effect. So the interest that they might have held was to lease a pumice mine and to actively mine that property. But it would not have been to develop it for other purposes. So, cutting to the chase, to summarize the recommendation and conclusions of the staff report, the County believes the claimant has not qualified for a Measure 37 claim; and to recognize that a reviewing court may decide that he does have an interest in property, despite the title being held by a partnership and, prior to that, a corporation. It takes those distinct ownership interests, as well as the shifting amount of property interest itself, into account. For example, in 1969 there was a lease and option. In 1980 a deed was issued. Well, the lease and option has some characteristics of an ownership interest, and those characteristics are expanded when you get to title to the property. The report recognizes those distinctions and tries to draw lines, if you will, based on language from Measure 37, around those interests. I am trying to summarize this without reading it all. LUKE: In the Order, could you talk about where the Board of County Commissioners hereby orders, and go through those sections for us? DALY: Doesn't Measure 37 say, "Any interest in real property"? PILLIOD: "Owner" is defined as the owner of property, or any interest therein. But we don't know whether the "therein" refers back to the property or an owner. This happens to be the way it was written and the commas that were used. DALY: There was a mining claim filed, and then we had a lease and option from the person who filed for the mining claim to La Pine Pumice. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 12 of 28 Pages PILLIOD: We don't now exactly when the mining claim was filed. We understand that a mining claim existed, unpatented, and that the person who held that petitioned for the government to issue a patent. That request apparently arose in the early 1960's. In 1969 a lease and option was negotiated between the person with the mining claim and La Pine Pumice Company. We understand that the Forest Service objected to the patent application, and the matter was not resolved until 1980. At that time, the patent was issued to the person with the claim, who petitioned for a patent - that's Claire Williamson. She in turn, subject to the lease and option, conveyed her interest in the property to La Pine Pumice Company in October 1980. DALY: The total interest was conveyed in 1980? PILLIOD: Yes. DALY: So, is that the date we are looking at? PILLIOD: Actually, no. The claimant is seeking a date of acquisition of 1969, based upon the lease and option to the property. James Miller does not appear in the chain of title at any point. He only acts in a representative capacity for the corporation and later as a general partner in the LPP Resources. DALY: It went to a corporation when? PILLIOD: The corporation obtained a lease and option in 1969. DALY: And the person who granted the lease and option was not a stockholder or a partner? This is very complicated. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 13 of 28 Pages PILLIOD: Correct. They didn't have anything more to extend at that time. They had an unpatented claim, a petition for a patent, and the lease and option gave La Pine Pumice an opportunity to continue to mine aggregate, and if and when the patent was issued, the person with the mining claim - Claire Williamson - would obtain the patent. At that point, La Pine Pumice Company could have exercised its option, which it did, to acquire title to the property. We're not here to evaluate or determine the claim that has since been filed by LPP Resources Limited Partnership. We're here to determine whether James Miller individually has established a Measure 37 claim. That's the direction that the staff report and Order are headed. There is some discussion about both LPP Resources and La Pine Pumice Company, but really insofar as Miller was a general partner of the limited partnership and a shareholder in the company. DALY: But the limited partnership didn't come until much later. PILLIOD: Correct, in 1988. I'll follow up on Commissioner Luke's suggestion. I will reflect a little bit on the changes or adjustments in the "whereas" clauses. The first "whereas" indicates the claim was submitted by Miller individually, not on behalf of LPP Resources. It sort of anticipates the Board will answer the question whether to allow an amendment to the original claim filing. "Whereas" number 7 is entirely new; it's the same language as in the staff report that discusses what occurred on October 30 with the request that the claim be modified to include LPP Resources as a claimant. The changes in the body of the Order are mainly in sections 2 and a new section 3. LUKE: I would hope that you would go into more than just the changes on this one. This needs a little explanation. It appears you are rejecting the claim, but you are putting some options in there in case it goes to court. Maybe we could kind of walk through those. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 14 of 28 Pages PILLIOD: I can read it. The language is substantially the same as in the original, but that's fine. Section 2, the Board hereby determines as follows: the claimant has no interest in the subject property described in exhibit B, as this property, on the date the claim was filed, was owned by LPP Resources Limited Partnership, in which claimant is a general partner. It should say LPP Limited Partnership LP. Prior to LPP acquiring the property, title thereto was held by La Pine Pumice Company, in which the claimant was a shareholder. Prior to acquiring title in 1980, La Pine Pumice Company had an interest which consisted of a lease and option in four unpatented mining claims, of which the subject property was one of those properties. LUKE: So we are determining that individually Mr. Miller didn't have - there were other people involved in the ownership of this piece of property, and he wasn't the sole owner. PILLIOD: No. He wasn't an owner at all. If a reviewing court should decide, that despite ownership of the property by LPP, and previous to LPP by La Pine Pumice Company, that claimant, in his individual capacity, has an interest in the subject property, then such interest first arose in October 1980, when title to the property was deeded to La Pine Pumice Company. As such, the property would have been subject to PL-15, the County's zoning regulations, and implementing zoning map, adopted in November 1979, and thereby prohibited the owner from mining, residential development, and geothermal power development. If a reviewing court should decide that despite ownership of the property by LPP, and previous to LPP by La Pine Pumice Company, the claimant in his individual capacity has an interest in the subject property, that such interest first arose in 1969 by virtue of a lease and option of an unpatented mining claim on the subject property obtained by La Pine Pumice Company, then until October 1980 such interest was limited to conducting mining operations. PL-15, the County's zoning ordinance, would have prohibited such use and the value of claimant's interest would thereby be diminished. Under these circumstances, in lieu of compensation pursuant to Measure 37, the County elects to waive the County's zoning regulations to enable the claimant to use the property only in such manner as he could have used the property in 1969, for a mining operation. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 15 of 28 Pages DALY: I was trying to follow through. Where are you? PILLIOD: Page 2, section 2. DALY: You haven't read number 4 yet. It starts out identical. PILLIOD: Almost all of them start out the same. Number 4, if a reviewing court decides that despite ownership of the property by LPP, and previous to LPP by La Pine Pumice Company, that claimant in his individual capacity has an interest in the subject property, that such interest first arose in 1969 by virtue of a lease and option of an unpatented mining claim on the subject property obtained by La Pine Pumice Company, and that by virtue of such option claimant's interest was not limited to conducting mining operations, then the County's zoning ordinance, PL-15, prohibited residential, mining and geothermal power development, and that such prohibition diminished the value of claimant's interests. Under these circumstances, in lieu of compensation pursuant to Measure 37, the County elects to waive the County's zoning regulations to enable the claimant to use the property for mining, residential development, and/or geothermal power development. So, you basically are going from less to more, in terms of extending Measure 37 waiver language. It depends on what particularly a reviewing court would determine as to the proper interpretation of Measure 37. Section 3 is new and refers to the Board's disposition of the request that LPP be added as a claimant to this claim. It reads, The claimant requests that the claim be amended to add LPP Resources LP as an additional claimant is not timely. An analysis of such an amended claim would require the County to examine the circumstances under which LPP acquired ownership and whether such ownership established a new acquisition date or related back to the acquisition date of La Pine Pumice Company. Nothing contained in this Order is intended as denying any claim that LPP may have over the subject property. Moreover, the County has not, by this Order, determine whether County land use regulations have been applied to property owned by LPP and have had the effect of reducing the value of LPP's interest in the property. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 16 of 28 Pages In so many words, they request that LPP be added as a claimant to Mr. Miller's claim is being denied. But they are being given the opportunity, as they apparently have exercised, to file a separate claim on behalf of the partnership. Section 4 is the same. It was previously numbered Section 3. Section 5 is the same, as is Section 6, to the previously submitted Order. DALY: I think it all hinges on what you say about their request not being timely. But they do have an opportunity to start all over again? PILLIOD: The partnership would. A new claim filed by LPP Resources LP can and has been filed. LUKE: Mike, by adding them at the October 30 meeting, the line of ownership would have had to be completely reviewed by staff and a different report done. We were running up against the clock as it was without starting the whole process all over again. And there was concern about setting precedent with allowing others to join in on a claim. LUKE: Is there additional testimony from the applicants and the opponents? VAN KOTEN: Taking the last point first, last week we filed a Measure 37 claim on behalf of LPP. We have not conceded that should have been required. We felt that LPP Resources was described abundantly in the other claim, and in fact when you go to the County website of pending Measure 37 claims, the County shows LPP Resources as the claimant. We felt we should have been able to proceed on that basis and we haven't waived that contention, but we filed the other Measure 37 claim. I would like to address the Jim Miller claim and briefly go through the Order that has just be reviewed and tell you what my objections are on portions of it, and why. I think we finally got the record fleshed out to the point where I don't think we have any significant disagreements on the facts, at least as they are summarized up to this point. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 17 of 28 Pages Starting on section 2, paragraph 1 of the Order, we of course do not agree that Jim Miller isn't a proper claimant, and would make a couple of points on that. In the first place, there are at least two cases where Deschutes County has determined that when property is placed in a corporation, the shareholders retain an interest under Measure 37. I realize those were cases where we had somebody that owned the property and created the corporation. I think this is a very similar situation. We had three people who wanted to acquire this lease, and they formed the corporation and took it that way for tax and other reasons, just as someone who owned property first contributed to a corporation for that reason. We think those precedents are applicable here. I would also like to point out that in Crook County vs. All Electors case, although that was a transferability issue, Judge Nielson did explain in that opinion that the term "owner" under Measure 37 is very broad and includes not only possessory interests, but also reversionary interests. So, we have a situation where Jim Miller and two other people, his attorney and one other person, formed this corporation for the specific purpose of acquiring the lease option on that property, and they did so. That lease option was the only asset of the corporation. Under Oregon law, shareholders of a corporation at any time could have dissolved that corporation, and when the corporation is dissolved, the property reverts to the shareholders. It is our position, and I think it was indicated by Judge Nielson, that the reversionary interest is sufficient for Jim Miller to be a claimant under Measure 37. That interest continued on. That was the only property that the corporation owned. In 1988, as it has been explained, for income tax purposes the legal form of the business was modified from a corporation to the limited partnership, LPP Resources, and the shareholders of La Pine Pumice converted into the partners of LPP Resources. Similarly, under Oregon law, a limited partnership can be dissolved at any time by the partners. When the limited partnership is dissolved, the property reverts to the partners. So we had a situation where Jim Miller acquired an interest in real property in 1969, and it carried on continuously until today. We submit that under paragraph 1, Jim Miller is a proper claimant who is entitled to bring this Measure 37 claim. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 18 of 28 Pages Moving to paragraph 2 of the Order that expresses an indication that as far as a date in interest of the property didn't occur until 1980 when Mrs. Williamson eventually got the patent to the property and La Pine Pumice exercised its option and actually purchased the property and got the fee simple ownership of the property. To the contrary, we think it is clear that the property interest arose in 1969 when the lease option was entered into. There are United States Supreme Court cases and a whole myriad of State court cases in various states, making it clear that an unpatented mining claim is an interest in real property. In addition to that, we have ORS 517.080 that says that mining claims are realty. It says, "All mining claims, whether quartz or placer, are real estate". We think it is very clear that in 1969 the unpatented mining claim was an interest in real property. La Pine Pumice took a lease option in that real property interest, and it is clear in Oregon that a lease option is also an interest in real property. So we think it is very clear that the real property interest we are talking about arose in 1969. That takes us to paragraph 3 of the Order, and I think the position taken by counsel, then, is, okay, if that is true, and there was a real property interest that arose in 1969, what is the scope of it. Because the waiver that they are entitled to now, effective on that date, is determined by that scope. We certainly agree that one of the things that could have been done under those mining claims in 1969 was an unrestricted right to surface mine pumice. But I think it is also true, although we disagree on this point, that under the mining claims this is a placer mining claim, and that is made clear if you look at the patent that is in the record. It is a placer mining claim, and the owner of the claim has the right to extract any mineral that is under the ground with the exception of ore that is in veins, locked into hard rock. This placer mining claim doesn't include that, but includes all other minerals that are loose in the ground. For example, it is very clear that if there was oil down there, that's a right in this mining claim. There admittedly was not much discussion in those early times about geothermal because there wasn't any interest in it. But it is also very clear that steam locked into the ground is also a mineral that could have been extracted at that time. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 19 of 28 Pages I submit that it is very clear that in 1969 the scope of those rights included both unrestricted mining and the unrestricted right to develop geothermal. Now, admittedly, as far as residential, the rights under the mining claim were restricted to residential that relates to mining. We just submit that it is our opinion under Measure 37 that if we establish an interest in real property in 1969, then that is not a pertinent inquiry, and that we have an interest that continues through. So, we'd still be entitled to a waiver of the restrictions that came in 1979 just before fee simple title was acquired. We would still be entitled to waiver of those restrictions as they apply to the requested residential use. I am not sure whether this access issue was raised or discussed. I think in the first place that issues of access are appropriate when a land use application is filed, not at this juncture. The record is abundantly clear that there is ample legal access over those existing two Forest Service roads for the purpose of mining. Obviously, if you have a mining claim, you have rights of access to go with it. There is no question about that. And for the same reason, geothermal is a mining right that is covered, so access exists for that also. We just submit that the federal highway that goes across there, I think it is called Paulina Lake Highway, does also actually abut the property at one location, and is connected. So there is an access that I understand has been used somewhat off and on at the property. So I think there is sufficient evidence in the record of access for purposes of this Measure 37 claim. Obviously there are going to be issues when a land use subdivision application is filed. There will be a lot of issues on what is appropriate access and where it should come from. But I don't think that is an issue for us here. The last point I'd like to make about the Order is that I don't think the County can have it both ways in this Order by denying the claim, but then saying but we will allow the claim if we are wrong. I think under Measure 37, the County either has to deny or allow the claim. If it is denied, we have our remedies in court. I understand the reason, but question whether you can do that. LUKE: As with many things with Measure 37, the courts are going to be the ones who have to decide. This, along with a lot of other things. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 20 of 28 Pages VAN KOTEN: That's my points in the Order. Number one, I think it is abundantly clear that Jim Miller, by virtue of his reversionary interest in the property that started in 1969 and carried through, is a claimant. I think it is also abundantly clear that a real property interest under Measure 37 arose in 1969. I think it is abundantly clear that the scope of that interest included the unrestricted right to mine pumice and also included an unrestricted right to take steam out of the ground for geothermal purposes. The final issue is that we submit, even though we acknowledge that the scope of that right at that time as far as residential goes was very limited, but we did have an interest in the property at that time which included an option to buy the property when the fee title was acquired. We submit that is sufficient also to give the residential that 1969 date in terms of a waiver. I'd be happy to answer any questions. LUKE: Any further questions or comments? DALY: I can understand your right to the pumice. But how does the geothermal right come into effect on a mining claim? VAN KOTEN: Because a placer mining claim allows the owner of the claim to extract any mineral that is loose under the ground. For example, oil. It has been very clear for years. And steam is also a resource that is loose under the ground that in the mining claim of 1969, they could have extracted steam just as well as oil or anything else that is under the ground. DALY: Is there something that says steam is a mineral? VAN KOTEN: I think a mineral is anything that is not vegetable, and steam is defined as a mineral. I believe there is also the Geothermal Steam Act that came along later and applies to geothermal energy on federal lands; it describes steam in terms of a mineral. I think it is clear that steam is a mineral. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 21 of 28 Pages KANNER: If I may ask the claimant's counsel, it is apparently your position that since you believe the claimant was entitled to extract the steam, they have a de facto right to construct a geothermal energy plant. Is that correct? VAN KOTEN: I believe they have the right - KANNER: It's a "yes" or "no" question. VAN KOTEN: Yes. I don't know what you mean by - KANNER: So since they have the right to extract ore under the mining claim, do you believe there is a de facto right to construct a smelter and a forge? VAN KOTEN: There is a de facto right to construct the improvements they need to get the minerals out of the ground at that site, whatever is appropriate for that mineral. KANNER: But if you extract steam, there are many things you can do with the steam, including just letting it loose into the atmosphere. Isn't that correct. VAN KOTEN: That wouldn't have any value. There wouldn't be any reason to do that. KANNER: We are not arguing whether it has any value. We are arguing about what they can do with the right to extract the steam. I am asking if they can extract steam and ore, is that all they are allowed to do. What rights to they have to construct other improvements in order to make use of the minerals they extract? Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 22 of 28 Pages VAN KOTEN: For example, if there was oil down there and they extracted it, it would include the right to pipe the oil off the claim. We believe steam would include the right to have a turbine or whatever is sitting over the top of it, and then transport the power off the site. Or maybe the steam could be transported off the site in a pipe, just like oil is. I don't know. But I think it includes the right to have the benefit of the mineral in an economic fashion. LUKE: Is there anyone else who would like to testify in favor of this claim? No response was given. LUKE: Is there anyone else who would like to testify in opposition to the claim? PAM HARDY: You have my letter in the file. For the record, my name is Pam Hardy, staff attorney for Central Oregon Land Watch. PILLIOD: Mr. Chair, the Ordinance does not provide for a public hearing. Only persons who are entitled to notice - that is, persons whose property is located within a certain distance of the claim property - are given permission to testify orally. All others are given merely the right to submit written documentation, which this person has. So I'd caution that it is not appropriate to take oral testimony at this time. PAM HARDY: I would like to respond to that briefly. In this particular case, I believe it is appropriate because so much of the land immediately surrounding the subject property is public land. And all citizens are owners of that land. LUKE: I appreciate that. A lot of claims we hear are surrounded or next to public lands, because 85% of the County is owned by the public. We do have an Ordinance, and we go a lot further than a lot of counties do by allowing written testimony to come in. You are in the record, and I have already looked through your materials. I'm sure the other Commissioners have. It would be a violation of our Ordinance to let you testify, so I ask that you do not. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 23 of 28 Pages PAM HARDY: How about, in that case, instead of testifying, I will make myself available for any questions that you might have. LUKE: Thank you. The Forest Service does have an opportunity to testify, because they were noticed. (Off microphone - Leslie Welden). We don't have anything at this time, unless you have questions. LUKE: For the record, the Forest Service stated that they don't have any direct testimony, but are available for questions. I would assume that since there was no other testimony, that the applicant doesn't have any rebuttal. VAN KOTEN: That's correct. DALY: I do have one question of Ms. Hardy. Her letter indicates on page 4, at the top, the date of interest is January 24, 1989. Where did this date come from? HARDY: I believe I looked at the deeds that were actually submitted with the application and were on the County's website. PILLIOD: There was a deed from La Pine Pumice to LPP Resources LP in December 1988, but it was subject to a corrected deed recorded in January 1989. DALY: I wasn't here for the first hearing, but staff makes a good case on the reasons for not including the request that we amend the claim. It is not timely in my opinion, with the understanding that they have filed a new claim. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 24 of 28 Pages DALY: Move approval of the Order. CLARNO: Second. LUKE: This is a tough one. I think staff has done an excellent job. We try to be as fair as possible and left the record open for additional comments from both sides and other interested parties. I'm sure this one doesn't end here, and there will be a lot of other interest in this claim. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. 8. Before the Board was a Hearing and Consideration of Signature of Order No. 2006-158, a Measure 37 Claim (continued from November 6) (Claimant: Nulton). Mark Pilliod stated that the applicant asked for an extension of 90 days; they have waived the time requirements. DALY: Move approval of the extension to February 12, 2007. CLARNO: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. DALY: Move approval of the Consent Agenda. CLARNO: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. CONSENT AGENDA 9. Signature of Resolution No. 2006-137, Transferring Appropriations within the General Fund, Finance/Tax Department Fund regarding Equipment Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 25 of 28 Pages 10. Signature of Resolution No. 2006-138, Transferring Appropriations within the Mental Health Fund 11. Signature of Resolution No. 2006-131, Transferring Appropriations within the General Fund CONVENED AS THE GOVERNING BODY OF THE 9-1-1 COUNTY SERVICE DISTRICT 12. Before the Board was Consideration of Approval of Weekly Accounts Payable Vouchers for the 9-1-1 County Service District in the Amount of $100.78. DALY: Move approval, subject to review. CLARNO: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. CONVENED AS THE GOVERNING BODY OF THE EXTENSION/4-11 COUNTY SERVICE DISTRICT 13. Before the Board was Consideration of Approval of Weekly Accounts Payable Vouchers for the Extension/4-11 County Service District in the Amount of $626.56. DALY: Move approval, subject to review. CLARNO: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. RECONVENED AS THE DESCHUTES COUNTY BOARD OF COMMISSIONERS 14. Before the Board was Consideration of Approval of Weekly Accounts Payable Vouchers for Deschutes County in the Amount of $740,197.33. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 26 of 28 Pages DALY: Move approval, subject to review. CLARNO: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. 15. ADDITIONS TO THE AGENDA Before the Board was Consideration of the Second Reading and Adoption of Ordinance No. 2006-020, regarding Events Parades, Funeral Processions and Outdoor Mass Gatherings. DALY: Move second reading by title only. CLARNO: Second. VOTE: DALY: CLARNO LUKE: Yes. Aye. Chair votes yes. Chair Luke conducted the second reading by title only. CLARNO: Move adoption. DALY: Second. VOTE: DALY: Yes. CLARNO: Aye. LUKE: Chair votes yes. Being no further items to come before the Board, Chair Luke adjourned the meeting at 12:15 p.m. Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 27 of 28 Pages DATED this 20th Day of November 2006 for t Deschutes County Board of Commissioners. Dennis R. Luke, C air aX "&J,Q Bev Clarno, Vice Chair A ATTEST: NflefiWel M. bafy, °Com ssioner (6f-- 6Xkt"4,- Recording Secretary Attachments Exhibit A: Exhibit B: Exhibit C: Agenda Correspondence from VanKoten dated October 30, 2006 Correspondence from Pamela Hardy dated November 17, 2006 Minutes of Board of Commissioners' Business Meeting Monday, November 20, 2006 Page 28 of 28 Pages G 01 E S { Deschutes County Board of Commissioners 1300 NW Wall St., Bend, OR 97701-1960 (541) 388-6570 - Fax (541) 385-3202 - www.deschutes.orm BUSINESS MEETING AGENDA - FOR THE WEEK DESCHUTES COUNTY BOARD OF COMMISSIONERS 10:00 A.M., MONDAY, NOVEMBER 20, 2006 Commissioners' Hearing Room - Administration Building 1300 NW Wall St., Bend 1. CITIZEN INPUT This is the time provided for individuals wishing to address the Board regarding issues that are not already on the agenda. Visitors who wish to speak should sign up prior to the beginning of the meeting on the sign-up sheet provided. Please use the microphone and also state your name and address at the time the Board calls on you to speak. 2. CONSIDERATION of Approval of the Deschutes County Sheriff Employees Association Contract through June 30, 2009 - Debbie Legg, Personnel; Mark Amberg, Legal Counsel 3. CONSIDERATION of Signature of Order No. 2006-160, Accepting Petition and Setting a Hearing Date for the Miller Tree Farm Annexation into Deschutes County Rural Fire Protection District No. 2 - Laurie Craghead, Legal Counsel 4. A PUBIC HEARING and Consideration of First Reading of Ordinance No. 2006-035, Relating to Solar Setback Requirements in the La Pine New Neighborhood - Peter Gutowsky, Community Development Department 5. CONSIDERATION of Second Reading and Adoption, by Emergency, of Ordinance No. 2006-031, Amending and Adding Clarifying Language for Subdivisions in the Urban Unincorporated Community of La Pine - Catherine Morrow, Community Development Department 6. CONSIDERATION of Second Reading and Adoption of Ordinance No. 2006-032, Amending Subdivision Code regarding Minimum Road Design Standards and Minimum Bike Facility Standards - Catherine Morrow, Community Development Department Board of Commissioners' Business Meeting Agenda Page 1 of 7 Pages Monday, November 20, 2006 7. DELIBERATIONS and Consideration of Signature of Order No. 2006-149, a Measure 37 Claim (continued from October 30) (Claimant: Miller) - Tom Anderson, Community Development; Mark Pilliod, Legal Counsel 8. A HEARING and Consideration of Signature of Order No. 2006-158, a Measure 37 Claim (continued from November 6) (Claimant: Nulton) - Mark Pilliod, Legal Counsel; Tom Anderson, Community Development Department CONSENT AGENDA 9. Signature of Resolution No. 2006-137, Transferring Appropriations within the General Fund, Finance/Tax Department Fund regarding Equipment 10. Signature of Resolution No. 2006-138, Transferring Appropriations within the Mental Health Fund 11. Signature of Resolution No. 2006-131, Transferring Appropriations within the General Fund CONVENE AS THE GOVERNING BODY OF THE 9-1-1 COUNTY SERVICE DISTRICT 12. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for the 9-1-1 County Service District in the Amount of $100.78. CONVENE AS THE GOVERNING BODY OF THE EXTENSION/4-H COUNTY SERVICE DISTRICT 13. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for the Extension/4-H County Service District in the Amount of $626.56. RECONVENE AS THE DESCHUTES COUNTY BOARD OF COMMISSIONERS 14. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for Deschutes County in the Amount of $740,197.33. 15. ADDITIONS TO THE AGENDA Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 2 of 7 Pages Deschutes County meeting locations are wheelchair accessible. Deschutes County provides reasonable accommodations for persons with disabilities. For deaf, hearing impaired or speech disabled, dial 7-1-1 to access the state transfer relay service for TTY. Please call (541) 388-6571 regarding alternative formats or for further information. FUTURE MEETINGS: (Please note: Meeting dates and times are subject to change. All meetings take place in the Board of Commissioners' meeting rooms at 1300 NW Wall St., Bend, unless otherwise indicated. If you have questions regarding a meeting, please call 388-6572) Monday, November 20, 2006 10:00 a.m. Board Meeting for the Week 1:30 p.m. Administrative Work Session Tuesday, November 21, 2006 10:00 a.m. Regular Meeting of the Employee Benefits Advisory Committee Thursday, November 23, 2006 Most County offices will be closed to observe Thanksgiving. Friday, November 24, 2006 Most County offices will be closed (unpaid holiday). Monday, November 27, 2006 10:00 a.m. Board Land Use Meeting 1:30 p.m. Administrative Work Session Tuesday, November 28, 2006 8:00 a.m. Oregon Youth Challenge Program Advisory Committee Meeting 12:00 noon Regular meeting of the Audit Committee Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 3 of 7 Pages Wednesday, November 29, 2006 10:00 a.m. Board of Commissioners' Meeting 1:30 p.m. Administrative Work Session - could include executive session(s) Monday, December 4, 2006 10:00 a.m. Board Land Use Meeting - Central Electric Cooperative Hearing 1:30 p.m. Administrative Work Session 3:30 p.m. Local Public Safety Coordinating Council (LPSCC) Meeting 5:30 p.m. Joint Meeting of Planning Commission and Board of Commissioners regarding Destination Resorts Wednesday, December 6, 2006 10:00 a.m. Board of Commissioners' Business Meeting 1:30 p.m. Administrative Work Session - could include executive session(s) Monday, December 11, 2006 10:00 a.m. Board Meeting for the Week 1:30 p.m. Administrative Work Session Tuesday, December 12, 2006 5:00 p.m. Regularly Scheduled Update with the Judges - Ernesto's Restaurant Wednesday, December 13, 2006 10:30 a.m. Oregon Youth Challenge Graduation 1:30 p.m. Administrative Work Session - could include executive session(s) Thursday, December 14, 2006 3:00 p.m. Regular meeting of the Fair Board, at the Fair/Expo Center Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 4 of 7 Pages Monday, December 18, 2006 12:00 noon Regular Meeting of Department Heads and Commissioners 1:30 p.m. Administrative Work Session Tuesday, December 19, 2006 10:00 a.m. Regular Meeting of the Employee Benefits Advisory Committee Wednesday, December 20, 2006 1:30 p.m. Administrative Work Session Monday, December 25, 2006 Most County offices will be closed to observe Christmas. Monday, January 1, 2007 Most County offices will be closed to observe New Years Day. Tuesday, January 2, 2007 8:00 a.m. Swearing-in of New County Commissioner and Other Elected Officials Wednesday, January 3, 2007 10:00 a.m. Board of Commissioners' Business Meeting 1:30 p.m. Administrative Work Session - could include executive session(s) Monday, January 8, 2007 10:00 a.m. Board Land Use Meeting 1:30 p.m. Administrative Work Session 3:30 p.m. Local Public Safety Coordinating Council (LPSCC) Meeting Wednesday, January 10, 2007 10:00 a.m. Board of Commissioners' Meeting 11:15 a.m. Legislative Update Conference Call 1:30 p.m. Administrative Work Session - could include executive session(s) Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 5 of 7 Pages Tuesday, January 11, 2007 7:00 a.m. Regularly Scheduled Meeting with the Redmond City Council, Council Chambers Monday, January 15, 2007 Most County offices will be closed to observe Martin Luther King, Jr. Day Tuesday, January 16, 2007 10:00 a.m. Regular Meeting of the Employee Benefits Advisory Committee Wednesday, January 17, 2007 1:30 p.m. Administrative Work Session - could include executive session(s) Monday, January 22, 2007 10:00 a.m. Board Land Use Meeting 1:30 p.m. Administrative Work Session Wednesday, January 24, 2007 10:00 a.m. Board of Commissioners' Meeting 11:15 a.m. Legislative Update Conference Call 1:30 p.m. Administrative Work Session - could include executive session(s) Thursday, January 25, 2007 8:00 a.m. Board Goal Setting Retreat - McMenamin's Monday, January 29, 2007 10:00 a.m. Board Land Use Meeting 1:30 p.m. Administrative Work Session Wednesday, January 31, 2007 10:00 a.m. Board of Commissioners' Meeting 1:30 p.m. Administrative Work Session - could include executive session(s) Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 6 of 7 Pages Monday, February 5, 2007 10:00 a.m. Board Land Use Meeting 1:30 p.m. Administrative Work Session 3:30 p.m. Regular Meeting of LPSCC (Local Public Safety Coordinating Council) Deschutes County meeting locations are wheelchair accessible. Deschutes County provides reasonable accommodations for persons with disabilities. For deaf, hearing impaired or speech disabled, dial 7-1-1 to access the state transfer relay service for TTY. Please call (541) 388-6571 regarding alternative formats or for further information. Board of Commissioners' Business Meeting Agenda Monday, November 20, 2006 Page 7 of 7 Pages ANNALA, CAREY, BAKER, THOMPSON & VANKOTEN, P.C. Wayne C. Annala Attorneys at Law Telephone 541-386-1811 Wilford K. Carey 305 Cascade Street Facsimile 541-386-6242 Jeffrey J. Baker* P.O. Box 325 Michael J. Thompson* Hood River, Oregon 97031 *Also Admitted to Victor W. VanKoten Practice in Washington October 30, 2006- Mark E. Pilliod Legal Counsel Deschutes County 1300 NW Wall Street, Suite 200 Bend, OR 97701 Re: Measure 37 Claim No. M37-06090 Dear Mr. Pilliod: This office has been retained to represent the claimants in the above matter. I tried unsuccessfully to reach you by telephone last week and have subsequently obtained a copy of your letter to Chris Bedsaul dated October 23, 2006. I understand that Mr. Bedsaul has provided you with a copy of the lease. I am additionally providing herewith a copy of an addendum to the pending claim, executed by James Miller and Frederick Weber, Jr. (the two general partners of LPP Resources Limited Partnership), individually and on behalf of said limited partnership. Also enclosed is a copy of a summary of pertinent facts I have prepared for this morning. I believe this will clarify the concerns expressed in your letter. If there is any further discussion that would be helpful prior to this morning's meeting with the Board, I can be reached on my cell phone (541-490-9440) and would be happy to come to your office. Thank you for your courtesy. ery Truly Yours, U~' 1~ Victor .Van oten SUMMARY OF FACTS IN SUPPORT OF MEASURE 37 CLAIM # M37-06090 The fee simple title to the property is in LPP Resources Limited Partnership (hereinafter "LPP Resources"). LPP Resources is identified and described in the claim form originally filed and is intended to be a claimant hereunder. The two general partners of LPP Resources have submitted an "Addendum to Measure 37 Claim" clarifying that fact, which is signed by them on behalf of LPP Resources and themselves individually. Measure 37 defines "Owner" as "...the present owner of the property, or any interest therein." Claire Williamson, a widow, was the owner of the mining claims covering the property. Patent applications were filed in 1961 and were being contested by the United States. On May 7, 1969 Mrs. Williamson entered into a "LEASE AND OPTION" with La Pine Pumice Company, an Oregon corporation (hereinafter "La Pine"). This document granted to La Pine full possession of the property along with the right to buy same from Mrs. Williamson when the Patent was obtained. It is well established that a mining claim for which the patent has not yet been obtained is an "interest in real property", and can be sold, leased, etc. Wilbur v. U.S. ex rel Krushnic, 50 S.Ct. 103, 280 U.S. 306, 74 L.Ed. 445 (1930). It is also indisputable that "leases" and "options" are both interests in real property under Oregon law. La Pine therefore acquired an interest in real property on May 7, 1969. Mrs. Williamson eventually prevailed in the litigation and in 1980 obtained the Patents for the mining claims. La Pine thereupon exercised its Option and purchased the property pursuant to deed from Mrs. Williamson recorded October 31, 1980. ORS 60.481 provides for the merger of a corporation into another business entity. It states in relevant part: "A corporation organized under this chapter may be merged into a business entity organized under the laws of this state...". In December, 1988 the shareholders of La Pine formed LPP Resources under the Oregon limited partnership law and merged La Pine into LPP Resources. The shareholders of La Pine become the partners of LPP Resources (James R. Miller and Frederick E. Weber, Jr. are the general partners and the other shareholders are the limited partners). This was done for tax purposes only, in order to comply with the amendments to the Internal Revenue Code going into effect at that time. ORS 60.497 explains the nature of a merger and its legal effect. It provides in relevant part: "(a) Every other business entity that is a party to the merger merges into the surviving business entity, and the separate existence of every other party ceases; (b) Title to all real estate and other property owned by each of the business entities that were parties to the merger is vested in the surviving business entity without reversion or impairment; P a (c) All obligations of each of the business entities that were parties to the merger, including, without limitation, contractual, tort, statutory and administrative obligations, are obligations of the surviving business entity; (d) An action or proceeding pending against each of the business entities or its owners that were parties to the merger may be continued as if the merger had not occurred It is therefore clear that under Oregon law this merger of La Pine into LPP Resources did not result in a change of ownership of the property from what existed as of May 7, 1969. There was simply a modification of the legal form of the owner to conform with changing tax laws. Based on the above facts, LPP Resources is entitled to a waiver of all existing County zoning regulations that restrict its right to use the property for mining, geothermal power development and residential development. It has been suggested in the proposed order that since the mining claims not yet patented in 1969 would have only allowed mining, the waiver granted now should only be for mining. That conclusion is erroneous. First, as pointed out above, Measure 37 defines owner as the holder of "a_y interest" in the property and the value of the property is to be determined "as of the date the owner makes written demand for compensation." Second, even if that were not so, the "interest" here is more than simply a possessory right under a lease. The 1969 interest included the right to acquire the fee simple title to the property when the patent was obtained, and that is what in fact occurred. Even if one were to concede that the waiver should be limited to the use permitted by the owner's "interest", La Pine did in fact acquire fee simple title on October 31, 1980. On that date geothermal power development was not yet restricted. Furthermore, the restrictions in PL 15 Zoning Ordinance applicable to residential development did not apply to this property in 1980 because this property was not designated on the Zoning Map filed April 8, 1980. Single family residential dwellings on this property were in 1980 therefore still classified as an outright permitted use, under the PL5 Zoning Regulations that become effective on January 1, 1972. r lAs Victor W. VanKoten, OSB# 1179 Attorney for LPP Resources Limited Partnership, James R. Miller and Frederick E. Weber, Jr. ADDENDUM TO MEASURE 37 CLAIM # M37-06090 LPP Resources Limited Partnership, an Oregon limited partnership (and its general partners James R. Miller and Frederick E. Weber, Jr., individually and on behalf of LPP), hereby consent, represent, confirm, clarify, ratify and agree as follows: 1. LPP is described and named in Claim #M37-06090, and identified therein as the owner of the property. By virtue thereof, LPP was intended to be, and is, a Claimant in said Claim. 2. LPP hereby authorizes, and ratifies, the authority of James R. Miller and/or Frederick E. Weber, Jr. to act on its behalf in the submittal of said Claim#M37- 06090 to Deschutes County. The actions authorized and ratified herein include preparation and signing of claim forms and other documents, together with any and all other steps or actions of any kind or nature relating to such Measure 37 Claim, as well as hiring consultants and attorneys to assist and participate in said actions. 3. Frederick E. Weber, Jr., individually, by his signature hereto, does hereby consent, ratify, join in, and agree to be bound by, Claim#37-06090. 4. The names, mailing addresses (street addresses are the same) and phone numbers of the undersigned claimants/property owners are as follows: LPP Resources Limited Partnership c/o Frederick E. Weber, Jr. 6441 SW Canyon Ct., Suite 10 Portland, Oregon 97221 (503) 297-5242 Frederick E. Weber, Jr. 6441 SW Canyon Ct., Suite 10 Portland, Oregon 97221 (503) 297-5242 James A. Miller 12918 SW 63`d Place Portland, Oregon 97219 (503) 639-1677 LPP Resources Limited Partnership By Ja s R. Miller, General Partner By 1 Janj~R. Miller, individually Frederick E. Weber, Jr. individually P~ ' •~"'•~•~+ua~c. ;wc++c~w 111110. J.ad.w r1Y1 A A menTitle Part Of The J£LD-WEN Family PRELIMINARY TITLE REPORT JIM MILLER May 18, 2006 c/o AmeriTitle Report 1i1 OR Title Number 090390 Title Officer ANN C. EASTON REPORT $200.00 rage Z or a We are prepared to issue title insurance in the usual form insuring the title to the land described as follows: Township Twenty-onc (21) South, Range Thirteen (13), East of the Willamette Meridian, Deschutes County, Oregon. Section Thirty (30), Lots Three (3), Four (4), Five (5), Seven (7), Nine (9), and the West one-half Southeast Quarter Southwest Quarter (W1/2SEli4SW1/4), as shown on the supplemental plat of said township, accepted January 12, 1963. Vestee: LPP RESOURCES, LZMZ=n PARTNERSH1P, an Oregon limited partnership Dated as of May 10, 2006 at 7:30 a.m. Schedule E of the policy(ies) to be issued will contain the following general and special exceptions unless removed prior to issuance: GENERAL EXCEPTZONS: 1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real properly or by the public records. Proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the public records. 2. Easements, liens, encumbrances, interests or claims thereof which are not shown by the public records. Any facts; rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of the land or by making inquiry of persons in possession thereof. 3. Discrepancies, conflicts in boundary lines; shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records. 4. (a) Unpatented mining claims; (b) Reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) Water rights, claims or title to water whether or not the matters excepted under (a), (b), or (c) are shown by the public records. 5. Any lien or right to a lien, for services, labor or material heretofore or hereafter furnished, imposed by law not shown by the public records. 2 _0_0 __619 01WO";1" 15 Oregon Avenue • Bend, Oregon 97701 • 541 3b9-7711 • Fax 541 389-0506 1 Website: www.aineri-6t1cc.rom Order No. 090390 Page 2 I VIL11LVVV III IIC. J..7L.UU rIN SPECIAL EXCEPTIONS: Taxes assessed under Code No. 1-099 Map a Account No. 164027 6. The 2002-2003 Taxes: $4,721.69, plus 7. The 2003-20104 Taxes: $4,811.69, plus 8. The 2004-2005 Taxes: $4,989.77, plus 9. The 2005-2006 Taxes: $4,965.86, plus nd Tax Lot Number 21 13 00 00 00101 interest, UNPAID. interest, UNPAID. interest, UNPAID. interest, UNPAID. rage.) or, 10. Taxes deferred, as disclosed by the tax roll, the premises herein described have been zoned or classified for open space deferred. At any time that said land is disqualified for such use the property will be subject to additional taxes or penalties and interest. 11. The terms and provisions of LLP Resources, Limited Partnership, an Oregon limited partnership agreement, a copy of which should be furnished for our examination prior to closing. 12. Notwithstanding Paragraph 4 of the insuring clauses of the policy or policies to be issued, the policy or policies will not insure against loss arising by.reason of any lack of a right of access to and from the land. 13. Rights of the public and governmental bodies in and to that portion of said premises now or at any time lying below the ordinary high water line of the East Lake, including any ownership rights which may be claimed by the State of Oregon as to any portion now or at any time lying below the ordinary high water line. 14. Such rights and easements for navigation and fishing as may exist over that portion of the property, now or at any time, lying beneath the waters of East Lake. 15. Easement, including the terms and provisions thereof, affecting the portion of said premises and for the purposes stated therein As granted to: Midstate Electric Cooperative, Inc. Recorded: November 15, 1966 Book-Page: 151-134, Deed Records 1E. Agreement, including the terms and provisions thereof, by and between LaPine Pumice Company, LPP Resources Limited Partnership, Frederick E. Weber, Jr. and United States National Bank of Oregon, dated December 22, 1988, recorded December 30, 1988, in Book 1-76, Page 1689, Deschutes County Records. NOTE: The following deed(s) affecting said land were recorded within six (6) months of the date of this report: NONE NOTE: The property addreso as shown on the Assessor's Roll is: 22201 Paulina Lake Road, La Pine, Oregon 97739 Nan : As of the date hereof, there are no matters against LLP Resources, Limited Partnership, an Oregon limited partnership which would appear as exceptions in the policy to issue, except as shown herein. uaie. iU14114Vu0 lime: xac:uu rM rage q or a Order No. 090390 Page 3 NOTE: Any map or sketch enclosed as an attachment herewith is furnished for information purposes only to assist in property location with reference to streets and other parcels. No representation is made as to accuracy and the company assumes no liability for any loss occurring by reason of reliance thereon. This report i9 preliminary to the issuance of a policy of title insurance and shall become null and void unless a policy is issued and the full premium paid. AmeriTitle By: ~L z Cx:5- Ann C. Easton, Title Officer AE-.kg "Superior Service with Commitment and Respect for Customers and Employees" rrom: Chris 5edsaul To: Victor Van Koten Date: 1012712006 Time: 5:52:00 PM Page 5 of 5 • I - - L07 1 37.57 f f L T51 f ,a,,: ! i 37,38 LOT / I - - - LOT f I 1 37.33 ^I j f 30?3 18 17 j 16 ttoa 1-99 37T29 } 1 f6 ram - - - Bo cw 79 21 Cf~ N. P~2g r I r~ 2 2 r - LOT 2 I f 37.28 21 19 i 7 29T55 20 ~tOT 3 19.50 J S 37.28 I 7 i f 5 r' LppT 2 24 1 ~jTf -J•0' P.7 4 of LOT I! LOT 1 2r S.DGI 24,40/ 11 EAST LAKE Ii5?BDI z~`DO 1 30 29 28 101 La7 LOT 5 1 3 25.17 6.131 _ - -I r LOT 7 LOT '0 hoT 9 79.31 LoT 6 `o, LOT l'9.3 5.56 15.15 Sl.lS~ - B. 84.60 :N ^ Lo, COMPLIMENTS OF 37,20 f 79.55 37.50 I Amef -WO 4 This eketch is NmIehsd tar Q~~L,w ,fit I for informatlOn purposes 37.22 f only to assist M property 31 I Z 2 I locatio+~h reference to 11i streets w W other parcels. J No representation is Ly7A3 f made as to accuracy and 1 the Company assumes nO liability for any loss LOT + I occurring by reason 37.75 f of reliance thereon. LOST w j~ LAKE f I k SEE MAP ucL et ub ua:uia JK Pi1LLtK 5U36391677 a From: Chris BedsaW To: Jim Hitler Date: 10128!2006 Time, 7`46-36 PM LBASL AND 0MQH THIS ArSRl.MM" MAUL A21D Eb`TERZD INTO thie .'.7th day of May, 1969. by and between CLARE :7T,LLAH5ON, a uidw, hereinafter referred to as the Owuar. ana LA PI'S MsICE CVYASt, as bregoo corporation, herainaftar know. as 'L& Pine', W 1 T 9 9 S s z r k: WBERms, the Owner destres and intends to tyrant to LaPine a lease and option to purchase certain wining claims vhieh are eituate to an unnamed siring district, Deschutes Couaty, State of Oregoo, described as follows: Unnamed placer mining claim esbraeisg 157.48 acres of land couprisin late 3. 4, 5. 6 and 7, Section 3C. Tcwuahip 21 South, range 13 :ant, rillaastte Haridi.au, location notice recorded July 2. 1945, io hook 1. Page 113 et rlie iXgUcA P.ecords of Deschutes County, Oregon. Claim [b. 1 locared September 20, 3933, 1oc.:tloa notice eecorded Gook 1, .'age 69 of the Ninim}t Aecmre3 et Deschutes County, ^rczon. Claim No. 3 located July 3, 1941, location aotico rarerded Ec,)t 1. page 101. :finimq Records of Deschutes County, Oregon, Claiot No. 4 located July 1, 1941, location notice recorded Book i, Fuxe 102, Mining Records of Deschutes county, Oregon. Claims Nos- I, 3 and A are embraced in Sections 4. 25, 30, 31 and 36, Townships Z1 and 22 South, Ranges 12 and 13 ?est. Willamette Meridian. Deschutes County. State of Oregon. Together with all rights, privileges sad franchises Incident, appendant, and appurtenant thereto, together with all rights of eRreas therefrom and ingress thereto that the Owner may possess. and personal, property thereon, and HTRBRFeS. Contest No. Oregon OILT35 instituted by the Voiced States of America. Cootastast, v_ Clara Williamson to contest the patent &"It- cation filed by Omer July 10, 1961. seektag patent to the Unnamed placer lining claim of 151.48 acres described above, Is pending sad Contestant sedha to declare said claim null sad void, and P.6 rage a or Id Pape 1 - Lease sod Option Uct e'/ Ub U8:Ula JR MILLER 5036391677 P,7 From: Chris Sedsaul To dim Miller Date 10/2612006 Tame: 7:48:36 PM Page 6 of 12 S 5(1Si.UAS, tae owner has waived surface rights to Claims Nov. 1. 3 and 4 described above under .action 4, Act all July 23, 1953. (69 Stag. 367), and the (Asrer ntiakes to representations or warranties with respect to bar ovnerahip of the above described claims, o:her :::acs she le the caner nc tbC prsessory title thereto, I'r7l' T81:1.InEZ, for an:: in coa0lderaciou o: %C". i:C•LL•MS pat3 uy Lo ?I-.,, ~,j :ha ractipt of uhieh 1,rreby lu selainvledc." by tl,o Nuer, on,! 1r. conni: eration of tla ::uruai COVE:WULA mac ac,reer,.enta en tt,e parto of the respective nartles herate_ U 1:3 C0."1iW,:.'1"WD A;0 ACAFCD AS 1POI.LDw5' First: !timer Roreb7 lnssaa, lets and denlsee nnto Lm ?the for the term tormeneinq as of the .!ate hereof an6 eudinv at noon oa Docenber 31, 19790 all oP the eining claims and araperty hersinabnve described. Saeoad: timer hnrely done give Tad scant to Lu Rine the solo and exclusive right to nine or•7 end all of sold claims ano to s@11 cbe valnnble ninara;n rocnvered tt.crefrc'n. Third: Lo Pine rrrcen tc pay to the (honer no annual royalty of ten per cent (10X) of the [roes sales of ell :.,inerals mined and sold from said property, lass trnr.•afortatiaa to demtlaatiott and intrsasit shipmeut points. Snie ro7sltr shell La gamble vitbin thirty (30) days after La Pine :tall. `xve r4ceLve6 cnyrrnt Sl"ert;Lr. Tourch: If ro7elty reserved oh-ill not mnuat co h fAuixam of One ThoasmW ($1,090.00) Dollars by :wember 1, 1964, then Ls Pine shall pay promptly tba difference batwaen the royalties paid by said date tnd $1,000.1110: Likewise, It by 3ovenber 1 of each ensuing year during the term of tbie lase, the percentage royalty paid daring the previous txelve sonths Zs leis than a totdl of One Thousand Dollars, then Us Pine abnll pay tha :i7fcreoze betveen such percentage royalties paid and the ulnimna annual payfwnt of One Thousand Dollars. fags 2 - L.sase and option. Uct 27 06 08:02a JR MILLER 5036391677 From: Chris Pedsaul 70: Jim Mikr Gate' 1012612008 Time: 7AS-36 PM Pifth: Ls Pine a;.cll have tht lmeditte scd excl-saive roNS468101A and control of said aropcrcy eurLt: the coeticv.anee of this sRreemeact and it e9all be selelw rersc,91bla for any and all stork der.: and all e;;yrrsee incurred ia, or n7or. or a?:ouc the seen, and for all Liability. claim aaJ ,der--n-nds of any kind or character arising out of the orerations conducted by La Pine. La :Iva chnil 'v"'7 vror.rct and :.rc^ t:± u.+utr of said pro- 1;orty neraleas from lieu; or other thsrgrs reaul:ic; from any acc of oni-viion or cowmiasion 1>~ La toe. Sixth: La Aire cove::.:ate acid av:ream at !.3 to prosecato Ch.-, Owner's applicatiou for ,a -atent to the Um=vl pl.ec~r mialnR claim of 137.48 *area filed by ovucr 3~,Ly lo, i961, and li rracewrp, is .'ins will cent1nVft to 7roaccote sail pattat ap*ltcaaon iu `'.w United Statue Uiat- ilet Court and in the uci_ad estates Court of Lppealy, and T.o firs agrees to !-rrFOCm ]ny en:unl n~;::•c~=~c:~r ue. , relufrc~ a.: .i;u ciaipu dccarit::xf herein before Septer..ber 1.ot each year for the Lena of this agreement, commaacing with 19k Y. Sevcrth! E. 1i-e :a . t:ve^ant and agrae tbs CR+nor as POllcvs, to wit' To enter upan eai<' p-rcer zainlnr claim or prerisee. ..rd work the vnna in the r...LZCar :uocrasary rc, ,ooeJ and ~cc;wuical mining. ao as to take tut the hreateat orx;uot of ore possible, Whir eve retard rrr the imm-.1o;nvm and 7rzscrvauitn. j-' told prewlL m, as a wora.shle r.ina, and to the special covenants enueLrated. Eighth: 1:1 coals, cupplioe, or movable tyoi;ment, and acy relnin; or wUllog mschiuary, placod on said lands by i.t iiu.. exceFeing, all build- inggo shall remain personal property, end the proydrty of La Piasi, and thin same sUelt be removed from said promises vichin niue months after any termination of this apreemat. riath: in the event the UnlLed 9tacos granta a patent to the Unnamee placer adhing elatms. tLe comer shall scrvv uatice thereof to La Pine and P.8 Page 7 oT L1 Page 3 - Leas and Option. Oct 27 06 08:02a JR MILLER 5036391677 p•9 1 From: Chris Bedsaul To: Jim wer Date: 1012612006 Time: 7:48:36 PM Page 8 of 12 La fine shall have one year, 36S days, from seectpt of such notice to eur- rise the optiou to purchase, acid the owner grants to La Pine the sole and exclusive right and option to purchase all the properly described in this screen^nt for the sea or llfty 1%nixsaN (S50,Af10.00) Dollars within the ode pA3r ,criu•I V..s Lgta of rc,.SLjC Of notice Cr the LaRt4a31ee of paten(, and such sun u: 150.05C.Uo is to :a r04;Jta1 ty :ha cots] amount of royalty and -other outs tharatotoze paid by La :inr,. ':tie Salarco of the purchase pricy e:.all then Dr Veld by w purchased noney norcgsge cover- leg said claims given by La Fice to the LXacr, payable at the rate of Tan Ibousand (S10,DOj.00) collars par annue with tntorest thereon at rate of six (61) peresac PCT In"ut on t':o unpaid halnnre ur•til the cocirm pur- erase price Is rally paid. Ir at the tiee of oxarcire of raid option., the parcantaga of roy+.llti.rs 112"0 Act ,m"ile" to the Sum of :'-10.ut1C.Oll, then La PLne aanll pry the difference betven the perceutaga royalty theretofore paid under this agreenent and the sum of $10,D00.00. If t%c patent is issued And the option is not e-retged within tho are ;roar n,4rtod provided, the Chm%r ret:etroc:ao :..a r[ hL to u._nis.+te the Cejaa after the one year period frog the dctr o: tl,+ sociu .f taro irourt_j: of the ;,great. Tenth: This agrasacat ahr.lt terminate upon the failure of La 8iaa to faithfully keep and perform the tcrme and conditions of Via lease, and in the event any clalmSdescribed tarein is deelarec null ru vat.:, eha dense shall thereupon terminate we to Such claims. If the patent applied for Is Oct granted and the clainta are not declareu null cud void, t[tea the lease term •shall continua sa aforesaid. If the patent is issued, and the aptioa !a not eumrcismd vithLn the cue Trait period, the owner resorvss toe right to terminate the lease attar one year from date of the receipt or notice of patent. Page 4 - Lease and Cptlor. Uct 27 06 08:03a JR MILLER 5036391677 P.10 From: Chris 8edsaU To: Jim wer Date: 1012612006 Time' 7:48:36 PM cage y or 14 Lleventt : =i.la a••rse.Rant 911r.12 tcruiuate: (a) tt the un.i a; the day cn an:ch asy.Fcy_ilty referrer co in this agraecu:at Is Ra)Faulz, If 51)4;a ru)a ::5+ s:cc ; d., ('o) I:al_re G.- I- i fnr...ltvia .:+iet7 (30) ua~~• after .''r. r:r.r:lCa n` 7nt7.Cd oy Litt Oy.1Cr en re-:a'y u=:y :re=eb :.a -'r, cf a •!'.ct i±r.: rr r,jv-i.nr '.n:reir re.r.! S:r•e+ :=rte vsr Ito ^srt to .e obrcYvcd cr periot7cv -IT (c) i-on LGf t•.:cpiracior• a cau (=v) nays afte La Nu,: '.u%s ;twn nacic_• ni termiuutin^, t:u thy, ~ti~xr:r. ;welftlr •o 0c rhis n; req. not by s:tIrer p::rty nl+al?. have the a fett of rti.n'•si::? t•a rin0 LTOP (",%y 1UL" or u1:1ch ,hall have accrueu or vccured heretw., .'.r ',c ore rh: effcvIlve data of ruct- tet ausrticr.. !,eitlv:r any provision o! tL•sr a~r~oaaal[ :or the rrant osi 'i fc3tpunru~r.[ fc2 L::n "An-: of an;•ti,i:c -rnvl,.nt vrr it .:as ,:er.-crtt. ..all ba constru-i o^12^3tir.p, :a Pine tc e::rec?cz tysc ~:clceire rlxat a~ Opelv.1 tv !t„«t;:,.•rp :,PCYt,^,d±,_ semi wz or to tn,Yt or ho],' peasessioa of the sold .ia:ndoed arentoes, or to carry out aay rri^Lo osera- *.Im o. e%ceptlifg us hcrr!rttet, vc stated. :h1r:a::tt* x/l reacts, c:era,nd%, and cen7unicatie19 herolo provided C:, v. rise:c, :z :4i:11 :•.i:• :S "I. -Cy 'uy dt%I3 i.t -•e'._-nb:c ..__+se3Yy rc ;;ire. a.:t` ali srrerr:.z.•aa ,etvzmu ta_ nar_laa D.: in •aititat:_ 1t1 ouch uoacc.c. >:F"»c dc. nr c0T^•t_i1ci:'iora :-~i t:'= .^rvcd h.• xnnyl Scrvic4 Oz •>'r certr.ftc' ma.I:. pc,tago ih:areon uliy raid, and clirecred to L2 ni =c .tc to else Ovaar e. the a drosaes sec forty Alter tho ,eamea subecribed %aroto. ,until a different aarLy or place is daalgo+ted In vrlcinn by the Tarty hereto. Fourreturh: 13 Pira •ill glee to tho 6vnRr coptee of its geological nad enPinevrlnc reports. r.ana and, resuU% of teyti~g arul e:olorinp for aa~ bo ks of accot~nis 1rerala, i1 n.:y,/+~t.,-t. rVne CLAY tm+~ concer.~ia- ssid !froprrty~. 91fteenth: ihia rgrreweut shall isure, to c::¢ beusftt of z i ba b:cs.- ina upon the ircirs, )w.a txccutors, adttinist7i atole s, succemors and Page 3 - Lassa acJ Oytiuu, Oct 27 06 08:04a JR MILLER 1 From: Chris Bedsaul To: Jim Miller 5036391677 P.11 Date: 1012612006 Time: 7:48:36 PM Page 10 of 11 oaa amoiaae of the respective parties hetsto. IN VITtafSS WIERTOP, the Osmer tuns bettunto act bar hand and acal, and la Pine rusice Conpany. pursuact to renolutiom Of Its Board of virectors, has hereunto affixed its corporato signature asd seal. end t`.e r^sp, ctlvu parties te;iac vxecuLCl thin artaG'-i6rtt as of the d2y and 70Az drat tserelvabcve uritten_ 'tTE ' ~ R f tJitasss ~ AdJtC9o: 701 Broadway Bend, OregoA i AiTESZ: - / . Sccrcer c S. iY6 GP MODS ! r se Cocaty of nuttaome!% ) mmy / PreridCAt .►_currca On this Gay of `;ay, 1969. bzfore veer, the undezsigoed aotary Public Jr, dr,44, for aniri County --md Stars, .7FI:rnted ^.IAV: W1UTA4:CX, kpawn to ¢a to be tho a-me ptraen who Sirned the Eorc^.oin^, irstruocat, and sae acknovladyctil to me that she executed the- sable freely and volun- tarily for the uses and purposes therein mentiarnl. In 6om; S, vrr-rL(:r, r have 1scrcaat,0 set ry heV4 are effired. cy official Seal the day and year first abovo written in this, r.+y eertifJcntx. i geA Notary Public for Ortgarm My Cawn1welor, eryires+ 8179/69 - - Page 6 - Lease and Option Uct 27 06 08:04a JR MILLER 5036391677 p.12 Date' 1012612006 Time: 7:4836 PM Gage 11 of le From' chAs Bedsaul To: Jim Miler STATr. os 02=W 3 C to county of Hbltuoaah ) . Oa this r_--`doy of Nay, 1964. before we appeared DOYALD T. FART and JA2C S R. TXLU1t, both to as petaanally %nu n+, rho batna duly 'worn. did oaT that the said InULD T. FAAET Is the President and th► said JA.`y'S R. ?rLL LIM to the Secretary of U PXXE FMCE C"AbY. the within named cor?orkcten, and that the said instrument was executed in behalf of said corporation by autbority of its hoard *of Directors, and Doorld r. Tahry sad 3-2tes K. Miller acknowledged said laatrurant to be the fame act end deed of said corporation. Tit TESTV..CKY ❑ EREC7, I have hereunto set my hood and affixed my official seal. this the• day and year first ie tLfe, try eertifleate, writeen. \otary -public for Oregon S my Cormiysion expires: 3/29/69 Vega 7 - Lags and Option. BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON An Ordinance Amending Ordin- ance No. PL-15, Deschutes County Zoning Ordinance of 1979, as Amended, to Provide Standards and Criteria for Geothermal Facilities, Pro- viding Definitions, Making Geothermal Operations Condi- tional Uses, and Making Findings. ORDINANCE NO. 85-002 THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON, ORDAINS as follows: Section 1. Section 1.030, Subsection (3), Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended to read: "(3) Accessory use or accessory structure. A use or structure incidental and subordinate to the main use of the property, and located on the same lot as the main use. Accessory uses in- clude drilling for, and utilization of, low- temperature geothermal fluid in conjunction with the main,use of the property." Section 2. Section 1.030, Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of the following:. "(46a) Geothermal energy facility, small-scale. An electrical power generating plant with a nom- inal electric generating capacity of less than 25 MW; a pipeline that is less than 16 inches in diameter and less than 5 miles in length used to carry geothermal resources; and related or supporting equipment and facilities." Section 3. Section 1.030, Definitions, Deschutes County Zoning Ordnance of 1979, Ordinance PL-15-,-is amended by the addition of the following: s 677 1 - CRDI°.=,NCE NO. 85-002 "(46b) Geothermal resource, high-temperature. Any > ground water, steam, or other fluid 250°F or greater which is used for its thermal charac- teristics." Section 4. Section 1.030, Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of the following: "(46c) Geothermal resource, low-temperature. Any ground water, steam, or other fluid less than 250°F which is used for its thermal character- istics." Section .5. Section 1.030, Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of the following: "(46d) Geothermal well, high-temperature. Any exca- vation, as defined by ORS 522.005(10), '522.005(12), or 522.005(15), that is constructed or used for the thermal properties of the re- source contained within, or which is constructed or used for returning such resource to an under- ground reservoir." Section 6). Section 1.030, Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of the following: "(46e) Geothermal well, low-temperature. Any excava- tion, as defined by ORS 537.515(7), that is con- Structed or used for the thermal properties of the resource contained within, or which is con- structed or used for returning such resource to an underground reservoir." Section 7. Subsection (2) of Section 4.100, Surface Mining (SM) Zone, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the deletion of Subsection (2)(I). Section 8. Subsection (3) of Section 4.100, Surface Mining (SM) Zone, Deschutes County Ordinance of 1979, Ordinance PL-15, is amended by the addition of Subsection (3)(E) which reads as follows: "(E) Operations for the exploration of geothermal resources." 2 - ORDINANCE NO. 85-002 Section 9. Section 8.050, Specific Use Standards, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of subsection (20) which reads as follows: "(20) High-temperature geothermal wells and small-scale geothermal energy facilities: (A) Applicants shall provide the following information: (1) Project description. A detailed nar- rative which describes the appli- cant's plan of operations for explor- ation, production, utilization, and/or injection. This description shall include estimated starting and completion dates for each activity or phase of the project. It shall also include a concise but compre- hensive discussion of the project's expected environmental impacts. This narrative shall also include as an exhibit a statement describing the applicability of all local, state, or federal inventories of Statewide Planning Goal 5 resources in the project vicinity. (2) Maps. As may be required by the Planning Director, maps shall be submitted on readily reproducible transparencies as follows: (a) A topographic map, of a scale not less than one inch to one-half mile, on which the following are shown: all pertinent property ownership and geothermal lease bound- aries; the location of all pro- posed, existing, and aban- doned geothermal wells and/or energy facilities; all exist- ing and planned access roads; major drainage patterns of the project's operational area; and significant environmental features and natural resource locations, including but not limited to: mineral or aggre- gate deposits, fish and wild- life habitats, ecologically or scientifically notable natural areas, outstanding scenic views, wetlands, surface water bodies, wilderness areas, his- toric and cultural sites, and recreation trails and facili- ties. (b) A map of the project site, of a scale not less than one inch to fifty feet, on which is shown a detailed layout of all drilling pads, sumps, equip- ment, buildings, pipelines, power lines, and related facil- ities. (c) Other specialized maps, plans, or drawings as may be required by the Planning Director, in- cluding but not limited to: a larger-scale map to show any of the foregoing information if details cannot be satisfac- torily indicated on the small- er scale map; detailed engin- eering drawings for any con- struction at.a location on steep terrain, potentially un- stable ground, or other geolog- ically or environmentally sen- sitive areas; and engineering drawings of new road construc- tion or existing road modifi- cation when such roads are in rugged terrain, or pass through or near environmen- tally sensitive areas. (3) Emergency contingency plan. A de- tailed emergency contingency plan which addresses prevention or con- trol of fires, blow-outs, pollution incidents, accidents, injuries, and adverse weather conditions. This plan shall describe the following: (a) How the emergency will or might affect the applicant's operations; or endanger person- nel, public health, safety, or the environment. L (b) Measures proposed to prevent, control, mitigate, or minimize the possible negative effects of emergency incidents. (c) Procedures for training and instructing personnel as to proper procedures for prevent- ing, controlling, or minimiz- ing the impacts of emergency incidents. (d) Where and how stand-by emer- gency control equipment and services are to be obtained in the event of an emergency inci- dent. (e) Notification list with order of notification, including names, telephone numbers and addresses of the applicant's responsible officials, and' those of applicable emergency service agencies. (f) Where and how first aid, and minor and major medical aid, will be obtained if needed during work on the project. (4) For drilling applications, a nar- rat ive and diagrammatic description of the following: (a) The type and capacity of drill- ing equipment to be used. (b) The expected drilling sched- ule. (c) The drilling method to be used; type of circulating media to be used, e.g., water, mud, foam, air, or combination thereof; chemical additives to be used; circulating media cooling measures to be em- ployed; and amounts of reserve circulating media and water to be kept on the drill site. If toxic materials to be used, protective measures must be ex- plained in detail. A I~ J PW (d) The number and type of workers to be employed during drill- ing. (e) The safety provisions and emer- gency shut-down procedures to be used for protection of the public health and environment. (f) The planned use, source, qual- ity, and consumption rate for any outside water supply. (g) The method and locations for disposal of wastes. (h) A description of the intended site restoration procedures to be used after completion of drilling. (i) When approved by the Planning Director, applications for prospect wells, as defined by ORS 522.005(15), may satisfy the information requirements of Section 8.050(A)(1) through 8.050(A)(4) by submission of a copy of the applicant's pros- pect well permit application to the Oregon Department of Geology & Mineral Industries. (5) For energy facility applications, a narrative and diagrammatic descrip- tion of the following: (a) The structures, equipment, and support facilities to be used in the project, and their man- ner of operation. C (b) A description of the purpose and operational characteris- tics of the major components in the energy facility, includ- ing schematic flow diagrams. (c) An artist's rendering which illustrates.the visual appear- ance of the facility and its immediate environs after com- pletion. 11 IL (d) A time schedule for the in- stallation and start-up of the facility. (e) The number and type of con- struction and permanent work- ers to be employed at the facility. 11 (f) The safety provisions and emer- gency shut-down procedures to be used in the facility for protection of the public health and environment, includ- ing a schedule for testing and maintaining safety devices. (g) The planned use, source, qual- ity, and consumption rate for any outside water supply. (h) The method and locations for disposal of wastes. (i) A description of facility monitoring to assure contin- uing compliance with appli- cable noise, air, and water quality standards and regula- tions, and for other potential- ly significant environmental impacts. (j) A description of the intended abandonment and site restora- tion procedures to be used if and when the facility is per- manently taken out of opera- tion. (B) The siting, drilling, operation, and abandonment of wells and energy facil- ities shall comply with the following standards: I rOk (1) Excluded areas. No activity shall be permitted in inventoried natural resource areas, as defined by Oregon Statewide Planning Goal 5, which the County has determined to be unsuit- able for any use other than the in- ventoried natural resource pursuant to Geothermal Policy 4(F) of the Comprehensive Plan. 7 - ORDINANCE NO. 85-002 (2) Scenic protection. Activities shall be designed and conducted so as to be as compatible as practical with surrounding scenic and visual charac- teristics. Energy facilities shall be designed to minimize their visual profile, and painted or prepared so as to be non-reflective, and of colors which blend with, and reduce contrast with, surrounding landscape colors. (3) Fish and wildlife protection. Activ- ities shall be designed, conducted and monitored, so as to assure pro- tection of surrounding fish and wild- life resources. Activities shall not encroach upon, nor jeopardize, habitat areas which are necessary to sustain local or migratory popula- tions of fish and wildlife deter- mined by the County to be signifi- cant. (4) Historic and cultural protection. Activities shall be designed and conducted so as to avoid disturb- ance to historic and cultural re- sources. The applicant shall cease constuction or operations if such resources are encountered, and inform the County wihin-48 hours of such resources. Thereafter the applicant shall submit a plan for preservation and/or interpretation of such resources before recommenc- ing construction or operations. (5) Access roads. Activities shall be designed and conducted in such a way as to utilize existing roads as much as practical. Any permanent roads to be constructed shall comply with applicable County road standards. (6) Signs. All well and facility sites shall have a sign of not less than three, nor more than six, square feet in surface area prominently erected, which displays the site's name or identification number; the operator's name, address, and phone number; and the name and phone num- ber of the operator's representa- tive to be contacted in the event of an emergency. (7) Earth work. Drill pads, pipeline routes, facility sites, and roads shall be designed and constructed as follows: (a) Plans for drill pads, pipe- lines, facility sites, and roads shall be prepared by a registered civil engineer. (b) Upon commencement of site work, topsoil shall be removed and stockpiled for later re- spreading over disturbed areas prior to revegetation in ac- cordance with Subsection 21 of Section 8.050(B). Except for large stumps, vegetation re- moved during initial site work shall be chipped, stockpiled, and respread with topsoil. Stumps shall be buried outside of fills. Vegetation beyond the site perimeter shall not be disturbed; the clearing limits for the site shall be specified in plans submitted to the County. Buffer zones of undisturbed soil and vegeta- tion shall be maintained for 500 feet on either side of stream courses. Roads and pipelines crossing riparian areas shall be designed and constructed at minimum widths and in consideration of maxi- mum erosion control. (c) Fills shall be compacted to a minimum of 9000- relative dens- ity (ASTM D-1557) so as to minimize erosion. If signifi- cant erosion occurs the appli- cant shall take prompt remed- ial action. (d) Fill slopes shall not exceed a gradient of 2:1. The toes of all fills shall be stabilized with rock, or keyed into stable soil, and placed so as a R to reduce erosion potential to an absolute minimum. Revege- tation of fill slopes shall be carried out in accordance with Subsection 21. Cut slopes shall not exceed a gradient of 1-1/2:1. Modification of these slope gradients may be made upon written approval of the Deschutes County Public Works Director. (e) Subdrains shall be provided under all fills where natural drainage courses and seepage are evident. (f) No drill pads, pipelines, fa- cility sites, or access roads shall be allowed on potential- ly active landslides. (g) Grading and filling shall be designed so as to channel storm runoff to existing natural drainages. Energy dissipaters and collection devices to reduce the erosion force of unnatural runoff shall be provided. (hy Sumps shall be designed so as to withstand both static loads, and dynamic loads im- posed by potential seismic events. Sumps shall be con- structed of material compacted to a minimum of 90% relative density (ASTM D-1557), and shall be lined with either clay or an equivalent imperme- able membrane. Safety fencing may be required. (i) Sumps shall be operated in such a manner as to preclude overtopping. Three feet of free board shall be maintained at all times when sumps are in use. Upon completion of drill- ing and testing, sumps shall be purged of environmentally L harmful chemicals and precipi- tates, and backfilled immedi- ately thereafter. (8) Pipelines. All pipelines shall be designed and constructed in accord- ance with applicable state stand- ards. Pipelines shall be subsur- face at road crossings, unless it is demonstated that no significantly adverse visual impacts will result from above-ground crossings. In no case shall pipelines impede vehicu- lar traffic. Catch basins and drain- age to acceptable receptacles shall be installed and continuously main- tained in order to contain conden- sate. (9) Noise. Activities shall be con- ducted in compliance with Oregon Department of Environmental Quality noise standards. Noise from drill- ing and facility operations shall be muffled, and times of operation limited so as not to constitute a public nuisance as defined by the Department's standards. The County may require noise monitoring and reporting over and above that re- quired by the Department of Environ- mental Quality. (10) Fire protection. Activities shall be designed and conducted so as to provide fire protection measures acceptable to the County, any ad- jacent land management agency, and any fire district in which the pro- ject is located. (11) Waste disposal. All wastes gener- ated by a project, including but not limited to refuse, drilling fluids, drill cuttings, sand, precipitates, and other solids, shall be disposed of in a manner and at a location in conformance with Oregon Department of Environmental Quality standards. (12) Public safety. Activities shall be designed and conducted such that un- 1 7 7-1 D I I attended equipment and operational areas are protected from access by unauthorized persons. (13) Air quality. Activities shall be designed and conducted so as to comply with the air quality stand- ards of the Oregon Department of Environmental Quality. Operational areas and access roads shall be re- gularly sprinkled with clean water to control dust. Except for pros- pect drilling, as defined by ORS 522.005(15), the County may require establishment of a meteorological station and meteorological monitor- ing at the site. (14) Water quality. Activities shall be designed and conducted so as to com- ply with the water quality stand- ards of the Oregon Department of Environmental Quality. The equip- ment service and fuel transfer areas, and the area occupied by drilling rigs, shall drain into sumps. No fluids of any type shall be allowed to enter stream courses. (15) Subsidence and induced seismicity. Activities shall be designed and conducted so as to minimize the potential for land subsidence or induced seismicity which could re- sult from the withdrawal and/or in- jection of geothermal fluids. Ex- cept for prospect drilling, as de- fined by ORS 522.005(15), the County may require submission of a geological study of such potentials. Except for prospect drilling, as defined by ORS 522.005(15), the County may also require estab- lishment of a monitoring program to gauge such impacts during opera- tions, and if either subsidence or induced seismicity is determined by the County to present a significant hazard, the County may require re- medial action including, but not limited to, reduced production rates, increased injection of waste or other fluids, or suspension of production. a (16) Clean-up. Upon completion of each phase of a project, the site shall be promptly cleared of all trash, refuse, and other waste material. All drilling equipment shall be removed from well pads within 60 days of the completion of a well. (17) Well drilling completion notice. Applicants shall notify the County in writing of completed well drill- ing and testing within 7 days of said completion. Applicants shall notify the County in writing of sus- pended drilling within 7 days of said suspension, when such suspen- sion is expected to last longer than 180 days. (18) Standby wells. Wells which have en- countered geothermal resources, and which are awaiting connection to a pipeline or energy facility, shall be maintained at a minimum steam bleeding rate in compliance with Oregon Department of Geology & Mineral Industry standards. The area surrounding the wellhead pads of standby wells and producing wells shall be subject to the revegetation requirements of Subsection (21). (19) Re-entry of wells. Applicants may redrill or otherwise reenter the same well-bore of any well for which a conditional use permit has already ..been issued as long as all conditions of the use permit con- tinue to be met. (20) Site abandonment and restoration. When a well or facility is perman- ently abandoned; the applicant shall remove all equipment, structures, and other related material within 180 days from the date operations cease. Thereafter the applicant shall regrade the area of opera- tions so as to match original land contours as closely as practical, and shall revegetate the area in accordance with Subsection 21 of 8.050(B). m_ 4~ 4 ■ 4 4 J 4 (21) Revegetation. Following the comple- tion of well drilling, or the per- manent abandonment of a well or fa- cility, the applicant shall revege- tate the area of operations as follows: (a) Previously stockpiled topsoil and chipped vegetation shall be respread over disturbed areas prior to reseeding. (b) Disturbed areas shall be re- seeded with native plants and grasses. This revegetation shall commence in the first fall following completion of drilling or site abandonment. Temporary fencing of reseeded areas may be required to facil- itate revegetation. The reveg- etation shall be evaluated by the County during the first spring following initial re- seeding, and if determined to have resulted in less than a 75% survival rate, additional revegetation shall be required in the immediately succeeding fall season." Section 10. Adopting findings as set forth in Exhibit A, attached hereto and by this reference incorporated herein, in support of the amendments set forth in Sections 1 through 9 of this Ordinance. , DATED this f ' day of 1985. r BO OF COUNTY COMMISSIONERS OF D SCHUTES COUNTY, OREGON LAURE CE A. T TTLE, hairman ATTEST: LOIS BRISTOW PRANTE, Commissioner ecording Secretary DAKMAUDLIN, o missioner R ■ i BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON An Ordinance Amending the _ Geothermal Policies, Ordin- ance No. PL-20, Deschutes County Year 2000 Comprehen- sive Plan, as Amended; Adopt- * ing Geothermal Resource Maps, * Adopting the Geothermal Resource Element and Making Findings. ORDINANCE NO. 85-001 THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON, ORDAINS as follows: Section 1. Policy Number 4, Alternative Energy Sources, Deschutes County Year 2000 Comprehensive Plan, Ordinance PL-20, is further amended to read as follows: "4. Geothermal Resources Policies. A.' Public Involvement 1. The Planning Division shall ensure that citizens, land owners, and lease holders are given ample opportunity to be involved in all phases of geo- thermal planning and decision-making that occur under the County's jurisdiction. This involvement program shall provide for continuity of citizen participation, and for information that enables citizens to identify and comprehend geothermal issues. 2. Federal and state agencies exercising geothermal responsibilities in the County shall be expected and encouraged to make use of the County's existing citizen involvement program whenever appro- priate. B. Intergovernmental Coordination 7 J 1. The County s of federal and state land cies which are consistent policies. In this regard become A partner with the :n determining the future County. hall encourage the formulation and resource management poli- with the County's geothermal the County shall endeavor to federal and state governments of geothermal energy in the ORDINANCE NO. 85-001 2. In view of the multiplicity of govern- mental jurisdiction over geothermal resources, the ffected ll a County shall seek close coordination with a and federal agencies. In this regard the state local , , hall maintain regular communications i on s Planning Livis with federal and state agencies that are exercising geothermal responsibilities in the County, and shall keep local. officials informed of federal and state actions accordingly. C. Resource Assessment In order to identify and protect the un- 1 . defined values of its geothermal resources, the County ssment activities shall support continued resource asse this regard, the I n by the public and private sectors. Planning Division shall monitor such activities and collect additional resource data wherever possible for inclusion in the Geothermal Element during updates or amendments. - fit d e 2. In recognition of the public bene rived from greater resource knowledge, the County may undertake its own resource assessment activities where l l oca such work is expected to ultimately benefit the economy. The results of County-sponsored resource assessment will be given the widest possible dissemin- eothermal devel- r th f g e ur ation in order to facilitate opment consistent with County policies. D. 'Resource Utilization 1. The County supports utilization of geo- thermal resources, either with heat pumps, direct appli- cations, or for purposes of generating power. However, such support is conditioned on a determination that the proposed use can be developed in a timely, orderly, and environmentally-sound manner, and that adequate protec- tion of the resource is provided so as to ensure its continued availability and productivity over time. Fur- then, such support is limited to those resource areas where conflicting uses are not considered predominant, as identified in Policy 4(F)- 2- When County facilities are to be renovat- ed or newly constructed consideration shall be given to the use of geothermal resources in these facilities when such use is technically and economically advanta- geous. The County shall encourage other local entities to conduct similar geothermal evaluations during their facility planning processes. I~ 2 110. ffim r~r E_ Economic Devel<---lent 1. The County's support for geothermal devel- opment shall be closely coordinated with its economic development program. The County believes that its low and moderate-temperature resources may offer a signifi- cant comparative advantage to business and industry, and it shall support geothermal projects that serve to retain or create employment opportunities in the County. F. Land-Use 1. For purposes of compliance with Statewide Planning Goal S, the County believes its geothermal resources and the conflicting uses identified in Sec- tion 4 of the Element should be balanced according to site-specific relative merits. Implementation measures shall provide protection for conflicting uses by condi- tionally allowing geothermal exploration and produc- tion, thereby balancing the benefits to the County from both geothermal resources and conflicting uses. This policy shall apply to all resource areas inventoried in S ti ec on 2.of the Element, except in those areas where the conflicting uses listed in Table 4.1 of the Element shall be fully protected as follows: a. Exploration and Production Prohi- bited (1) That portion of the Newberry Volcano resource area lying within the exclusion area boundary shown in Exhibit "B". (2) Those areas presently defined by the Deschutes National Forest Land & Resource Man- agement Plan, incorporated hereby by reference, as ineligible for leasing, specifically: Wilderness, Re- search Natural Areas, Experimental Forest, Bend Muni- cipal Watershed, Developed Recreation Areas, and Dis- persed Recreation Unroaded Winter Areas. b. Production Prohibited (Exploration Allowed) (1) Those areas presently defined by the Deschutes National Forest Land & Resource Man- - agement Plan, incorporated hereby by reference, as being limited to no surface occupancy, specifically: Experimental Forest, Dispersed Recreation Unroaded areas, Dispersed Roaded-Areas, Developed Receation Areas Protecti M , on anagement Areas, Special Manaaement Areas, Potential Research Natural Areas, and Threatened and Endangered Species Areas. 3 - ORDINANCE NO_ 85-001 • q 1 The County has determined that conflicting uses shall be fully protected in the foregoing areas because of the greater economic, social, and environmental bene- fits that accrue from the conflicting uses. In reach- ing this determination, the County has relied upon the ~I discussion of conflicting uses and their consequences contained in Sections 4 and 5 of the Geothermal Ele- ment; the Rural Development, Economy, and Recreation i° sections of the Growth Management Element of the Com- prehensive Plan; the Forest Lands, Open Spaces, Fish & Wildlife, and Historic & Cultural sections of the Re- source Management Element of the Comprehensive Plan-, the Recreation, Fish & Wildlife, Special Uses, Visual Quality, Economy, Employment, and Forest Dependent Community Concept sections of the Deschutes National Forest Land & Resource Management Plan; and the Oregon Department of Economic Development 1983 Annual Economic I Report for Deschutes County. It is the County's determ- ination that the conflicting use information contained I,. in these references constitutes sufficient evidence of the greater importance of the conflicting uses to the County, thereby warranting exclusion of geothermal ex- ploration and/or production in the areas cited above. I; 2. The County recognizes that if utilization of geothermal energy is to be optimized, the designa- tion of land--uses for areas overlying geothermal re- sources must accommodate those uses to which the re sources can be applied. In this regard, the County shall incorporate geothermal utilization as a determ- inant in land-use planning; and, where appropriate, shall review permitted uses that can utilize geothermal resources if and when suitable resources are confirmed in an area. However, geothermal end-uses shall be permitted only where their compatibility with surround- ing land-uses can be demonstrated with certainty. G. Environmental Protection 1. In all cases the County's support for geothermal development shall be conditioned upon sat- is-factory evidence that sufficient environmental safe- guards are provided. Environmental concerns of the County shall include, but not be limited to: air qua- lity, water quality, noise, subsidence, induced seis- micity, water- consumption, fish and wildlife, vegeta- tion, historic and cultural resources, visual and scenic qualities, erosion and earth stability, waste disposal, and public safety and health. H_ Public Facilities and Services 1. In addition to Policy G(1), in all cases the County's support for geothermaI development shall 4 - ORDINANCE NO_ 85-001 F 4 E off;-. wn~PA r 12ti Elf I r a. depend on the extent of rnpacts to public facilities and services. In this regard, the County's concerns shall include, but not be limited to: roads, drainage, schools, law enforcement, fire protection, water sup- ply, sewage disposal, solid waste disposal, and general administrative services. 2. The Planning Division, in consultation with the Public Works Department, shall monitor geo- thermal activities in order to forecast impacts to public facilities and services; and shall prepare cap- ital improvement or related plans accordingly so as to support geothermal development in a timely and orderly manner with a level of facilities and services-appro- priate to such development. I. Fiscal Responsibilities 1. In recognition of specialized admin- istrative demands that may be placed on the County by geothermal developers, the County shall require said developers to defray County expenses associated with processing geothermal permit requests, or conducting related studies or monitoring programs, directly re- quired by a geothermal project. This Policy shall alp, extend to any government agency engaged in geothermal development." Section 2. Deschutes County Year 2000 Comprehensive Plan, Ordinance No. PL-20, is amended by the addition of "Geothermal Resource Areas" map, marked Exhibit "A", attached hereto and by this reference incorporated herein and "Newberry Exclusion Area Map", marked Exhibit "B", attached hereto and by this reference incorporated herein. Section 3. Adopting the book entitled Geothermal Element for the Deschutes County Comprehensive Plan and Zoning Ordin- ance, dated January 30, 1984, as the Geothermal Resource Element of the Deschutes County Year 2000 Comprehensive Plan, Ordinance PL-20. Section 4. attached hereto support of the ance. Adopting findings as set.forth in Exhibit "C", and by this reference incorporated herein, in amendments set forth in Section 1 of this Ordin- Cz_ tol: I DATED this ! 'day of 1985 BOARD OF COUNTY COMMISSIONERS OF ft- SCHUTES COUNTY, OREGON ATTEST Recording Secretary ~ 10 I ~l LAUR8NCE A. TUT~~E, Chairman ~7 is x LOIS BBaSTO4y PJUNTE, Commissioner DICK MAODLIN, Cd-mmissioner s i i 6 - ORDINANCE NO. 85-001 - ALM a~ :Y u , L1J - - 7 7 7 < ~ o= LJJ p D fD CL R cl u p• < E O _ Z m E E og - - ~ U ~ • Q ~ n• O C O n~ E v / i U D O W Q E O E U) W = U d L c p a ( ...1 W Q m Q c U7 S L ~ W 1 O W orb ` f~ I-T ~.~Sl-~ '1 1,-.'- _ _ i i r - .C. -o- j EXHIBIT '•B'• - :-a•. V .may. _II. _ •1 ..v~~ i _ t 5- s G - ~ ~1. ' a' ~ - - .ti's„ •.~.=.1:_ - ~ ' ~ ~ _.}._\...i,.;, _ ' a , . alt rte. - _ r , - ~k O H ~a T• ~ Imo/ `~7.-~~~~)), ` t - ~'1F- y~• ~ ' % `t`,t'~r.- 'f.~0~ /`!~~`.--mot , _ ~ e_•_ :.~r: t ^J ~ •.~~~j'~,-. ~ - fl t t 1, .~i'1'.~J~•-~ r .l-t/ I - r2 r JNJ J,- I EXHIBIT "C" FINDINGS FOR ADOPTION OF DESCHUTES COUNTY GEOTHERMAL ELEMENT (References cited are listed in Section 8 of the Element) 1. The present treatment of geothermal resources in the Comprehensive Plan predates the Oregon Land Conservation and Development Commission's adoption of procedures for complying with Statewide Planning Goal 5 (as stipulated in OAR Chapter 660, Division 16), and will therefore be a compliance requirement during periodic review. The Geothermal Element being adopted by Deschutes County is intended to comply with Division 16, recognizing, however, that the Element will require periodic amendment to incorporate new resource information as it becomes available over time. 2. Presently the County zoning ordinance does not comply with ORS 215.416 as it applies to geothermal activities. This statute stipulates that. clear and objective standards must be in place for uses that are treated conditionally, which is the case for geothermal well drilling and :acilir_y siting. The Geothermal Element_ being adopted by Deschutes County is intended to comply with the requirements of ORS 215.4416 by providing such standards. I 1 -4 II 3. The Pacific Northwest Electric Power Planning & Conservation Act of 1980 stipulates that local governments shall participate fully in the preparation and implementation of the regional power plan (reference Sections 4(g)(2)(c) and (4)(g)(3) of the Act). The subsequent April, 1983 Northwest Conservation & Electric Power Plan stipulates that local governments shall be fully involved in implementation of the Plan's measures affecting renewable resource development (reference Policies, p. 2-2, and Resource Options, p. 3-5, of the Plan). The Geothermal Element being adopted by Deschutes County represents the County's response to this regional mandate for local resource planning. 4. The adoption of the Geothermal Element is timely in view of increased interest in the County's geothermal resources during recent years. Since the early 1970's the number of geothermal well permits issued by the state inside the County has increased markedly, as shown in Tables 3.1 and 3.2 of the Element. This increased interest in local resources was interpreted by the Oregon Department of Geology & Mineral Industries in their 1983 statewide sum mare of geothermal activity as follows: "Drilling. . was chiefly centered on Newberry volcano in the Central High Cascades. . For the first time in the history of geothermal leasing in Oregon, the acreage leased by the U.S. Forest Service exceeded the acreage leased by the U.S. Bureau of 'an_` Management. Tnis. . _reilected continued investor 2 onficience in Newberry volcano and the Cascades. The f P' emphasis on the Cascades and on Newberry volcano, which began in 1981, continued in the drilling activity of 1983. All of the holes drilled were in these two areas. Newberry volcano remained the most popular target, but the High Cascade Range, particularly the area just south of the silicic South Sister volcano and the area between Mt. Jefferson and Green Ridge, were also attracting drilling interest. . The shift from BLM to USFS leases reflects a fundamental change in the emphasis of the' geothermal industry in Oregon. Prior to 1980 and 1981, Basin and Range targets were predominant, but the discovery of high- temperature resources at Meager Creek in the British Columbia Cascades, and a similar discovery at Newberry volcano, demonstrated to explorationists the tremendous potential of the Cascades. It became apparent from the results at Newberry that high-temperature reservoirs could exist in youthful volcanic areas without significant hot spring activity. This conclusion implied that, even though most of the High Cascade Range lacks significant hot springs, large, undetected reservoirs could exist almost anywhere. This caused a rush to.lease Cascade lands, especially lands nexr_ to silicic volcanic centers such as Crater Lake and the South Sister." (Priest, DOGAMI, 1984) S. The U. S. Forest Service and the Oregon Energy Facility Siting Council (EFSC) are in the process of reexamining the geothermal components of t'-eir respective plans nc :ules_ 1 The U.S. Forest Service has asked the County for countywide geothermal recommendations as early in 1985 as possible for consideration in updating of the Deschutes National Forest Plan; and EFSC has encouraged the County to submit its Newberry resource area recommendations as soon as possible for consideration in EFSC's review of the power plant suitability boundary surrounding the Newberry caldera. The Geothermal Element being adopted by Deschutes County represents, in total, a response to the Forest Service; and a response to EFSC in terms of Policy 10 of the Element as it relates to the Newberry resource area. 6. In accordance with OAR 660-16-020, the County has gone to extraordinary lengths to provide opportunities for public involvement in the preparation and adoption of the Element. Between December, 1983 and October, 1984 the Planning Commission conducted eight public workshops and two public hearings, with the Commission and County staff spending over 120 person-hours working with state and federal agencies, industry representatives, and individual citizens on the Elemenr_. Informational presentations were made on two occasions to industry groups, and involvement was encouraged by first-class notice to all federal geothermal leaseholders and applicants in the County. To dare, a total of 13 news s-ories on the Element and the Newberry suitability boundary have appeared in the Bend Bulletin and Portland Orego::ian. I- addition, the Board of Commissioners have conduc-ed =ive public hearings over a four-month period to enable ample time for final comments on the Element. A derailed chronology of public involvement during the Element's preparation and adoption is given in Appendix C of the I Element. 7. The Element has been reviewed by the following agencies without objections being raised: U.S. Forest Service; U.S_ Bureau of Land Management; and the Oregon Departments of Energy, Water Resources, Environmental Quality, Land Conservation & Development, Fish & Wildlife, and Geology & 4 Mineral Industries. The Element has also been reviewed by the Planning Department of Lake County, California, where 215 MW of geothermal power is presently on-line, and 600 MW is under development; Lake County has regulated geothermal ` development since 1974. This review found the Element being adopted by Deschutes County to be: "An accurate description of the state-of-the-art in. . .geothermal steam development. .and well suited to Deschutes County's geothermal resources." (Dellinger, Lake County Planning Dept., December 7, 1984) 8. The resource inventory within the Geothermal Element concludes that there are several significant resource areas with unconfirmed potential for supporting commercial end- uses, either for purposes of power generation or directzation. The inventory, as shown in Figure 2.1 o the i Elemenr, concludes that the Counr_; has notable not_en:.ials for high-temperature power generation and Low-r_emperature heat pump applications, with moderate-temperature direct utilization potential being uncertain without further exploration. Given these resource potentials, along with the increase in local drilling activity, and BPA's intent_ to solicit 10 MW of geothermal power in 1985, and the County's proximity, to the California intertie transmission line, the County finds that the inventoried resources are significant enough to warrant application of the full Goal 5 process under OAR 660-16-005 through 660-16-010. ~ 10 9. In examining conflicting uses pursuant to OAR 660-16-005, the County finds that the most serious potential conflicts center on the "industrialization" that accompanies high- temperature exploration and utilization (construction of wellpads, pipelines, generating equipment, support_ structures, transmission lines and access roads, and associated operational characteristics); and the incompatibility of this industrial-type activity in 14 areas that_ either possess significant_ natural values and/or are used intensively for recreation. The 14 areas are listed in Policy 10 of the Element, and derailed descriptions of the conflicts are given in Sections 4 and 5 of the Element. The County finds that the mos. serious consequences of such I ~ conflicts would be alteration and/or degradation of the natural environment. from said industrial-type activir_ies, and resulting adverse econo:aic i mpacr.s to the recrea-.iona L sector of the local economy from the dimii :.shed touri,m th,: would follow such environmental changes. These negative impacts outweigh the potential benefits to be derived from geothermal development in the conflicting use areas, and therefore exploration and/or production is to be prohibited in said areas per Policy 10 as a means of limiting conflicts in accordance with OAR 660-16-010(3). Exclusion of geothermal exploration and/or production from said areas r wi21 not unduly impede countywide geothermal development inasmuch as the excluded areas, comprising approximately 241,000 acres, only represent roughly 26% of the total i inventoried resource of approximately 936,000 acres t countywide. The exclusion of approximately 26% of the r County's presently known resource base is a reasonable conflict resolution mechanism in locations where natural and recreational values are most sensitive to alterations caused by the introduction of industrial-type geothermal activities. In this way geothermal development may proceed expeditiously in areas without conflicts, while areas with unacceptable negative impacts are clearly identified and avoided. 10. With regard to the 11,000 -acre interior of the Newberry volcano the County finds that exclusion of geothermal exploration and production in this small portion of the 270,000 acre Newberry resource area is an aF)oropriate t balancing mechanism to limit conflicts between recreational r uses and industrial-type geothermal activities_ Within the 1 4 overall Newberry resource area recreational activities are most concentrated inside the volcano's caldera; and, although there is in all likelihood a significant geothermal resource beneath the caldera, there is nonetheless a paramount need to prevent the creation of geothermal/recreational conflicts that would violate the ecological and recreational integrity of the volcano's interior. This conflict resolution mechanism leaves approximately 96% of the total Newberry resource area surrounding the caldera available for scientific research and commercial development. 11. The LaPine Pumice Company owns 157 acres of property situated in the center of the Newberry caldera between East and Paulin.a Lakes. This property represents approximately 1% of the 11,000 ac res which lie inside the caldera. The property is curr ently designated as Forest in the Comprehensive Plan and is zoned Open Space. If allowed through a, change to a zone that permits geothermal development, the owner has proposed to undertake an exploration program that--, if successful, would culminate in the construction of a 10 megawatt- (MW) geothermal power olant on the property- For purposes of the Goal 5 process -he County finds that this would be an inappropriate use of -he property, and that the exclusionary provision of Policy :0(a) of the Element- should apply for the following reasons= i I t a- Industrial -r_ pe effecr_s (,f resource exploration and utilization. The introduction of geothermal industrial-type activities inside the caldera will substantially alter the existing recreational character of the area surrounding such activities. Geothermal exploration and utilization on the subject property will involve: land clearance and grading for well pads, pipelines, and buildings; generation of heavy truck traffic needed for transporting drilling equipment, facility materials, and operational supplies; temporary visual alteration during intermittent use of drilling equipment for exploration, and for well maintenance and replacement over time; permanent visual alteration from the construction of generation facilities, support structures, and new power transmission lines; generation of industrial- grade solid wastes from exploration drilling and resource production; emission of air pollutants during exploratory drilling and resource production; and emission of noise during drilling and facility operations. Although noises from power plants can be limited by enclosing plants within structures, drilling noise cannot be similarly contained. A U.S_ Forest Service assessment of potential noise impacts from geothermal developmenr_ in r_he Newberry area has concluded that-- "there are potential impacts resulting ,rom increased noise levels associated with all of the various phases of geothermal development on people,. . .recreation use, wildlife, and the oppor- tunities for solitude on National Forest lands. An I I) increase in noise level can result from the movement of trucks and other vehicles, drilling of wells, venting of steam, and other sources. Well drilling operations tend to be a principal source of noise. The operation of internal combustion engines, the racking of drill pipe, venting of compressed air, and steam venting can all cause excessive noise levels. This poses a health and safety hazard. . .and is objectionable to visitors to the area. There are areas adjacent to the Forest boundary, or adjacent to high-use recreation sires, where the noise levels would be a serious problem. . .Periodic noises due to well venting and drilling reach levels similar to the noise level of a jet aircraft takeoff. . These noises may be continuous for three to six days. Well blowouts . . if they occur, noise level may stay high for the length of time necessary to bring the well under control; this may be days, weeks, or even months. . .The engines operating compressors have a deep resonant_ sound that carries a considerable distance, especially at night. Drilling continues on a 24-hour a day basis during this period." (Fore= Rock Ranger District, Deschutes National Forest, April, 1981) s t b- Preservation of the ecological inr_eurity of the caldera. The subject property is an integral part of the ecosystem that exists inside the caldera, including vvwo plant and animal communities, and related natural resources that do not recognize the limits of property lines. This ecological integrity would be violated by the introduction of geothermal industrial- type activities inside the caldera, by disrupting and/or degrading the area's natural qualities with the noise,. traffic, visual alterations, and potential emissions that are described above and detailed in _MM Sections 4 and S of the Element. Of particular concern in this regard are the following features of the caldera: 1) protection of air quality, which would be jeopardized by pollutant emissions during drilling and res d ource pro uction, such as the release of hydrogen sulfide gas which occurred at the USGS well approximately one-half mile south of the subject property; 2) protection of wildlife from noise and habitat degradation, including a nesting site for a pair of federally-protected bald eagles located approximately one-half mile north of the subject property on the shorline of East- Lake; and 3) protection of rare plants from habitat degradation, such as the Pumice Grape Fern (Botrychium Pumicola) whi h i c s known to occur in Oregon only at Newberry 1 Meadow (approximately one-half mile from the subject. 110 1 I , 1 9-1 Property), Broken Top Mountain and Crater Lake, an~ which has been recommended to the Forest Service for protection as an endangered plant (Garrett, December 28, 1984). C. Geothermal industrial-type activities are incompatible with surrounding intensive recreation. The Newberry caldera is one of the County's most heavily-used recreation areas. Within a 3 mile radius of the subject parcel there are: 8 public campgrounds with 318 campground units and associated picnic facilities; 1 picnic area outside the campgrounds; 3 boar_ ramps; 2 private resorts; 6 private vacation residences; approximately 100 miles of trails used for hiking, horseback riding, snowmobiling, and cross-country skiing; and 2 scenic observation points (Ft. Rock Ranger District, Deschutes National Forest, 1983). The tourist visitation in the caldera is summarized below on an average annual basis for the years 1979 through 1983 (Mohla, Deschutes National Forest, Januarv 9, 1985): Act~vir_ies Inside the Caldera Average Annual Visitor Da s y Camping Organization 94,700 Picnicking 300 Resorts 3,400 Recreation residence 22,100 Cross-country skiing 1,400 2,100 Nature study - education 3,300 Walking 9 400 Viewing interpretive & scenery , 5,500 Auto & motorized travel 9,000 Snowmobiling 14 600 Hiking and walking , 5 800 Bicycling 1 Horseback riding Boating 400 3,400 41,100 Fishing 82,000 Misc.. games T t l 2,500 o a 300,000 The County finds that introduction of the industrial- type geothermal activities described above would constitute a serious degradation of the natural values that currently underpin these predominant recreational Y uses within the caldera. In reaching this conclusion the County has also taken note of the adverse circumstances that exist with geothermal power plants in Lake County, Oregon (Cannon, Lake County Planning Dept., December 14 and 28, 1984), and the experience at the California Geysers vis-a-vis recreation incompatibilities (Dellinger, Lake County Planning Dept., December 27, 1984). d• Subject Property size is below industry. norm. Aside from conflicr_s with surrounding recreational uses, i geothermal development on a parcel as small as the subject property would be significantly contrary to industry norms, where power generation projects are normally supplied from well fields covering several hundred, if not thousands, of acres. This is illustrated by Table 3.3 in the Element, showing the average size of approved federal geothermal leases in Deschutes County to be 6,132 acres. Because of its extremmely small size, the 157 acre subject parcel would obviously require an unorthodox concentration of facilities not found in typical geothermal power projects. Moreover, despite the ability to visually screen some activities inside the parcel's pumice cone, its extremely small size would impede the establishment of natural buffers on the property's periphery to limit off-site impacts, as in the case of noise. e. Potential adverse economic impacts. The County finds that the potential economic benefits that may accrue from a 10 MW power plant on the subject property are too small in comparison to the existing economic benefits from tourism in the caldera, to justif: y jeopardizing the ecosystem that presently supports recreation in the caldera_ A 10 MW facility would create no more than 5 permanent jobs (FERC, 1981) which would represent a total annual payroll of no more r.::an $250,000_ Alternativelv, the average ann-,:,a recreational use of 300,000 visitor <33ys in the cal'era car: be equate-d to approximately 512 -,iIIion an nuay in the form of wages, salaries, and rent-al income spent by visitors on equipment., supplies, lodging and other i services. The amount of work generated by this level of tourism is approximately 550 jobs in 107 of the 120 sectors of the local economy (Mohla, Deschutes National Forest, January 9, 1985). After allowing for indirect employment effects by doubling the power plant jobs and payroll, the local economy would still suffer a net loss, if caldera tourism were to fall by only 10% as a i result of geothermal industrialization in the area. i fProtection of caldera hydrology. Within a 2-1/2 mile radius of the subject property there are 22 groundwater wells supplying over 3 million gallons annually for recreational visitors to the caldera. This groundwater system is related to the caldera's surface water resources, including two lakes, springs, and several creeks. The County finds that the potential for hydrological impacts from geothermal activities on the subject property represents an unjustified risk to current hydrological qualities in the caldera. In reaching this conclusion the County has also taken note of the adverse hydrological circumstances that may exist with the 2 MW geothermal power plant near Lakeview, Oregon (Gannett, Oregon Water Resources Dept., December 27, 1984; and Cannon, Lake Coun~_v Planning Dept., December 14, 1984). g. Power transmission line improvement. If the subject property is to be developed for power generation it will be necessary to enlarge the existing power transmission line serving the caldera. Assuming 1OMW of output, this would require line capacity on the order of 30 kilovolts, which will necessitate installation of new lines on the poles in the existing utility right-of-way. The County finds that this type of construction activity and permanent enlargement of a highly visible utility facility are contrary to the preservation of natural aesthetic values inside the caldera, and illustrative of the type of negative off- site impacts that would accrue to other portions of the caldera from geothermal development on the subject property. h. Year-round access. If geothermal power generation were to be developed on the subject property, such a use would create a need for year-round vehicular access inside the caldera, which is presently not available from the responsible land management or trans porta;_ion agencies. Moreover, the introduction of vehicles inside the caldera durina winter months would significantly alter the area's present wln:-.er recreation values. s J iI f Promor.ion of tourism contrar to geothermal industry prate The subject property owner has asserted that tourism will be increased by location of a geothermal power plant inside the caldera, and that such visitation will be encouraged on the subject property if geothermal development is allowed. The County finds that this is contrary to general industry practice, which discourages visitation by the. general public at facility sites for purposes of safety and operating efficiency. (Dellinger, Lake County Planning Dept., December 27, 1984) 3. Proposal contrary to Deschutes Comprehensive Plan poli- cies. The proposal to develop geothermal resources on the subject property is contrary to the following Comprehensive Plan policies: No. 15, Rural Development, which states that "construction on open lands shall be in a manner least intrusive to the aesthetic and natural character of those lands and neighboring lands;" No. 4, Economy, which states that "consistent with policies in the Recreation and Open Space chapters, cooperation with federal and state agencies shall be sought by the County in preserving and developing, as appropriate, scenic and recreational resources;" and No. 6, Open Spaces, which srar_es that 'because management of state and federal lands a: Lects areas under the County's jurisdiction and :ice versa, better coordination of land-use pLanning ber_wee^ the County, U. S. Foresr_ Service,- . and other agencies shall be sought." The Count--y finds that the proposal is contrary to Rural Development Policy 15 because it. would be extremely intrusive to the aesthetic and natural character of the caldera as detailed above; that it would be contrary to Economy Policy 4 because of the negative economic impacts resulting from scenic and recreational degradation detailed above; and that it would be contrary to Open Space Policy 6 because industrialization of a small parcel completely surrounded by federal recreation lands would be clearly inconsist_erit with the objectives of coordinated land- use planning. k. Proposal contrarv to objectives- of wildlife refuge agreement. The County finds that the proposed use of the subject property is contrary to the intent of the August 1, 1979 agreement between the Oregon Department of Fish & Wildlife and the Deschutes National Forest establishing a wildlife refuge in the caldera, in view of the agreement's purpose of "protecting all wildlife species for added enjoyment of the public" (Mathisen, Dept. of Fish & Wildlife). As indicated previously, the inr_roducr_ion of indusr_rial -type activities in the caldera would be adverse to existing wildlife Conditions, and r_hererore, contrary to the princip_es of a refuge (M.ohla, Deschutes National Fori2s`, January 9, 1985). I 1. Proposal contrary to U.S. Forest Service olicv_ The I / s4!~ County finds that the proposed use of the subject property is contrary to existing U.S. Forest Service policy as contained in the Deschutes National Forest Land and Resource Management Plan. Under this Plan the central interior of the caldera has been designated as Intensive Recreation and Undeveloped Recreation areas, and has been excluded from the federal geothermal leasing program. The Deschutes National Forest Supervisor has indicated that these management policies are likely to remain in the Forest's 1985 update of its Plan (Mohla, Deschutes National Forest, November 21, 1984), and that it views the proposal unfavorably in light of its adverse impacts (Mohla, January 9, 1985). M. Proposal contrary to U.S. Park Service policv. The County finds that the proposed use of the subject property is contrary to the U.S. Park Service's 1975 designation of Newberry volcano as a National Natural Landmark under the Historic Sites Act of 1935, in that such designation is intended to "encourage the preservation of significant areas-" The National Park Service has provided this information to the County "to ensure that nationally significant- features are considered in planning decisions, and nor. inadvert;inr_ly damaged or destroyed through lack of knowledge of t--heir existence or sionificance" (Atkins, Nar_io2al Park a ry ~ )k A Service, December 19, 1984). The County finds r.hat the Park Service's criteria of national significance is based largely on an area's natural integrity, making continued integrity essential to preservation of landmark values. Natural landmarks should be managed in such a way as to pose no threat to the perpetuation of the designated features, and industrial-type activities in the vicinity of these features would clearly violate the integrity of the natural values represented by the landmark. n. Proposal contrary to Oregon Legislative policy. The County finds that the proposed use of the subject property is contrary to House Joint Resolution 31 enacted by the 1975 Oregon Legislature, in that the subject property is within an area declared by the Resolution to be unsuitable for power plants because "preservation of the recreation, scenic and historic areas of Newberry crater. . is of vital importance to the people of the state of Oregon." Introduction of industrial-type geothermal activities into the caldera would violate such preservation efforts. o. Proposal contrary to Oregon Energy Facility Siting Council Rules. The County finds that the proposed use of the subject property would be inconsistent with OAR 345-40-030 which establishes 'he Newberry caldera area as unsuitable for geothermal cower plants. A1`.:ough ' EFSC s rule technically applies only to power plants r greater than 25 MW in capacity, the siting of a 10 MW plant in the caldera would clearly be inconsistent with the overall purpose of EFSC's rule, which is to protect environmentally-sensitive areas from the industriali- ti za on that accompanies high-temperature geothermal development. p. Proposal contrary to Bonneville Power Administration environmental policies. The County finds that the ro d p pose use of the subject property is contrary to the Bonneville Power Administration's environmental policies as follows: Section 917.4(d) of the BPA Environmental Manual, which states that "adverse effects include any action resulting in the reduction or d t i e er oration of the environmental and cultural values for which an area has been designated. Values of such areas include but are not limited to: 1) cultural, scenic, historical, ecological, air and atmospheric, water, or archeological resources; 2) Provide for fish and wildlife food and habitat, outdoor recreation, and human occupancy and use." Section 917.6 further stares that "if a practicable alternative to the proposed action and any of its associated adverse effects exists, ir_ shall be are erred" (emphasis added). Adverse effects are fur-,her defined by Section 917.7 as "anv acr_ion which coul(: alr.er or ;s i i I destroy the values of r.hese areas. . which include but-- a re not limited to. . .introduct_ion of visual, auditory, or other intrusions which would be incompatible with the environmental or cultural values for which the area was established" (BPA, November 1, 198111. The County finds that the proposed use of the subject property would create adverse effects as defined by BPA, and more importantly per Section 917.7, that there are ample alternative locations for the proposed power plant in the 259,000 acres of the Newberry resource area that are not being excluded from exploration and production. q. Proposal contrary to Oregon Land Conservation & Develop- ment-Commission rule. Based on the foregoing inconsistencies with federal and state policies and plans, the County finds that the proposal is contrary to Oregon Statewide Planning Goal 2, as contained in OAR 660-15-000(2), which states that "County, state, and federal agency. ..plans and actions related to land-use shall be consistent_." Clearly, a County decision to permit geothermal exploration and/or production on r_he subject_ property woult~ be inconsistent with the plans and policies of the U.S. Forest Service, U.S. Park Service, Oregon Legislature, Oregon Devt. of Fish & Oregon ::nergv Fac_lit_y Siting Council, and the Bonneville Fewer Administration. r. Proposal contrarv to Bonneville Power Adminisr-_ar. ion r geothermal solicitation criteria. Th(~ only purchaser of power from the proposed plant identified to dare by the property owner is BPA. However, selection of the subject property for a BPA project is riot only contrary t th o e BPA environmental policies cited above, but also contrary to the BPA solicitation scheduled for May, 1985, in that BPA will require candidate sites to "have an initial capacity of 10 MW and be capable of expansion to at least 100 MW (emphasis added) (Fuqua, BPA , November 16, 1984). The subject property is therefore not an eligible candidate under the BPA solicitation because EFSC will not issue a site certificate for plants larger than 25 MW in capacity inside the caldera. Moreover, given typical high- tem erature well i i p spac ng requ rements of 30-40 acres per well and a liberal assumption of 10 MW of steam production per well, 'the subject property is substantially inadequate in size to reasonably accommodate an ultimate wellhead capacity of 100 MW. In the absence of BPA eligibility, the COUrr.v is unaware of any purchaser of output. from a planr on the subject property. 12. The Geothermal Element being adopted complies wi'.~ r_1e applicable Statewide Planning Goals as follows: 4 It u ,.t Ii a. Goal 1, Citizen Involvement. Adequate opporrunir.ies for citizens to be involved in all phases of the preparation and adoption of the Geothermal Element have been provided as described above in Paragraph 6, and as detailed in Appendix C of the Element. b. Goal 2, Land-Use Planning. The Geothermal Element is based upon the facts and analysis contained in Sections 1 through 7 of the Element, including identification of issues and problems, an inventory of the resource, evaluation of alternative courses of action, and ultimate policy choices. Preparation and adoption of the Element has been coordinated with all affected agencies as indicated above in Paragraph 7, and as detailed in Appendix C of the Element. C. Goal 3, Agricultural Lands. The Element preserves and maintains agricultural lands by adherence to the permitted uses in exclusive farm use zones as stipulated by ORS 215.213- c. Goal 4, Forest Lands. The Element conserves forest lands for forest. uses by identifying conflicting uses, and limiting such conflicts through exclusion of geothermal exploration and/or production in -.he specific areas lisr.ed in i'olicv 10 of the Element- e. Goal 5, Open Spaces, Scenic and Historic hreas, and Natural Resources. The Element conserves open space and protects natural and scenic resources through compliance with OAR Chapter 660, Division 16. Goal 5 compliance is discussed in derail in Paragraphs 6 through 10 above, and Sections 1 through 7 of the Element. f. Goal 6, Air, Water, and Land Resources Quality. The Element seeks to maintain and improve the quality of the air, water, and land resources of the County through geothermal development standards that do not permit development to violate, or threaten to violate, applicable state and federal environmental quality statutes and standards. -The pertinent policies and standards are contained in Section 7 of the Element. 9. Goal 8, Recreational Needs. The Element seeks to satisfy the recreational needs of the County's citizens and visitors by identifying those recreational areas where conflicts will occur with geothermal development, and by providing policies and standards for limiting such conflicts. The pertinent policies and standards are contained in Section 7 of the Element. Is h. Goal. 9, Economy. The Element. seeks to diversify anu improve the local economy by generally supporting geothermal development. This support. is specifically expressed in Policies S through 9 in Section 7 of the Element. i. Goal 11, Public Facilities and Services. The Element_ supports a timely, orderly, and efficient arrangement_ of public facilities and services in resource areas through Policies 13 and 14 of the Element, and conditional use standards contained in Section 7 of the Element. C e 4 BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON An Ordinance Amending Ordin- ance No. PL-15, Deschutes County Zoning Ordinance of 1979, as Amended, to Provide Standards and Criteria for Geothermal Facilities, Pro- viding Definitions, Making Geothermal Operations Condi- tional Uses, and Making Findings. ORDINANCE NO. 85-002 THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON, ORDAINS as follows: Section 1. Section 1.030, Subsection (3), Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended to read: "(3) Accessory use or accessory structure. A use or structure incidental and subordinate to the main use of the property, and located on the same lot as the main use. Accessory uses in- clude drilling for, and utilization of, low- temperature geothermal fluid in conjunction with the main,use of the property." Section 2. Section 1.030, Definitions, Deschutes County Zoning Ordinance of 1979, Ordinance PL-15, is amended by the addition of the following:. "(46a) Geothermal energy facility, small-scale. An electrical power generating plant with a nom- inal electric generating capacity of less than 25 MW; a pipeline that is less than 16 inches in diameter and less than 5 miles in length used to carry geothermal resources; and related or supporting equipment and facilities." Section 3. Section 1.030, Definitions, Deschutes County Zoning Or inance of 1979, Ordinance PL-15, is amended by the addition of the following: 1 - CRD_'IyNCE 7\10_ 85-O C2 Section 9. Section 8.050, Specific Use Standards, Deschutes County Zoning ordinance of 1979, Ordinance PL-15, is amended by the addition of subsection (20) which reads as follows: "(20) High-temperature geothermal wells and small-scale geothermal energy facilities: ILI (A) Applicants shall provide the following information: (1) Project description. A detailed nar- rative which describes the appli- cant's plan of operations for explor- ation, production, utilization, and/or injection. This description shall include estimated starting and completion dates for each activity or phase of the project. It shall also include a concise but compre- hensive discussion of the project's expected environmental impacts. This narrative shall also include as an exhibit a statement describing the applicability of all local, state, or federal inventories of Statewide Planning Goal 5 resources in the project vicinity. (2) Maps. As may be required by the Planning Director, maps shall be submitted on readily reproducible transparencies as follows: (a) A topographic map, of a scale not less than one inch to one-half mile, on which the following are shown: all pertinent property ownership and geothermal lease bound- aries; the location of all pro- posed, existing, and aban- doned geothermal wells and/or energy facilities; all exist- ing and planned access roads; major drainage patterns of the project's operational area; and significant environmental features and natural resource locations, including but not limited to: mineral or aggre- gate deposits, fish and wild- L (b) Measures proposed to prevent, control, mitigate, or minimize the possible negative effects of emergency incidents. (c) Procedures for training and instructing personnel as to proper procedures for prevent- ing, controlling, or minimiz- ing the impacts of emergency incidents. (d) Where and how stand-by emer- gency control equipment and services are to be obtained in the event of an emergency inci- dent. (e) Notification list with order of notification, including names, telephone numbers and addresses of the applicant's responsible officials, and' those of applicable emergency service agencies. (f) Where and how first aid, and minor and major medical aid, will be obtained if needed during work on the project. (4) For drilling applications, a nar- rative and diagrammatic description of the following: (a) The type and capacity of drill- ing equipment to be used. (b) The expected drilling sched- ule. (c) The drilling method to be used; type of circulating media to be used, e.g., water, mud, foam, air, or combination thereof; chemical additives to be used; circulating media cooling measures to be em- ployed; and amounts of reserve circulating media and water to be kept on the drill site. If toxic materials to be used, protective measures must be ex- plained in detail. 1 77 1 (d) A time schedule for the in- stallation and start-up of the facility. (e) The number and type of con- struction and permanent work- ers to be employed at the facility. (f) The safety provisions and emer- gency shut-down procedures to be used in the facility for protection of the public health and environment, includ- ing a schedule for testing and maintaining safety devices. (g) The planned use, source, qual- ity, and consumption rate for any outside water supply. (h) The method and locations for disposal of wastes. (i) A description of facility monitoring to assure contin- uing compliance with appli- cable noise, air, and water quality standards and regula- tions, and for other potential- ly significant environmental impacts. (j) A description of the intended abandonment and site restora- tion procedures to be used if and when the facility is per- manently taken out of opera- tion. (B) The siting, drilling, operation, and abandonment of wells and energy facil- ities shall comply with the following standards: (1) Excluded areas. No activity shall be permitted in inventoried natural resource areas, as defined by Oregon Statewide Planning Goal 5, which the County has determined to be unsuit- able for any use other than the in- ventoried natural resource pursuant to Geothermal Policy 4(F) of the Comprehensive Plan. 7 - ORDINANCE NO. 85-002 s v :7 r r ■ r r ■ r r tive to be contacted in the event of an emergency. (7) Earth work. Drill pads, pipeline routes, facility sites, and roads shall be designed and constructed as follows: (a) Plans for drill pads, pipe- lines, facility sites, and roads shall be prepared by a registered civil engineer. (b) Upon commencement of site work, topsoil shall be removed and stockpiled for later re- spreading over disturbed areas prior to revegetation in ac- cordance with Subsection 21 of Section 8.050(B). Except for large stumps, vegetation re- moved during initial site work shall be chipped, stockpiled, and respread with topsoil. Stumps shall be buried outside of fills. Vegetation beyond the site perimeter shall not be disturbed; the clearing limits for the site shall be specified in plans submitted to the County. Buffer zones of undisturbed soil and vegeta- tion shall be maintained for 500 feet on either side of stream courses. Roads and pipelines crossing riparian areas shall be designed and constructed at minimum widths and in consideration of maxi- mum erosion control. (c) Fills shall be compacted to a minimum of 90% relative dens- ity (ASTM D-1557) so as to ' minimize erosion. If signifi- cant erosion occurs the appli- cant shall take prompt remed- ial action. (d) Fill slopes shall not exceed a gradient of 2:1. The toes of all fills shall be stabilized with rock, or keyed into stable soil, and placed so as 9 harmful chemicals and precipi- tates, and backfilled immedi- ately thereafter. (8) Pipelines. All pipelines shall be designed and constructed in accord- ance with applicable state stand- ards. Pipelines shall be subsur- face at road crossings, unless it is demonstated that no significantly adverse visual impacts will result from above-ground crossings. In no case shall pipelines impede vehicu- lar traffic. Catch basins and drain- age to acceptable receptacles shall be installed and continuously main- tained in order to contain conden- sate. (9) Noise. Activities shall be con- ducted in compliance with Oregon Department of Environmental Quality noise standards. Noise from drill- ing and facility operations shall be muffled, and times of operation limited so as not to constitute a public nuisance as defined by the Department's standards. The County may require noise monitoring and reporting over and above that re- quired by the Department of Environ- mental Quality. (10) Fire protection. Activities shall be designed and conducted so as to provide fire protection measures acceptable to the County, any ad- jacent land management agency, and any fire district in which the pro- ject is located. (11) waste disposal. All wastes gener- ated by a project, including but not limited to refuse, drilling fluids, drill cuttings, sand, precipitates, and other solids, shall be disposed of in a manner and at a location in conformance with Oregon Department of Environmental Quality standards. (12) Public safety. Activities shall be _ designed and conducted such that un- 7 (16) Clean-up. Upon completion of each phase of a project, the site shall be promptly cleared of all trash, refuse, and other waste material. All drilling equipment shall be removed from well pads within 60 days of the completion of a well. (17) Well drilling completion notice. Applicants shall notify the County in writing of completed well drill- ing and testing within 7 days of said completion. Applicants shall notify the County in writing of sus- pended drilling within 7 days of said suspension, when such suspen- sion is expected to last longer than 180 days. (18) Standby wells. Wells which have en- countered geothermal resources, and which are awaiting connection to a pipeline or energy facility, shall be maintained at a minimum steam bleeding rate in compliance with Oregon Department of Geology & Mineral Industry standards. The area surrounding the wellhead pads of standby wells and producing wells shall be subject to the revegetation requirements of Subsection (21). (19) Re-entry of wells. Applicants may redrill or otherwise reenter the same well-bore of any well for which a conditional use permit has already .been issued as long as all conditions of the use permit con- tinue to be met. (20) Site abandonment and restoration. When a well or facility is perman- ently abandoned; the applicant shall remove all equipment, structures, and other related material within 180 days from the date operations cease. Thereafter the applicant shall regrade the area of opera- tions so as to match original land contours as closely as practical, and shall revegetate the area in accordance with Subsection 21 of 8.050(B). vet 17- PAv 98 IN THE BOARD OF COUNTY caymrSSIONERS OF THE STATE OF OREGON FOR THE COUNTY OF DESCHUTE5 In the Matter ) j J J ` Of 1 Zoning of private ) J laude lying within J . J Deschutes National 1 O R D E R 1 Forest boundaries J in Deschutes County J W-10 ) This matter coming before the Commission upon the Planning Commiseion's petition who held a public hearing on this issue, June 12, 1973, and unanimously recommended approval, and, The County Commission deeming this action to be in the public interest and the County Commission being advised, and, pursuant to Oregon Revised Statutes 215 requiring zoning to be established in Conoities, and, Pursuant to County Zoning Ordinance PL-5, l IT IS HEREBY ORDERED that the official Zoning Map NZM-10 with zones sham be adopted zoning those areas within the confines of the folUving legal description: All of the private lands not presently zoned lying within the Deschutes National Forest boundaries in Deschutes County. Lands are proposed to be zoned A-1-T, Exclusive Agricultural with _ Transitional Standards adopted herein. EM --H POIT I'- - r vot 17 rmc 3o IT IS FURTHER ORDERED that the following transitional standards are adopted with the A-1-T exclusive agri.cuZturaZ zone: 1. Open meadows shall be preserved within any development plan filed pursuant to the subdivision ordinance, the Zoning Ordinance and the Comprehensive Plan. 2. Any development plan shall be restricted to Planned Unit Development pursuant to the Zoning Ordinance, the Subdivision Ordinance and the Comprehensive PZan.- 3. The minimum parcel size shall be 40 acres unless otherwise approved in a suitable plan pursuant to this Ordinance. 4. Scenic corridors outlined in the Comprehensive Plan shalt be protected and provided for. 5. All Zan& which are exchanged to private lands in the future shalt be subject to the same zone as provided for on the adjoining lands. Done by order of the Co lesion this 20th day of June, 2973; Said zoning to be effective this date. •S ':4 v - y V C S ONPsRS = - Pamela Hardy Attorney at Law Central Oregon LandWatch 1629 NW Fresno Ave. Bend, Oregon 97701 (541) 550-7968 pamhardy.law@gmail.com November 17, 2006 Deschutes County Commissioners 1300 NW Wall Street Bend, Oregon 97701 Measure 37 Claims Unit Dept. of Administrative Services 1225 Ferry Street, SE, U-160 Salem, OR 97301-4262 Re: Deschutes County Measure 37 Claim M129449 (Newberry Caldera) State Measure 37 Claim No. M129449 Dear Commissioners: Pursuant to DCC 14.10.070 and OAR 125-145-0080, I am writing on behalf of Central Oregon LandWatchl and its members to urge the Board to reject the Measure 37 claim filed by James R. Miller (hereinafter "Claimant"). This claim seeks over $200 million for the right to develop a pumice mine, a geothermal energy plant, and subdivide the 157 acres in the County's Open Space and Conservation zone in the center of the Newberry National Volcanic Monument, according to rules in effect in the 1960's. This Measure 37 claim should be rejected outright for numerous reasons as explained below. However, even if it is not rejected outright this is exactly the kind of claim that the County should pay compensation for at a reasonable price. The Newberry Volcanic Monument surrounds subject property on all sides for at least ten miles in every direction. Not only is the subject property in the middle of a regionally important recreation area, it is immediately adjacent to one of the two caldera lakes that form the very centerpiece of the Monument. The Newberry Volcanic National Monument and its lakes are prized by locals for its tranquility, remoteness, scenic natural beauty, and 1 Central Oregon LandWatch is a conservation organization whose members recreate around and observe wildlife in the Newberry Caldera and around this private property. November 17, 2006 Page 2 of 11 fish and wildlife habitat.z The proposed use would fundamentally destroy these values. Even if a government knows it lacks funds to pay off most Measure 37 claims, it still needs to know what exactly the tradeoff is before making a decision to compensate or waive. Surveys have shown that 55% of the voters believe that compensation should be paid for Measure 37 claims instead of waiver, and 43% believe that waiver shouldn't be given even if compensation is unavailable.3 It may be that the Government would "pay" any reduction in value if it truly understood what was at risk and if there was a sound valuation, or if private donors could contribute funds for compensation. Further, as will be demonstrated below, any compensation due is nowhere near the astronomical claim submitted by the claimant. The number submitted is based on numerous errors of law including: • What constitutes an ownership interest. The land has been owned by the federal government since the acquisition of the Oregon Territory from the British Government in 1846. It was only placed into private ownership ("patented") on July 3, 1980, yet the claimants have asserted ownership back to 1969. No ownership interest could possibly exist prior to patenting. Further, according to the deeds on record with the County, the current owner of the land is a partnership: LPP Resources Limited Partnership. Even if Mr. Miller is a partner in this organization (a fact not established by the claimant's submission) state law makes clear that "Property acquired by a partnership is property of the partnership and not of the partners individually." ORS 67.060. The media report that the claimant's attorney has added LPP Resources Partnership to the current claim. This assertion is not born out by evidence in the record available to the public through the County's website. If this is the case, this new claimant should not be considered an amendment to the old application, but a new application altogether for which the 180 day cycle begins on the date of submission. This is necessary because there may be numerous additional considerations, and further research involved in whether to grant a claim to a partnership rather than to an individual. • How to calculate a reduction in value. Measure 37 only compensates for a reduction in the value of the property based on its value before the regulation, and its value after the regulation. It does not compensate for the maximum achievable economic gain that could possibly be realized today without the z See attached media articles. See also video at http:/ / www.sightline.org/ research/ sprawl/ res_pubs/ property-fairness/ east-lake-video (Showing video of the area, and an interview with David Jones, owner of the East Lake fishing resort. 3 See attached CFM survey at page 37. November 17, 2006 Page 3 of 11 regulation. As explained in detail below these are two distinct economic concepts. As much as the claimant would like the windfall of the second, the text of the Measure only addresses the first. The evidence submitted by the claimant does not meet the basic requirements of "substantial evidence" on which a government decision must be made. Substantial evidence is "evidence a reasonable person would rely upon in reaching a decision." City of Portland v. Bureau of Labor and Ind., 298 Or 104,119 , 690 P.2d 475 (1984). Here the claimant has made numerous unsubstantiated assertions that are contradicted by the evidence submitted by other parties. The unsubstantiated claims of an interested party cannot be considered "evidence a reasonable person would rely upon" where they are contradicted by more credible documentation. The Government cannot make a decision under Measure 37 to "compensate" or "waive" without having sufficient facts on which to make a decision. This Measure 37 claim should be denied for the following reasons: 1. The claimant is not the owner of the property. Measure 37 is clear that any claim of waiver is due to only to the present owners of the property. The deeds attached show that LPP Resources Limited Partnership is the owner of the property, and that that ownership interest is undiluted by other interests. Even if Mr. Miller is currently a partner in this organization (a fact not established by the claimant's submission) state law makes clear that "Property acquired by a partnership is property of the partnership and not of the partners individually." ORS 67.060. Also "Property is partnership property if acquired in the name of [t]he partnership." ORS 67.060(1). Further, "[t]he purpose of incorporating a business is to create a separate legal and financial entity." Peterson v. Employment Division, 82 Or App 371, 374, 728 P2d 95 (1986). "The disregard of a legally established corporate entity is an extraordinary remedy which exists as a last resort Amfac Foods v. Intl Systems, 294 Or 94,103, 654 P2d 1092 (1982). The deed is clear that the property was acquired in the name of LPP Resources Limited Partnership. Hence any approval of a Measure 37 claim can only be made to the partnership, not to Mr. Miller himself. Further, any waiver can only be made back to the date that the present owner acquired the property. According to the deed, that was November 17, 2006 Page 4 of 11 January 24, 1989, and on that date the land was already zoned for its present uses. Mr. Miller's arguments that an option to purchase federal land on the contingency that it might someday be patented constitutes an ownership interest for purposes of Measure 37 is without merit. It is clear from the context of Measure 37 that it contemplates ownership interests in the land, and not just any interest. 2. The Application is inaccurate because it fails to provide the correct information about what regulations were in effect when the owner acquired the land. Any claim of waiver is limited to regulations in effect when the present owner acquired the property. Under the remedy of waiver, the County may waive regulations "to allow the owner to use the property for a use permitted at the time the owner acquired the property." (Section 8) The term "owner" is defined in Section 11(C) as "the present owner of the property." In this case the owner acquired the land in 1989. At that point the land was already in "OS and C" (Open Space and Conservation) zoning with an "LM" (Landscape Management) overlay. See 1982 appraisal submitted by U.S. Forest Service. The construction of a geothermal energy plant was specifically outlawed prior to the acquisition of the property in 1989. See La Pine Pumice Co. v. Deschutes County Board of Commissioners, 300 Or. 704, 707 P2d 1263 (1985) (finding that the County decision to prohibit construction of a geothermal plant was a legal decision.) Attached. No information was submitted regarding the default zoning that would have gone into effect immediately upon privatization of the land when it was patented in 1980. 3. The Application is incomplete because it fails to provide evidence of a reduction in fair market value. The Government cannot make a decision under Measure 37 to "compensate" or "waive" without having sufficient facts on which to make a decision. Even if a government is known to lack funds to pay off most Measure 37 claims, it still needs to know what exactly the tradeoff is before making a decision to compensate or waive. It may be that the Government would "pay" any reduction in value if it truly understood what was at risk and if there was a sound valuation, or if private donors could contribute funds for compensation. November 17, 2006 Page 5 of 11 Measure 37 only applies where there has been a reduction in value. Notwithstanding claimant's astronomical assertions, claimant has not established this threshold requirement - that there was a bona fide reduction in value - using the methods required by either the Deschutes County Code or Measure 37 itself. Claimant has only established that his preferred, but disallowed, use of the property might be profitable. Measure 37 requires that there be a reduction in value. The appropriate calculation for this reduction should be the market value of the property (i.e. the price the property would have fetched on the open market4) before the regulation went into effect, and the market value of the property after the regulation went into effect. If today's value is less than the purchase price, in inflation adjusted dollars, then there has arguably been a qualified reduction in value.5 Deschutes County Code specifically and appropriately requires exactly this "before and after" analysis. Yet, the claimant has not submitted any past or present evidence of market value. Instead, the claimant has asserted that there is a use of the property that cant be accomplished given the current zoning laws. The claimant has not shown, or apparently even considered whether there are legal uses of the property that would earn just as much such as using it as a private campground, or simply selling it on the hot Central Oregon real estate market as a private retreat. But even more significantly, Measure 37 does not compensate for the profit that might be achieved given any use the owner wants to put it to. Measure 37 only compensates for reductions in fair market value. The claimant has submitted no evidence that the price that the property would fetch on the open market with the restrictions in place is less than the price of the property when it was acquired, or before the regulations. For this reason alone, the applicant has failed to submit the basic evidence required to show that Measure 37 even applies. Measure 37 only applies where there has been a reduction in value. But the claimant has submitted no evidence from which such a conclusion could be drawn. All the claimant has done is assert that there is one use that might be profitable and that he cannot currently do. 4 See Andrew J. Plantinga, Measuring Compensation Under Measure 37: An Economist's Perspective 6-11 (2004), available at http://arec.oregonstate.edu/faculty2/measure37.pdf, (explaining how the market value - purchase price -of a property contains both the potential income stream and the speculation value at the outset.) 5 Of course, there must also be a showing that the reduction didn't arise from some event totally unrelated to zoning restrictions such as the deposit of hazardous waste, lack of maintenance, or a general decline in the economy as a whole. November 17, 2006 Page 6 of 11 That simply isn't what Measure 37 compensates for. In fact, it is entirely plausible that given the current boom in real estate in Bend that the property would fetch a very high dollar amount specifically because both the subject, and all the surrounding properties, are similarly zoned. All real estate agents will tell you that the value of a property is "location, location, location". By zoning all the surrounding properties for Open Space and Conservation the location value of this property is extremely high because people can count on the continued peace and quiet. It is entirely plausible that this particular property would sell for more on the open market as open space than it would as a pumice mine.6 The claimant has only submitted a basic calculation showing what kind of income might be produced from his preferred use.7 The claimant appears not to have even considered the value of legal uses of the property, or subtracted from the claimed compensation value the existing value of the land. As a result the evidence submitted does not meet the basic requirements of "substantial evidence" on which a government decision must be made. 4. There is no jurisdiction to hear this claim under Measure 37 for land use regulations which are exempt from Measure 37 as "[r]estricting or prohibiting activities for the protection of public health and safety" Measure 37 does not allow for waiver of or compensation for laws in place "for the protection of public health and safety." The claimant has identified some of the laws which were in effect on various dates, but clearly made errors.s Many of the laws prohibiting mining, heavy industrial use such as energy generation 6 For a detailed explanation of this effect in economic terms please see the attached article: William K. Jaeger, The Effects of Land-Use Regulations on Property Values, 36 ENVTL. L. 105,117 (2006) (explaining how amenity and scarcity effects of an individual exemption are distinct from a reduction in value, and how land use laws have proven to increase property values, particularly in scenic areas.) 7 The claimant has not attempted to justify in any way the costs associated with removal of the pumice. Is the $141.11 number based on historical figures? If so, are they still accurate today? Does this include the cost of the federal environmental analysis that will have to be conducted to verify that there will be no pollution of the lake? If this number is historic, does it include the cost of upgrades to the present operations that will be required to comply with current health and safety laws both at the state and federal level? B For example, claimant asserts that the property was zoned Al-40, but the professional appraiser who looked at the land for the U.S. Forest Service in 1982 found that it was zoned "OS and C". Before this claim can be complete conclusive documentation needs to be found of the zoning history of the parcel. November 17, 2006 Paze 7 of 11 plants, and subdivision are in place for critical health and safety reasons such a fire protection and pollution abatement. Here the claimant proposes to make extremely high intensity use of the land immediately adjacent to a lake prized for fishing. Both industrial effluent from the mining and energy generation as well as sewage contamination from the proposed subdivision pose a substantial threat of pollution to this pristine area. Further, heavy industrial use is likely to substantially increase fire hazard. Additionally DCC 17.22.020(A)(3) requires for any partition: "The partition is accessed either by roads dedicated to the public or by way of United States Forest Service or Bureau of Land Management roads where applicant has submitted a written agreement with the appropriate land management agency providing for permanent legal access to the parcels and any required maintenance. This provision shall not be subject to variance." The applicant has submitted no evidence of what the traffic impacts would be. He is proposing an extremely high intensity use that would require the ingress and egress of large trucks over what is now a narrow two lane road full of recreational visitors. The claimant has submitted no evidence that there is a traffic solution that would make this project fiscally feasible if they had to substantially widen the road to make the truck traffic safe. The claimant has not even submitted evidence that he has considered this potential cost. Because these land use regulations are exempt under Measure 37, the jurisdiction to determine compliance with them is limited to the process prescribed by ORS Chapter 197 and DCC Chapter 22. The text of Measure 37 does not address how a claim is to be handled where it is based in part on regulations covered by Measure 37 and in part on regulations exempt from Measure 37. Any waiver must be clear in specifying what is being waived and that these health and safety related provisions are not being waived. This claim must be denied until the applicant provides the above information. 5. There Has Been No Showing of Feasibility. The Deschutes County Code requires evidence that the proposed use is feasible. Despite the voluminous application submitted, claimants have not shown that the proposed geothermal energy plant, pumice mine, or subdivision are feasible, especially given that the health and safety regulations may not be waived. November 17, 2006 Page 8 of 11 a. Claimant has not shown that a geothermal plant is feasible on the property. In 1985 La Pine Pumice Company brought suit against the county for the application of the Open Space and Conservation zoning to its property. See La Pine Pumice Co. v. Deschutes County Board of Commissioners, 300 Or. 704, 707 P2d 1263 (1986) This zoning prohibited further exploration for geothermal resources on the property. La Pine Pumice Co. argued then that such exploration was necessary under Goal 5's accommodation of resource use. The Court of Appeals disagreed. The Court concluded that Petitioner is not concerned with a failure by the county to apply Goal 5 to a newly discovered resource; its concern is over the county's prohibition of explorations aimed at discovering the resource. we do not construe the goal as requiring that the county permit all possible measures to locate a Goal 5 resource when the exploratory measures themselves would be destructive to other Goal 5 resources that have already been identified. The obvious implication of this is that at the time of the suit not enough exploration for geo-thermal energy had been done to verify that there was a resource worth exploiting, and that prohibition of further exploration was both done, and perfectly legal. Hence this case shows that the claimant has already admitted on the public record that it is unknown whether geothermal energy production is feasible. Further, this case shows that further exploration was illegal because it was in conflict with existing zoning regulations. While the claimant has asserted that various additional studies have been done (apparently in contradiction to the law) the claimant has only submitted partial documentation of each of these, none of which is conclusive.9 The result is that the claimant has not shown the feasibility of the proposed use, and has not complied with the Deschutes County Code requirement that feasibility be demonstrated. 9 It appears that when the double sided originals were duplicated that only every other page was copied. The result is that the submissions are inconclusive. November 17, 2006 Patze 9 of 11 b. Claimant has not shown the proposed use will satisfy federal permitting requirements under the Clean Air Act, the Clean Water Act, or the Endangered Species Act. Because of the location of the subject property within the center of Newberry National Volcanic Monument the claimant will have to undergo numerous federal permitting procedures to show that he is in compliance with the Clean Water Act, the Clean Air Act, and the Endangered Species Act. Given the location of the proposed use on a pristine lake without an outlet pollution impacts could be substantial. It is not clear whether the applicant has considered this element in the $141.11 cost of pumice extraction. c. Claimant has not shown that he has the required water rights for the proposed use. The claimant will need substantial water for all three of the proposed uses. The claimant has not shown that there is either sufficient groundwater or surface water rights available for the proposed use. 6. Claimant has not shown that the proposed use will not conflict with federal Supremacy, or the Property Clause of the United States. As the USFS brought up, it is entirely possible that the owner may not gain any additional rights to develop his property under state law now that the National Monument has been declared. The Monument made exceptions for existing rights, but did not make exceptions for potentially new rights that would be contrary to the purposes for which it was declared. The Property Clause of the U.S. Constitution states that, "Congress shall have the power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States." Although this power is rarely used, since Camfield v. U.S.,167 U.S. 518 (1897) this has been interpreted to mean that the federal government may regulate activities on private property if those uses directly conflict with federal purposes. Conclusion (next page) November 17, 2006 Paze 10 of 11 Conclusion. For the foregoing reasons James R. Miller's claim should be rejected. Any consideration of a claim made by LPP Resource Partnership should be considered a separate claim with its own 180 day clock beginning at the time that LPP Resource Partnership actually attempted to submit a claim. Thank you for the opportunity to submit comments on this matter. Please keep me informed of any further developments in this case, and any additional opportunities to submit comments. Very truly yours, Pam Hardy Staff Attorney Central Oregon LandWatch cc: LandWatch Board Attachments: 1. William K. Jaeger, The Effects of Land-Use Regulations on Property Values, 36 ENVTL. L. 105,117 (2006). (Explaining the distinction between a bona fide reduction in value, and the potential increase that might be expected from an individual exemption because of scarcity and amenity effects.) 2. Andrew J. Plantinga, Measuring Compensation Under Measure 37. An Economist's Perspective (2004), available at http://arec.oregonstate.edu/faculty2/measure37.pdf, (explaining how the market value - purchase price -of a property contains both the potential income stream and the speculation value at the outset.) 3. CFM RESEARCH, OREGON LAND USE STATEWIDE SURVEY 3 (2005), available at http://www.oba-online.org/cms/images/landuseanalysissurvey.pdf 4. Matthew Preusch, Owner seeks to build in Newberry Crater, The Oregonian, June 27, 2006, available at http://www.oregonlive.com/news/oregonian/index.ssf?/ base/ news/ 115137514411230.xml&coll=7&thispage=1 5. Judges Ruling Limits the Bonanza from Measure 37, The Oregonian, August 14, 2006 http://www.oregonlive.com/editorials/oregonian/index.ssf?/base/editorial / 1155340522142360.xm1&coll=7 November 17, 2006 Page 11 of 11 6. Sightline Institute, Mining in a National Monument, undated article available at http:/ / www.sightline.org/ research/ sprawl/ res_pubs/ property-fairness/ measure- 37- newberry-crater-mine. See also video version at http://www.sightline.org/ research/ sprawl/ res_pubs/ property-fairness/ east-lake-video 7. La Pine Pumice Co. v. Deschutes County Board of Commissioners, 300 Or. 704, 707 P2d 1263 (1986). THE EFFECTS OF LAND-USE REGULATIONS ON PROPERTY VALUES BY WILLIAM K. JAEGER* Land use regulations can affect property values m a variety of complex ways In the context of laws like Oregon's Measure 37, requiring that landowners be compensated if regulations reduce property values, the economic effects of land use regulations on property values have been widely misinterpreted because two very different economic concepts are being confused and used interchangeably. The first concept is "the effect of a land use regulation on property values" which measures the change m value when a regulation is added to many parcels The second concept is "the effect of an individual exemption, or variance, to an existing land use regulation, " which measures the change in value when a regulation is removed from only one parcel. The effect of a land-use regulation on property values can be positive or negative, whereas removing a land-use regulation from one property can be expected to have a positive effect. Indeed, many land- use regulations actually increase property values by creating positive "amenity effects "and "scarcity effects "As a result of these differences, a positive estimate for removing a land-use regulation cannot be interpreted as proof that the other concept was negative. Despite this, a positive value for an individual exemption to a land use regulation continues to be interpreted as proof that compensation is due under Oregon's Measure 37 Indeed, this mistaken interpretation may be partlyresponsible forpubbe sentiment that land-use regulations tend to reduce property values. I. INTRODUCTION 106 H. SCARCITY EFFECTS OF LAND-USE REGULATIONS 108 III. AMENITY EFFECTS OF LAND-USE REGULATIONS 112 IV. EMPIRICAL EVIDENCE OF SCARCITY AND AMENITY EFFECTS 115 V. THE VALUE OF AN INDIVIDUAL EXEMPTION FROM LAND-USE REGULATIONS 118 VI. DYNAMIC INTERACTIONS 122 © William K. Jaeger, 2006. Associate Professor of Agricultural and Resource Economics, Oregon State University, Corvallis, Oregon. Comments on an earlier draft from Emery Castle, Greg Perry, Andrew Plantinga, and Rob Zako are gratefully acknowledged. However, the author alone is responsible for the paper's contents. [105] 106 ENVIRONMENTAL LA W [Vol. 36:105 VII. WHEN LAND-USE REGULATIONS REDUCE PROPERTY VALUES 124 VIII. SUMMARY AND CONCLUSIONS 126 IX. APPENDIX: POTENTIAL MARKET EFFECTS OF LAND-USE REGULATIONS 127 1. INTRODUCTION Land-use regulations can affect the market value of property in a variety of ways. Although some of the effects may be straightforward, in most cases they are complex and can easily be misunderstood or misinterpreted. In particular, it has been assumed that land-use regulations invariably reduce property values when, in fact, they often have positive effects. The positive effect of a land-use regulation on property values can occur two ways. One way is an "amenity effect"-when land-use regulations protect, enhance, or create amenities or services that benefit property owners. Perhaps the most transparent example of this is the property tax: many communities use property taxes to finance public services like police and fire protection, public schools, and infrastructure such as roads and utilities. These public services help these communities prosper, and make them an attractive place to live, which in turn raises property values. I Similar kinds of positive amenity effects arise with other kinds of land- use regulations such as regulations to protect environmental amenities, open space and farmland, or to control objectionable conditions such as noise, congestion, and pollution.' Like a property tax, these land-use regulations impose costs or restrictions on landowners' actions, but they also generate beneficial effects. Indeed, the motivation behind most land-use regulations is to protect or enhance amenities that contribute to a community's health, safety, and welfare. The other way that land-use regulations can increase land values is through their "scarcity effects."' By increasing the scarcity of land available for a particular use in a particular location, the prices for those lands are bid up in the market. For example, a limit on the land available for development in one location is likely to increase the price of developed and developable lands. These effects can be very large, and they can have spillover effects on land prices in other locations. Since the cause-and-effect connection between a land-use regulation in one location and heightened demand for lands in other locations is indirect, it is unlikely to be apparent to most landowners. What landowners will I See GORDON C. WORK, LIFE, LIBERTY AND PROPERTY 85-86 (1990) (discussing the argument that services provided by property taxes increase the value of the real estate to which they are applied). 2 See Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365, 388 (1926) (justifying the classic use of zoning police power by stating, "[t]here is no serious difference of opinion in respect of the validity of laws and regulations fixing the height of buildings within reasonable limits, the character of materials and methods of construction, and the adjoining area which must be left open, in order to minimize the danger of fire or collapse, the evils of over-crowding, and the like, and excluding from residential sections offensive trades, industries and structures likely to create nuisances"). 3 See WORK, supra note 1, at 92-93 (discussing the effect of large-lot residential zoning on housing scarcity and housing costs). 2006] EFFECTS ONLAND PRICES 107 recognize, however, is the value ofan individual exemption. The value of an individual exemption is defined here as the increase in value for an individual property, currently subject to a binding land-use regulation that would occur if it were given an exemption or waiver to the regulation. If a land-use regulation constrains landowners from actions or uses that would increase their land's value, then it follows that an exemption to that regulation will increase the property's value. Evidence that an individual exemption would increase a property's value has been widely interpreted as evidence-or even proof-that the land-use regulation had reduced the property's value in the first place. This is erroneous, however. Indeed, an exemption to a binding land-use regulation can be expected to increase a property's value even in cases where the regulation has raised property values. The purpose of this paper is to examine the direct and indirect ways that land-use regulations can, and do, increase property values as a result of their amenity and scarcity effects. A second purpose of the paper is to clearly distinguish between two very different economic concepts: the effect of a land-use regulation on property values, and the value of an individual exemption to a land-use regulation. It will be shown that the latter concept can be expected to be positive whether the former concept is positive or negative. These issues are important in the legal debates at the national level involving takings cases, and they are highly relevant to Oregon's Measure 37, passed by voters in November 2004.4 Measure 37 requires that when a land- use regulation "has the effect of reducing the fair market value of the property," then either a payment must be made to landowners equal to the reduction in the fair market value, or a waiver must be granted from the regulation.' Determining whether land-use regulations have had positive or negative effects on land values is, of course, a central question in this context. These same issues have arisen in the context of many federal regulatory takings cases.' And, while U.S. courts have long recognized that landowners frequently benefit from land-use regulations because of their "mutual reciprocity of advantage,"' other assessments, such as a 1999 Congressional Budget Office report, have failed to recognize or acknowledge the potential positive amenity and scarcity effects.' 4 Ballot Measure 37 (Or. 2004), available at http://www.sos.state.or.us/elections/nov22004/ guide/meas/m37_text.html. 5 Id § (1)-(2), (8)• 6 See GEORGE SKOURAS, TAKINGS LAw AND THE SUPREME COURT: JUDICIAL OVERSIGHT OF THE REGULATORY STATE'S ACQUISITION, USE, AND CONTROL OF PRIVATE PROPERTY 35 (1998) (noting that, in the seminal Supreme Court case Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365 (1926), land values were reduced from $10,000 per acre to $2,500 per acre as result of the Village of Euclid using its residential zoning district to preclude Ambler's desire to develop the land for industrial purposes). 7 See, e.g., Euclid, 272 U.S. at 394-95 (giving an example where apartment houses should be excluded from a single-family residential district so as to not "utterly destroy[]" the desirability of that district). 8 CONGRESSIONAL BUDGET OFFICE, REGULATORY TAKINGS AND PROPOSALS FOR CHANGE (Dec. 1998), available at httpJ/www.ebo.gov/ftpdocs/lOxx/docIO51/taldngs.pdf. For a criticism of the CBO paper, see C. Ford Runge, The Congressional Budget Office's Regulatory Takings and 108 ENVIRONMENTAL LAW . [Vol. 36:105 As Oregon's state and local governments respond to claims under Measure 37, the way they interpret these relationships could have a profound effect on how governments respond to claims, and how costly those responses are to the publics In Oregon's case, the second concept, the value of an individual exemption, has commonly been interpreted as being identical to, or a proxy for, the first concept. In the next two sections of the paper, the two ways in which land-use regulations may affect property values are discussed, starting with the scarcity effects in Part II, followed by the amenity effects in Part III. Part IV presents empirical evidence that land-use regulations often raise property values. The distinction between the value ofan individual exemption and the effect of land-use regulations on property values is elaborated upon in Part V. Part VI discusses the dynamic and interconnected interactions between land-use regulations and other private and public actions. Part VII describes the kinds of circumstances in which land-use regulations can lower property values. Concluding comments are presented in part VIII. H. SCARCITY EFFECTS OF LAND-USE REGULATIONS The purpose of this section is to describe the scarcity effects of land- use regulations by presenting a simple framework for thinking about how land markets adjust to land-use regulations-a framework that can be applied to different kinds of regulations for a range of market conditions. A standard approach in economics for evaluating the effect on market prices of a policy change is to consider the market outcome with the change, and to compare it to the hypothetical alternative: what would have happened without the policy change. This "with versus without" method considers the changes in supply and demand, and evaluates how those changes affect prices in one or several markets. In the case of land-use regulations, the "with versus without" approach will require an analysis beyond the standard methods of property appraisal because appraisal methods are not designed or intended to estimate the scarcity effects caused by these kinds of market shifts. Appraisers rely on observed market transactions involving similar or "comparable" properties, making adjustments for characteristics of the property that have been observed to increase or decrease the value of a property compared to average characteristics in the area (e.g., larger acreage, smaller house, view, etc.). But these methods implicitly assume that a property identical to other properties that sold for a price X, will also be worth X, no matter how many such properties were to be put on the market. To clearly see how land-use regulations may affect market prices, consider a situation where a land-use regulation limits the kind of use allowed on specified lands. As a result of this, the supply of land available for the "allowed use" is likely to remain higher than it otherwise would have Proposals for Change: One-Sided and Unreformed, ENvTL. L. AND PRAc., Fall 1999, at 5. 9 For additional discussion of the way compensation is defined in Measure 37, see ANDREW PLANTINGA, MEASURING COMPENSATION UNDER MEASURE 37: AN ECONOMIST'S PERSPECTIVE (Dec. 9, 2004), avagableathttp://arec.oregonstate.edu/faculty2/measure37.pdf. 2006] EFFECTS ON LAND PRICES 109 been without the regulation, and the supply of land available for the "disallowed use" is likely to be lower than it otherwise would have been without the regulation. With these supply shifts, land prices for one land use may rise following the enactment of the regulation, and land prices for alternative land uses may decline following the regulation's introduction. These market adjustments will give rise to a price differential, or wedge, between the land prices in the two land markets-one that will equal the negative price adjustment in one market plus the positive change in the other market. An example of these kinds of changes in land prices that might occur over time is illustrated in Figure 1. The effect of the land-use regulation on regulated lands is the decline in the solid line after the regulation takes effect; the differential, or wedge, between the prices for the regulated and unregulated lands is much larger than the reduction in price for the regulated lands (in this particular example), so that looking only at this wedge, or differential, could easily be misinterpreted (see appendix for a more detailed analysis of the market shifts involved). Price per acre (in "real" or inflation- adjusted dollars) Price of unregulated land/use Price of regulated land Time line: Regulation takes effect Today Figure 1. Illustrating price changes with land-use regulations. Given the possibility of a price effect for both regulated and unregulated land due to the land-use regulation, it would be presumptuous to attribute the entire price differential between the two markets to a reduction in property values for the regulated lands. To use an analogy, if you tie your boat to a coastal pier and then, after a period of hours, notice that the level of the boat is now below the level of the pier, you are unlikely to ask: Did the pier move up or did the boat move down? You will immediately understand that piers don't move up, but that an outgoing tide could have easily caused the boat to fall. By contrast, in the case of a price difference between two different land markets, the answer to the analogous question is not obvious at all, even though we may instinctively jump to one conclusion. Does the observed 110 ENVIRONMENTAL LA W [Vol. 36:105 price differential measure the price increase for the one land use, or does it measure the price decrease for the other land use? In order to answer this question, we need a way to measure and separate the effect of the regulation on land prices in at least one of these markets in order to distinguish it from the total price difference or the price effect in the other land market. Depending on the specific market conditions, the total price differential between the two markets may be mostly, or entirely, attributable to price adjustments in one of the two markets, or it may be divided between the two. Alternatively, of course, we can look only at the changes in the price of the affected land from before and after the introduction of the land-use regulation. This approach would avoid some of the ambiguity created when looking at the value of lands not subject to the land-use regulation, but it may not avoid the problem of other factors, related or unrelated to the land- use regulation, that may affect land values over a given period of time. Indeed, the effect of a land-use regulation on property values will extend beyond a given, narrowly-defined location or vicinity where equivalent parcels are "perfect substitutes." When the supply of land in one market is reduced relative to demand, the scarcity effects not only drive up prices in that market, but they also cause potential buyers to look at "imperfect substitutes" (for example, lots in other locations). The pent-up demand resulting from the land-use regulation will shift demand from one market or location to another market or location, which in turn may drive up prices in those markets. If these secondary markets are not subject to the same land-use regulation, then prices will rise in them. If the secondary market is subject to the land-use regulation, then landowners will view this pent-up demand as an opportunity for financial gain that is being blocked by the land-use regulation. Consider a city surrounded on all sides by farmlands, and where land- use regulations such as exclusive farm use (EFU) or urban growth boundary-type (UGB) restrictions have prohibited development of properties outside the boundary as depicted in Figure 2. Suppose that in the absence of the regulation, residential development would have spread only in areas labeled A, B, C, and D (lying to the north and east of the city center), but not to the south, west, or more distant zones (parcels in areas labeled E through L). With the land-use regulation in effect, however, there is pent-up demand for developable lots, since development in areas A-D is not permitted. This unmet demand will extend beyond areas A-D, and may manifest itself in offers for lots in any or all of the other labeled areas. In the absence of available parcels to the north and east of the city, developers' pent-up demand spills over into areas that they would not have been interested in were it not for the scarcity effects of the land-use regulation. As a result, farmers with lands in locations to the south and west of the city center will be aware that if their land could be developed, they could sell it for a price much higher than its value as farmland. The effect of the land-use regulation has been to raise their (potential) property's value. 2006] EFFECTS ONLAND PRICES 111 G H H r - . r r ~ i ~ L ~ F City C , r Center r N ~ E r R - r J Urban ` growth ~ boundary Figure 2. Potential shift in location of demand for developable lands with growth limits. Ironically, those landowners in areas subject to the land-use regulation may not realize that the developer's interest in buying their land at a high price is a direct result of the very same land-use regulation that prohibits them from developing the land (or lands in any of the areas outside the UGB). In that sense it would be illusory to believe that if the land-use regulation were removed from all lands the same price premium would be offered to this particular farmer. This hypothetical example illustrates the fallacy of confusing the value of an individual exemption with the reduction in value due to the land-use regulation. Indeed, the pattern of property values in this hypothetical case may be more like those represented in Mgure 3, where the regulated lands experience no reduction in value, even though lands not subject to the regulation see an increase in value owing to the scarcity effects of the regulation. 112 ENVIRONMENTAL LA W [Vol. 36:105 Price per acre (in "real" or inflation-adjusted dollars) Figure 3. A case where land-use regulations do not affect prices of regulated properties. The increase in value for unregulated lands (where development is not constrained or prohibited) may be large depending on the scale, or area, over which the land-use regulation is limiting. The more locations affected by the land-use regulation, the more the resulting pent-up demand will be reflected in the value of an individual exemption. III. AMENITY EFFECTS OF LAND-USE REGULATIONS Amenity effects are the second of the two ways that land-use regulations can have positive effects on land values. The most transparent example of amenity effects arises when landowners are required to pay a property tax, with the resulting revenues used to provide public services such as police and fire protection, public schools, roads, and other utilities." Although property taxes are not usually thought of as land-use regulations, they fit the general profile-government actions that impose a cost on individual landowners, but at the same time give rise to shared benefits in the form of amenities and public services." Less transparent but equally valid examples of amenity effects include land-use regulations to protect environmental quality, open space, groundwater availability and quality, or to reduce noise, congestion, or pollution, as well as agricultural lands and lands with historical significance.12 Regulations of this kind may require actions having positive 10 Baoxx, supra note 1, at 85-86. 11 Id 12 Id at 62 ("Zoning is the land-use control device in general use that extends, limits, and defines land use, that secures the conferral of valuable environmental amenities, and that prevents the imposition of undesirable neighborhood effects."). Timeline: Regulation takes effect Today 2006] EFFECTS ONLAND PRICES 113 effects, or limit actions having negative effects.13 Regulations of this kind in residential areas include building restrictions, environmental zoning, restrictions on paint color for houses, and even lawn mowing rules that are enforced in some communities.14 Like property taxes, these kinds of regulations impose costs on individuals because they limit options, but they also confer shared benefits that may result in increased property values." Land-use regulations that confer amenity benefits are likely to give rise to higher property values like those depicted in Figure 4. So long as the costs of compliance are small relative to the collective benefits from the amenities, the net effect should be an increase in property values.16 This can occur with regulations such as environmental zoning in residential areas which limits the "footprint" of houses and other improvements to protect neighborhood aesthetics and environmental amenities.17 This characterization of amenity benefits in economic terminology is similar to the legal concept of "average reciprocity of advantage" that has been noted in federal takings cases. Reciprocity of advantage was identified by Justice Holmes in Pennsylvania Coal Co. v. Mahon as a justification for denying compensation for takings." More recently the same concept has been explained as follows: "While each of us is burdened somewhat by such restrictions [on the uses individuals can make of their property], we, in turn, benefit greatly from the restrictions that are placed on others."" U.S. courts appear, in general, to bar compensation for takings claims when there exists some level of mutual benefits accruing to landowners.20 These rulings do not appear to consider whether these reciprocal benefits are large enough to equal or outweigh the costs of the regulations imposed on landowners." 13 See Laurence Katz & Kenneth T. Rosen, The Interjurisdictional Effects of Growth Controls on Housing Prices, 30 J.L. & ECON. 149, 150 (1987) (discussing regulations concerning restrictions and regulations requiring improvements). 14 See, e.g., Portland Dev. Code § 29 (2005), available at http://www.portlandonline.conV auditor/indexcfm?c=28193 (property maintenance regulations); Portland Dev. Code § 33.430, available at http://www.portlandonline.conVshared/cffiVimage.cfm?id=53343 (environmental overlay zones). 15 See SKOURAS, supra note 6, at 32 (discussing the average reciprocity of advantage analysis used by the Supreme Court where the fact that a regulation might also provide benefits to the burdened party is a factor in takings cases). 16 See Richard K. Green, Land Use Regulation and the Price of Housing in a Suburban Wisconsin County, 8 J. HOUSING ECON. 144, 144 (1999) (starting with premise that regulations increase price of housing). 17 See, e.g., Metro (Portland) Title 3 Model Ordinance, at 24, available at http://www.metro- region.org/library_docs/land_use/modelord.pdf (setting a maximum footprint of 5,000 square feet of disturbed area for granting of a variance to allow building in a water quality resource area, defined as a vegetated corridor around a water resource protected to improve water quality and provide related environmental benefits). 18 260 U.S. 393, 415 (1922). 19 Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 491 (1987). I am grateful to Michael Rubin, Chief of the Rhode Island Attorney General's Environmental Unit, for drawing my attention to "reciprocity of advantage." 29 See RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN 103 (1985) (claiming courts tend to give lawmakers "free rein"). 21 Id. 114 ENVIRONMENTAL LA W [Vol. 36:105 In these cases, however, an individual exemption from the land-use regulation allows one property owner to both avoid the compliance costs and benefit from the amenities. The result will likely be an (additional) increase in the value of the exempted property even though the land-use regulation had already raised property values (see the appendix for a more detailed analysis of these market adjustments). Price per acre (in "real" or inflation-adjusted dollars) Figure 4. Land price changes when land-use regulations have "neighborhood" effects. Environmental zoning is an example that is directly relevant to Oregon's Measure 37. These types of regulations are frequently motivated by recognition that environmental amenities, such as habitat protection, may not be adequately protected by the decisions of individual landowners." These regulations may also be motivated by a recognition that there can be positive neighborhood externalities when a given property is surrounded by other properties with trees, streams, open space, or other amenities that make the neighborhood more attractive to residents.21 Even in cases where such amenities have successfully raised the average value of properties in a neighborhood, it will still be the case that if a single property in this neighborhood were exempt from the environmental regulations, the property owner could increase the value of his property (for example, by being able to enlarge the "footprint" of the house, adding a garage, increasing the view or open space by cutting trees, or filling in wetlands or streambeds). In this case, however, the increase in value for a single property is dependent on the other nearby properties continuing to conform to the environmental zoning rules. 22 See id. at 121-23 (discussing and criticizing wetlands protection measures, a form of environmental zoning). 23 See U.S. ENvTL. PROT. AGENCY, ENVIRONMENTAL BENEFITS OF SMART GROWTH, http://www.ep&gov/smartgrowtMopies/eb.htm (last visited Jan. 22, 2006) (listing environmental benefits of "smart growth" regulations). Time line: Regulation takes effect Today 20061 EFFECTS ON LAND PRICES 115 IV. EMPIRICAL EVIDENCE OF SCARCITY AND AMENITY EFFECTS Numerous studies have examined how land-use regulations affect property values. Many of these have scrutinized the scarcity effects of land- use regulations aimed at controlling growth. For example, in a study of growth-control land-use regulations in the San Francisco Bay area, market values for houses were between 17% and 38% higher than in uncontrolled areas.24 A study in Montgomery County, Maryland found that restrictive zoning significantly raised home prices over time.25 A study of data based on many U.S. metropolitan areas found evidence that moving from less stringent to more stringent regulations generated a premium of 130/0-26% in housing rents and 320/6146% for property sales.26 A comprehensive study of the effects of land-use restrictions from the one million acre New Jersey Pinelands Protection Act and its "Comprehensive Management Plan" produced similar results.21 The study assessed the effect of management districts established for preservation, forest, agricultural, rural development, and regional growth.28 Each district was subject to a different set of restrictions.29 The study concluded that when compared to unregulated control areas, prices in regulated districts exceeded those in unregulated districts by statistically significant amounts in five out of the six years where sales data were evaluated." Similar to the scarcity effects, studies have documented how environmental and other amenities can affect property values. For example, in one study zoning restrictions on lakefront development were estimated to increase the average price of lakefront properties by 21.5%.31 A study of Milwaukee examined land-use regulations such as minimum lot sizes; permitting of mobile homes; minimum frontage setbacks; and requirements for minimum street widths, sidewalks, curbs, and gutters.32 The study found that mobile home prohibitions increased home prices by 7.1-8.5%, and that requiring an additional 10-foot setback was associated with a price increase of 6.1-7.8o/0.31 A detailed study of environmental zoning in Portland, Oregon was conducted in 2005.34 The study is based on data from over 30,000 sales in 24 Katz, supra note 13, at 159. 25 Henry O. Pollakowski & Susan M. Wachter, The Effects of Land-Use Constraints on Housing Prices, 66 LAND ECON. 315, 323 (1990). 26 Stephen Malpezzi, Gregory H. Chun & Richard K. Green, New Place-to-Place Housing Price Indexes for US. Metropolitan Areas and Their Determinants.- An Application of Urban Indicators, 26 REAL EST. ECON. 235, 262 (1998). 27 Patrick W. Beaton, The Impact of Regional Laud-Use Controls on Property Values- The Case ofthe NewderseyPlnelands, 67 LAND ECON. 172,175 (1991). 28 Id. 29 Id. 30 Id at 191. 31 Morena Spalatro & Bill Provencher, An Analysis of Minimum Frontage Zoning to Preserve LakefrontAmerdties, 77 LAND ECON. 469, 480 (2001). 32 Richard K. Green, Land Use Regulation and the Price ofHousingin a Suburban Wisconsin County, 8 J. HOUSING ECON. 144, 149 (1999). 33 Id. at 156. 34 Noelwah Netusll, The Effect of Environmental Zoning and Amenities on Property Values 116 ENVIRONMENTAL LA W [Vol. 36:105 different parts of Portland, and takes into account the characteristics of the property, the characteristics of the house, the environmental zoning, and a range of variables related to property amenities on or near each property.35 Using the statistical methods for a hedonic pricing analysis, the study concludes that for Southwest Portland's environmental "c-zoning" areas, the zoning and related amenities, such as tree canopy, have a positive but small net effect on the mean sale price of properties (+0.54%).36 In many cases amenity and scarcity effects will both be present, and may reinforce one another. For example, land-use regulations to protect sensitive environmental areas such as wetlands may enhance environmental amenities and the appeal of an area, while at the same time limiting the supply of developed and developable parcels. Both these effects may cause land prices to rise. A number of studies have examined cases where amenity and scarcity effects are present. For example, land-use restrictions near Chesapeake Bay were studied to measure the effect of limits on the locations of residential and commercial development.37 The restrictions included channeling development to already developed areas (scarcity effects) as well as requiring new shorefront developments to conform to landscape requirements, setbacks, and surface restrictions (amenity effects).38 The analysis found that in one county subject to the restrictions, shorefront houses increased by 46-62% compared to the control area.39 Houses without water frontage increased by 14-27% compared to the control area.41 And finally, houses near, but not in, the designated critical area also increased compared to the control area by 13-21%. This latter result is consistent with the idea that land-use regulations can have positive effects in other, nearby markets.41 Another study of the designated critical areas near Chesapeake Bay found that the value of vacant parcels in one county increased by 33% in 1984, by 53% in 1985, and by 39% in 1986 compared to the control areas .42 In other counties, the effects were also positive but less statistically significant 43 Designations such as historic district regulations have also had positive effects on land values. A 1991 study of historic designations in Chicago neighborhoods found that historic designation increased average housing values 29-38%.44 Once again, areas outside the regulated zones were also Portland, Oregon, 81 LAND ECON. 227, 228 (2005). 35 Id at 231-34. 36 Id. at 245. 37 George R. Parsons, The Effect of Coastal Land Use Restrictions on Housing Prices: A Repeat Sale Analysis, 22 J. ENvTL. ECON. & MGMT. 25,25 (1992). 38 Id. at 28-29. 39 Id. at 33. 40 Id. 41 Id 42 Patrick W. Beaton & Marcus Pollock, Economic Impact of Growth Management Policies Surrounding the Chesapeake Bay, 68 LAND ECON. 434, 451 (1992). 43 Id 44 Peter V. Schaeffer & Cecily A. Millerick, The Impact of Historic District Designation on 2006] EFFECTS ONLAND PRICES 117 affected positively.45 The study found that in areas adjacent to the historic districts land, property values increased by 29%.46 Finally, in the case of non-metropolitan lands designated as farm use only, one might expect that the designation would raise the value of developed properties and vacant properties not designated as farm use only, but have no effect on farmland prices. The effect on farmlands, however, may be positive in some cases.47 Many farm community members believe that their local farm economies are interdependent and scale-dependent because their profitability requires a certain scale of farming activity in the area (number of total farms and total farm sales) in order to support local services such as input suppliers, processors, etc. Economies of scale like this could imply that a reduction in the number of farms and farm acreage in a given area will give rise to increased costs and a decline in profits, which would lower farmland prices.48 Farm values can also be affected adversely when residential penetration creates conflicts over farm noise, dust, or smells.41 Indeed, a study of the effects of farm protection zoning on farmland prices in Wisconsin found that farmers were willing to pay more for land zoned for farm use only than for land with a less certain future.50 These effects were capitalized into higher land prices.51 The premium was found to be highest on large parcels farthest from urban areas. 12 This represents a particularly interesting example where the (potentially negative) scarcity effects on farm lands appear to be outweighed by the amenity benefits in farming areas. 53 Property Values: An Empirical Study, 5 ECON. DEV. Q. 301,311 (1991). 45 Id 46 Id 47 See GERRIT KNAPP & ARTHUR C. NELSON, THE REGULATED LANDSCAPE, LESSONS ON STATE LAND USE PLANNING FROM OREGON 142-44 (1992) (citing data showing that reduction of non- agricultural proximate uses removes speculative influences on farmland and more closely ties value to the land's underlying agricultural productivity). 48 Id. at 144. 49 See in. at 126-27 (discussing conflicts between farmers and adjacent urban residents). 50 D.M. Henneberry & R.L. Barrows, Capita&zation of Exclusive Agriculture Zoning into Farmland Prices, 66 LAND ECON. 249, 257 (1990). 51 Id 52 Id 53 See C. Ford Runge et al., Government Actions Affecting Land and Property Values: An Empirical Review of Takings and Givings, LINCOLN INSTITUTE OF LAND POLICY 7-23 (1996) (reviewing empirical evidence on the effects of government action on property values). What their analysis demonstrates is that government actions including land-use regulations, provisions of government services, and infrastructure, etc., can have positive or negative effects on land values. Their interpretation makes the point that consideration of compensation for regulatory takings (negative effects of government action on property values) should recognize the prevalence of regulatory "givings" (positive effects of government actions on property values). Id. at 24-25. See also John M. Quigley & Larry A. Rosenthal, The Effects of Land-Use Regulation on the Price ofHousing.• What Do We Know? What Can We Learn? 8 CITYSCAPE 69 (2005), available al http://urbanpolicy.berkeley.edu/pdf/QR2005.pdf (surveying studies of the effect of land-use regulations on housing prices). 118 ENVIRONMENTAL LA W [Vol. 36:105 V. THE VALUE OF AN INDIVIDUAL EXEMPTION FROM LAND-USE REGULATIONS Given the analysis and empirical evidence presented above for amenity and scarcity effects due to land-use regulations, this section looks closely at their relationship with the value of an individual exemption. Where amenity or scarcity effects of a land-use regulation have raised land values, elimination of the land-use regulation on all properties can be expected to undo these changes, and land values would decline. But what happens if the land-use regulation is removed from one property only, as is the case if a landowner is given an exemption to the land-use regulation? If the land-use regulation is binding, and constrains the landowner from taking preferred actions or favored land uses, then removing that constraint will make the landowner better off. If the landowner is acting to maximize the value of her land, then removing a binding constraint would presumably raise the value of the land. The landowner is able to avoid the costs associated with the land-use regulation (paying property taxes, conforming to building restrictions, etc.) while still enjoying the amenity or scarcity effects resulting from the continued compliance of all other landowners in the area. The implication of this is significant. In cases where land-use regulations have raised land values, an individual exemption to that regulation can still be expected to increase the value of the exempted property. The same will be true for land-use regulations that reduce a property's value. Since an individual exemption will likely have a positive value for any binding land-use regulation whether it reduced land values or raised land values, there is no basis for using the value of an individual exemption as a proxy for, or even an indication of, the reduction in value caused by the enactment of a land-use regulation. Once again, the property tax example is the most transparent. An exemption from paying current and future property taxes will increase the value of a property.54 The exemption reduces the cost to the landowner without affecting the public services that have contributed to the property's high value. In the case of scarcity effects, the land-use regulation has restricted the supply and pushed up land prices for the disallowed use, and increased the supply of lands put to alternative uses. This creates a price differential between the land markets for these two uses, and, as a result, it creates an opportunity for financial gain as a result of the exemption to the restriction. In neither case, however, should one conclude that the positive value of an exemption to the land-use regulation is evidence that the regulation has, in fact, reduced the land's value. Indeed, in all cases where land-use regulations have actually increased land values, we can expect that an exemption to that regulation will raise the value of an individual parcel even more. A hypothetical example can be an instructive way to highlight certain economic interactions and relationships, and in some cases an exaggerated 54 See KNAPP & NELSON, supra note 47, at 127-28 (discussing the effects of tax reduction for farm land, both positive and negative). 2005] EFFECTS ON LAND PRICES 119 and unrealistic example is the best way to illuminate those key concepts or ideas even if the particulars are unrealistic. The following section employs such an example. Suppose a large city like Portland (including its surrounding areas) introduced a land-use regulation 30 years ago that prohibited lands from having improvements used as restaurants, and that the only exceptions allowed were the 20 parcels occupied by restaurants at the time the regulation was implemented. Let's assume that with growth in population and income over a period of years, this hypothetical city grew to the point where it could easily support 200 restaurants, but only 20 were allowed. As you can imagine, the 20 existing restaurants would do a booming business, and would be able to charge very high prices and earn very large profits. As a result, the value of these 20 restaurant-eligible parcels would be very high. Let's suppose that each parcel would be worth $500,000 more than other similar commercial properties. If this situation actually existed, we might observe owners of regulated properties (those not allowed to house restaurants) looking at the differences between the price of their land and the price of a restaurant parcel and interpreting the situation as follows: "This regulation that prohibits me from opening a restaurant, or from selling my parcel to someone for restaurant use, is costing me $500,000." This interpretation is also consistent with the idea that if they alone were given an exemption from the regulation, that exemption would be worth $500,000 because it would enable them to sell their parcel for $500,000 more than what it is currently worth. The problem with this interpretation, however, is that it is not a measure of the reduction in value caused by the land-use regulation; it is most likely entirely a result of the increase in value of the 20 properties not subject to the regulation. True, if one parcel were given an exemption to the regulation, the property would likely increase in value by about $500,000. But this observation measures a very different economic relationship than the "reduction in value" concept. To see this, let's carry this example further. Suppose this hypothetical city now passes a law like Oregon's Measure 37. Eligible landowners would likely file claims arguing that, because of this land-use regulation, the value of their property has been reduced by $500,000, and they would ask to be compensated in that amount. To verify this claim, the government would likely ask an appraiser to verify the estimate. The appraiser would look at the values of "comparables" (i.e., the other 20 restaurants) and, using standard appraisal methods, would indeed come to the conclusion that if the property in question (and only the property in question) were not controlled by the land-use regulation, the landowner could open a restaurant on the property, increasing the value of their land by about $500,000. Once again, however, the value of an exemption is a very different economic concept than a measure of the reduction in value. Since the standard methods used by appraisers to value properties typically consider only incremental change (i.e., for a single property), the likely effects of large changes in restaurant-eligible properties on land prices 120 ENVIRONMENTAL LA W [Vol. 36:105 would tend to be ignored. Yet if we were to ask what would happen to the land price differentials if the land-use regulation were removed entirely, we would come to a very different conclusion. In our hypothetical example, the premium price for a restaurant-eligible parcel is due entirely to the scarcity created by the land-use regulation. Just look at other cities. In a city without this kind of regulation, what do we observe? In general, we find that restaurants compete for land with other uses, and they compete with each other for customers. As a result, restaurants succeed and fail, they come and go, but on average, they do not create a premium on land prices for their owners. Therefore, in this example, the answer to the question "What is the reduction in fair market value resulting from enactment or enforcement of the land-use regulation?" is, generally speaking, "none." This point is illustrated in Figure 5. Regulated lands (those prohibited from restaurant use) do not see any change in price after the enactment of the land-use regulation. Land not subject to the regulation, however, sees a large increase in price. The increase in price is, however, a direct result of the regulation, and the price difference would disappear if the land-use regulation was eliminated. Price per acre (in "real" or inflation-adjusted dollars) Price of alternative (restaurant-eligible) land Price of regulated land Timeline: Regulation takes effect Today Figure 5. Hypothetical example of land-use regulation restricting use as restaurant There may be exceptions to this conclusion. Some properties might have special attributes, making them much more valuable for restaurants than for other uses (view, prime location, etc). But, even the magnitude of this kind of "attribute premium" will be influenced significantly by the land- use regulation, and may also be an attribute that is desirable for other uses as well. Instead of observing what restaurant properties are worth in other cities without such regulations, suppose we asked specifically: What would have happened-hypothetically-if this particular land-use regulation had 20061 EFFECTS ONLAND PRICES 121 notbeen enacted or enforced? The difference in this approach is that it tries to consider the dynamic changes that would have occurred in the past thirty years if the restaurant restrictions had not been put in place instead of making comparisons to other geographic areas. Without the regulation, we would expect that many restaurants would have been opened at various times over the past thirty years, in many different parts of the city. Some of these ventures would have been successful, while others would have failed. Restaurants would have competed with each other, and with alternative land-use options. The pattern of restaurant expansion that would have arisen would be difficult to predict or evaluate with any certainty. For example, restaurants might have been spread evenly throughout the city, or they might have become grouped in a "restaurant district" that attracted other complementary land uses (movie theaters, night clubs, etc.). The market for land would have evolved with land values that might be different than in the current situation, but it would be very difficult to discern what kinds of differences would have emerged, in which parts of town, and for which kinds of land uses. What we could be fairly certain of, however, is that in this alternative scenario without the land-use regulation, the ability to put a parcel of land to restaurant use would not cause the value of the parcel to rise by $500,000. Most likely, in a world with no such restaurant restriction, the value of the parcel would be the same as its current value. This hypothetical illustration highlights the following. The reduction in market value resulting from a land-use regulation is a fundamentally different concept than the value of an individual exemption to the regulation. An exemption confers a special right to one individual landowner to take advantage of an opportunity that is unavailable to other property owners. Economic analysis suggests that the value of that exemption will often be the direct result of the denial of that same opportunity to others (currently and over a period of time). This issue is highly relevant to Oregon's Measure 37.55 To the extent that Measure 37 defines compensation based on the "reduction in the fair market value resulting from enactment or enforcement of the land-use regulation,"56 it would seem to be important to correctly identify and measure the dollar amount attributable to the reduction in value for the land subject to the regulation (the direct effect), as distinct from the increase in value for non-regulated lands (the indirect effect). In cases where restrictions on development in multiple markets have shifted pent-up demand into areas that would otherwise not be of interest to developers, the land prices for the current use (farm and forest land) may be unaffected (negatively) by the land-use regulation. This is because the prices of these lands depend directly on their productivity, and on the value of what they produce in the marketplace.57 Since these markets tend to be 55 Measure 37 (Or. 2004). 55 Id. § (2). 57 See James Ryan et al., Government Payments to Farmers Contribute to Rising Land Values, AGRIC. OU17.OOK, June-July 2001, at 22, available athttp://usda.mannlib.comell.edu/repo rts/erssor/economics/ao-bb/2001/ao282.pdf (starting with the presumption that earnings from 122 ENVIRONMENTAL LA W [Vol. 36:105 national or even international, the amount of land allocated to farm and forest production in a local area is unlikely to have any effect on commodity prices or profits, and therefore these changes are unlikely to affect land prices. As a result, a regulation that increases or maintains the supply of land for these uses (e.g., regulations such as exclusive farm use zoning) may not cause a reduction in their value because the value is unaffected by changes in the amount of land put to these uses locally. This kind of situation may be similar to the one illustrated in the appendix, where the land-use regulation may have a large positive effect on the prices of land not restricted under the regulation, but little or no negative effect on the prices of lands that are restricted to farm or forest uses. VI. DYNAAuc INTERACTIONS The effects of land-use regulations on property values will, in many cases, occur gradually over a period of time. When urban growth boundaries are established, for example, they tend not to be binding initially on the land- use decisions being made, so they do not typically constrain the existing demands for different land uses.' With rising population and urban expansion, however, these land-use regulations will begin to influence land prices and land uses. They may also influence other subsequent private and public land-use decisions, other public and private investments, other government policies such as taxation, and decisions about infrastructure.59 As the pattern of land uses and land prices evolves, there will be feedback effects on land markets, land-use decisions, government policy, and even on demographic changes and economic growth. Over a period of years, this complex, interdependent pattern of changes that may occur with a given land-use regulation makes it very difficult, and perhaps impossible, to ascertain what would have happened withoutthat regulation. In particular, the direction of causality between land-use regulations and land prices is ambiguous in some cases. Land-use choices can have effects on land prices, neighborhood composition, housing quality, and government services. But these effects may also influence land-use choices. The causality can occur in either direction or in both directions simultaneously. Accounting for the simultaneity of these various influences in order to isolate and identify the effect of land-use regulations on property values would require a sophisticated and complete dynamic model of all relevant influences. However, the kinds of data needed to measure each of the relevant factors are scarce, making such estimation very difficult.60 These issues make it problematic to estimate the effect of any given land-use regulation on land prices because the "with and without" scenario farming drive the value of agricultural land). 58 See KNAPP & NELSON, supra note 47, at 51-52 (noting that the original urban growth boundary for Portland was believed by Oregon's Land Conservation and Development Commission to be too large). 59 See id. at 40 (stating that the objectives of Oregon's urban growth boundaries included efficient provision of public facilities and creation of a distinctly urban ambience). 60 Quigley & Rosenthal, supra note 53, at 87. 20061 EFFECTS ONLAND PRICES 123 involves speculating about what would have occurred in the absence of the regulation, and how those alternative public and private actions would have affected property values. Roads and utilities that exist today might not have been built or improved; residential development might have spread in many directions, rather than primarily in one direction. As with our hypothetical example in which it was impossible to say where restaurants and other complementary businesses might have become concentrated in the absence of restrictions on restaurants, land-use regulations such as exclusive farm use (EFU) or urban growth boundaries (UGB) present huge obstacles for evaluating with any confidence what would have occurred over an extended period of time in the "without" scenario. The kinds of amenities that give rise to land-use regulations for environmental or aesthetic reasons can also affect the dynamic pattern of land development involving urban expansion and other kinds of development. As discussed above, these dynamics are difficult to predict, and this can add to the difficulty of distinguishing between the direct costs of a restrictive land-use regulation and the indirect effects they may have by preserving amenities and related development opportunities. Let's look at one example intended to highlight the way in which land- use regulations can create an impression that highly profitable investment opportunities are being blocked by the regulation alone, when those development opportunities may, in fact, exist only because ofthe regulation. For example, an opportunity to build custom homes in a pastoral setting surrounded by beautiful farmland can be a tempting and potentially very profitable investment. But in some cases, the beautiful pastoral setting may still exist only because of the land-use regulation; without the regulation being in place for the past thirty years, other landowners would have already sold off parcels for other uses, or built homes creating a patchwork of mixed use land and perhaps some not-so-profitable housing developments. It would be easy to miss the connection between a) a profitable investment opportunity that is blocked by a land-use regulation, and b) the fact that this profitable investment opportunity is presenting itself only because of this very same land-use regulation, which has kept others from taking advantage of this or similar opportunities for as along as the regulation has been in effect. The economic forces behind these kinds of examples are no different than the ones in the hypothetical example above that make the opportunity to open a restaurant overwhelmingly attractive precisely because a land-use regulation has kept others from doing so. In cases where a land-use regulation has kept the competition at bay for a long period of time, the value of an individual exemption to the land-use regulation may confer very large rewards tied directly to the fact that the regulation has held back all the other competing market forces for a period of many years. Given the dynamic interactions between land-use regulations and demographic, economic, and political changes, it is very difficult to sort out which changes may be directly attributable to land-use regulations and which are due to other related or independent factors. Even detailed statistical studies have had mixed results trying to identify these relationships. One study of single-family home sales data in Vancouver 124 ENVIRONMENTAL LA W [Vol. 36:105 between 1957 and 1980 found evidence that zoning impacts were positive in some cases, negative in some cases, and insignificant in other cases.61 When the focus is on housing prices, studies do suggest that existing housing prices are raised by land-use regulations.62 The net effect of density controls (lot sizes) on average land prices, however, may be indeterminate if restrictions on developable lands and density cause some land prices to rise and others to fall.' VII. WHEN LAND-USE REGULATIONS REDUCE PROPERTY VALUES The focus of this essay has been on understanding the ways in which land-use regulations can raise property values. Land-use regulations can, however, reduce the value of properties affected, or they may reduce the value of some properties subject to the regulation, even if the effect is positive for some or most other properties affected' For example, if a land- use regulation is too onerous, or if the amenities generated are not valued sufficiently by the residents, then the overall effect may be zero or negat ive.1 In the end, it is a "case-by-case" empirical question that would need to be evaluated using statistical analyses of housing values in a specific city and for regulations of specific kinds. One situation where a land-use regulation will indeed cause a reduction in property value is where a) the supply of land for an "allowed use" is higher than it would have been without the land-use regulation, and b) this additional supply causes a drop in the market price due to downward- sloping demand. This situation is illustrated in the appendix in Figure A2. For example, if a municipality zoned more land for commercial or industrial use than the demand would support, the prices for these lands would decline, and might be lower than they would have been without that particular zoning. A second situation where a land-use regulation will reduce property values is where the regulation was intended to generate neighborhood or local external effects, but the regulations were so onerous, or the positive external effects so small, that the net effect was a reduction in property values in the zoned area.66 A third situation where a land-use regulation will reduce property values occurs when the external effects represent benefits to society generally, but do not tend to be reflected in the property values.67 These may 61 J.H. Mark & M.A. Goldberg, A Study of the Impacts of Zoning on Housing Values Over Tune, 20 J. URB. ECON. 257,271 (1986). 62 Quigley & Rosenthal, supra note 53, at 85-86. es Id. at 86. sa See, eg, Parsons, supra note 37, at 35 (listing winners and losers of restrictive land-use regulations abutting Chesapeake Bay). 6<5 See, e.g., Schaeffer & Millerick, supra note 44, at 311 (asserting that decreased property values in historic districts regulated through the establishment of the Chicago City Historic District program were the result of the regulatory burdens of the program exceeding the benefits of a historic district designation). 66 Id. 67 See, e.g., Parsons, supra note 37, at 35 (noting that property owners of undeveloped and restricted land within the Chesapeake Bay Resource Conservation Area, such as owners of 20061 EFFECTS ON LAND PRICES 125 include designations for scenic or historical areas, wild and scenic rivers, etc. Even though the benefits to society generally may be very high, these benefits accrue to the general public rather than the landowners, so that the benefits to the landowners may not outweigh the costs of the restrictions. A fourth situation where land-use regulations impose costs on landowners is somewhat more difficult to evaluate in terms of market economics. These situations include ones where a family wishes to transfer land, such as farm or forest land, to family members for other kinds of uses like building homes for personal use.68 These instances cannot be easily evaluated by looking at comparable sized parcels in appropriately zoned areas, since often the landowners have a personal attachment to the specific parcel and neighborhood where the family may have farmed for several generations. Examples of the desire on the part of farm families and woodlot owners to subdivide a portion of their land for use by family members have received great attention in the debate over Oregon's Measure 37.69 The personal values of particular individuals, however, cannot easily be translated into "fair market value" in cases involving unique circumstances such as a sentimental attachment to a particular piece of land. Indeed, it would seem difficult to apply the language from Oregon's Measure 37 (reduction in fair market value) to these kinds of situations. And finally, for current purposes, we want to distinguish between land- use regulations that reduce the value of land below its prior value, and the possibility that a land-use regulation may conflict with some future, unforeseen windfall gain or increase in value. Unforeseen economic changes can raise and lower the economic potential of lands for a variety of reasons. In some cases, these may be directly or indirectly related to the land-use regulations or complementary government actions. However, in other cases, lands may become more valuable for unforeseen reasons, and land-use regulations may begin to conflict with those uses long after enactment. The distinction between a land-use regulation that reduces a property's value (at the time it is enacted) versus one that, at some future date, is an impediment to a windfall gain that was unforeseen at the time of the regulation's enactment, represents an additional complication for interpreting laws like Oregon's Measure 37. If land-use regulations are subject to compensation for reductions in value due to unforeseen events or changes in market conditions, this would appear to put government in a perpetual position of liability for future changes in the economy. farms in the Resource Conservation Area, suffered lost property value). 68 See, e.g., Jeff Barnard, OREGONIANS BEGIN F UNG MEASURE 37 CLAIMS (Dec. 2, 2004), http://www.kgw.conVnews-local/stories/kgw_120204_life_ore_land_use_.115882f.html (describing two of the rust Measure 37 claimants to file, a woman near Portland who wanted to subdivide land to give to her children, and a couple in Sisters, Oregon, who wanted to build a retirement home on a 20-acre farm parcel). 69 See, e.g., Pete Hunt, 77re Grandmother Clause, WILLAMETTE WK., Feb. 16. 2005, available at http://www.mweek.conVstory.php?story=6010 (highlighting the role of 92-year old Multnomah County, Oregon resident and property owner Dorothy English as the poster child of the successful ballot measure). 126 ENVIRONMENTAL LA W [Vol. 36:105 VIII. SUMMARY AND CONCLUSIONS The analysis presented here spells out how land-use regulations can, and often do, have positive effects on land values in settings where amenity effects, scarcity effects, or both kinds of effects are at work. There is also abundant empirical evidence that documents how land-use regulations have raised rather than lowered property values in many cases.70 In either case-whether a land-use regulation reduces or increases property values-an individual exemption from a binding land-use regulation can be expected to have a positive effect on a property's value. Logically, if a land-use regulation imposes a cost on landowners, eliminating that cost is likely to make that particular property more valuable, so long as the benefits associated with the land-use regulation are unaffected. The implication of this result is highly significant. Evidence that the value of an individual exemption to a land-use regulation is positive does not, by itself, represent proof or unequivocal evidence that the enactment of the land-use regulation reduced the property's value. As a result, claims that a land-use regulation has reduced a property's value must be substantiated with other kinds of evidence and analyses. In particular, an appraiser's estimate that a property's value would rise if a given land-use regulation were removed tells us nothing definitive about whether the land-use regulation has actually reduced the property's value. Indeed, given the dynamic and complex interconnections between land- use regulations and their amenity and scarcity effects, as well as other related government and private actions and responses, it is highly problematic to disentangle the separate effects of a particular land-use regulation from the effects of other actions and responses that may be independent or related to any given land-use regulation. Proof that a land- use regulation reduced a property's value would appear to face insurmountable obstacles in many cases. Decisions about zoning and urban growth boundaries are interdependent with decisions about funding for roads and other infrastructure development, and all of these will affect the value (and potential value) of developed and undeveloped properties within and outside each boundary and zone. Ascertaining the effect of a particular land-use regulation would appear to be particularly problematic if we recognize that, had the land-use regulation not be enacted, other public and private decisions would have had different outcomes, and these in turn could have altered the current opportunities and limitations in ways that are impossible to know. Still, it is completely understandable that landowners limited by a land- use regulation view the value of being free of that regulation in terms of the value of an exemption. That view, with the potentially large financial gains that would appear to result, is no doubt tempting to landowners, and has led to anger over land-use restrictions. The recognition, however, that in many cases these potentially large financial gains are actually caused bythe land- use regulation, is not well understood by the general public, in part because 70 See, e.g., Beaton, supra note 27, at 191 (finding that regulated areas in the New Jersey Pinelands outstripped unregulated areas in terms of price appreciation). 20061 EFFECTS ONLAND PRICES 127 of the indirect, invisible, and often gradual market forces at work. In most public discussions that preceded the approval of Measure 37 in Oregon, and in those that have continued in the year following its passage, there is little evidence of a public awareness of the critical distinction between the value of an individual exemption and the reduction in value caused by a land-use regulation. IX. APPENDIX: POTENTIAL MARKET EFFECTS OF LAND-USE REGULATIONS Depending on the specific market conditions, the price differential in markets affected by a land-use regulation may be mostly, or entirely, attributable to price adjustments in one of the two markets, or it may be divided among several markets. A simple diagram provides a way to think about these kinds of effects. Consider a land-use regulation that allows land to be put to use A, but restricts certain areas of land from being put to another use, use B. Prior to the enactment or enforcement of the land-use regulation, the market can be expected to allocate some land to use A and some to use B, with the price of land being the same for both (at the margin), since both uses will compete for land in a single market/supply. Of course, prices for parcels with unique characteristics will differ because of those characteristics (soil quality, view, distance from city center, etc.). Figure Al illustrates this point. It describes the total supply of land on the horizontal axis. The amount allocated to land use B begins at the left end of the axis; the amount allocated to use A begins on the right end of the axis. The demand or willingness to pay for B slopes down to the right, declining as more land is allocated to B. The demand for A is "flipped" left to right, since an increase in the amount of land for use A means moving from the right end of the horizontal axis to the left. In this particular example, the demand for A is assumed to be relatively flat; whereas the demand for B is assumed to be relatively steep. If a land-use regulation limits the amount of land available for B, we can indicate that amount with a vertical line. All land to the left of the vertical line is limited to use B; the remaining land (to the right of the vertical line) may be used for use A. We can therefore evaluate the effects of the land-use regulation on the price of land for both uses, given the way we have characterized the demand for each land use. The land price for use B is indicated by the intersection of the supply and the demand, or price P, The land price for use A is indicated by the intersection of the supply and the demand for use A. In this case, all land not available for use B will be included as the supply for use A, so the intersection of the vertical supply line and the demand for use A gives us the price in the market for land use A, PA. 128 ENVIRONMENTAL LA W [Vol. 36:105 SUDD]v B C,,, "l- A P'B PB Po PA Figure Al Prior to the introduction of this land-use regulation, how would land have been allocated and what would the price of land have been? From the illustration, we see that the vertical supply line would be removed, and the demand for one land use would play off, or compete against, the demand for the other use, leading to an equilibrium price and allocation at Po and Q, Given the particular way this illustration has been drawn, we can see that most of the price differential created by the land-use regulation is due to the large increase in the price of 13-lands (P,, Po), and only a small reduction in land prices for land use A can be attributed to the land-use regulation (Po PA). These demand curves, however, can only represent the competing demand for land in one location or market. If land-use regulations have also limited the availability of land for use B in other nearby locations, then some of the pent-up demand that would have been satisfied elsewhere may spill over into the market illustrated above. This might shift demand B up (to the dotted line above "demand B"), which would cause P,, to be even higher (P'J, with even more of the overall differential between PB and PA being due to a rise in P,, rather than a decline in PA. For a landowner restricted to use A, the value of an individual exemption will equal the price differential P,, PA (or P',, PA), since they will be able to shift from use A to use B. The magnitude of these results depends on assumptions about how steep or flat the demand curve for B is relative to the demand curve for A, and also on whether we assume that markets in other locations are affected, and whether demand shifts from those markets to this market. It is also possible that the demand for A could be relatively steep, in which case the --00. Land use B Qo Land use A 20061 EFFECTS ONLAND PRICES 129 diagram would look like Figure A2 below. We can see that the land-use regulation, when compared to the unregulated case, causes the price of A- land be reduced (Po PA), whereas the increase in the price of B-land would be relatively small (P,, Po). Once again, however, if the land-use regulations restrict the availability of land for use B in other locations, some of that pent up demand may be felt in the market/location illustrated in Figure A2. If this were the case, demand A would shift up (as indicated by the dotted line parallel to demand A) so that P. would rise to P',,. Supply B P'e PB Po PA L Supply A Figure A2 We can depict the case of amenity effects for residential properties by indicating how the benefits and costs of the land-use regulation will affect the demand for land in a market with a fixed supply of land. Beginning with a land base of Q. and an initial land price of Po, consider how land-use regulations may affect land prices. If amenity benefits like those discussed above are increased (government services, environmental amenities, etc.) this can shift the demand from Do to D,. This shift may include the effect of spill-over demand from other locations or neighborhoods if residents see the amenity benefits being more attractive in the market being depicted. Land prices will rise from P. to P, in the case illustrated. An individual landowner who was exempted from the land-use regulations, but was surrounded by lands where the regulations were in force, would be in a position to benefit from the amenities generated but without the restrictions or costs that produce them. For example, being free of building restrictions to protect environmental zoning rules, an exempted landowner could build or expand their residential buildings in ways that their neighbors could not. The demand, or willingness to pay, for such an Land use B Qo Land use A 130 ENVIRONMENTAL LA W [Vol. 36:105 exempted property might be reflected in the demand curve D2, and the price that the exempted property could obtain in the market would be higher than for conforming properties. Here we see a case where the effect of the land- use regulation on property values is positive, but at the same time the value of an individual exemption is also positive. P2 P, Po Figure A3 In cases where amenity effects are combined with scarcity effects (e.g., if environmental zoning includes setting aside environmentally sensitive areas or greenbelts), then the result could be more pronounced. This kind of change can be characterized as a shift in the supply of land from S° to S', so that prices P,' and PZ' would shift up even more, to where SZ' intersects D' and D2. Compared to Po, land prices will rise even more as a result of the land-use regulation, but at the same time the value of an individual exemption will remain positive. Qo Measuring Compensation Under Measure 37: An Economist's Perspective Andrew J. Plantinga Department of Agricultural and Resource Economics Oregon State University Corvallis, OR 97331 lantin a(d,oregonstate.edu Ph: 541-737-1423 December 9, 2004 Helpful comments on earlier drafts from Gail Achterman, Bill Boggess, Dan Bromley, Emery Castle, and Bill Jaeger are acknowledged. However, the author alone is responsible for the content of the paper. Measuring Compensation Under Measure 37: An Economist's Perspective Governor Kulongoski recently stated his preference for paying claimants under Measure 37 rather than foregoing enforcement of the state's land-use laws. Many have expressed fears that such claims could run into the billions of dollars, further straining budgets for education and other publicly-funded programs. If compensation is paid, the costs of Measure 37 will depend ultimately on how compensation is determined. Measure 37 does not precisely define how to compute compensation, leaving the door open to different interpretations. There are several ways in which compensation might be calculated, all of which involve thinking about how land markets operate. This white paper provides an economist's perspective on measuring compensation. What are the different ways in which compensation might be determined? What do these approaches assume about the operation of land markets? The text of Measure 37 raises many questions. I only address the issue of how to determine compensation, using the text of the measure as a reference point. I am interpreting the text as an economist, not as a legal expert. My expertise is the field of economics, not law. In addition, the consensus of legal experts I have spoken to is that no body of case law provides guidance on how to determine compensation. One naturally thinks about parallels with government takings cases-but this parallel is weak, as discussed below. I will then provide a simple example to focus my discussion on compensation. Following that, I will propose and evaluate two approaches to computing compensation and, then, end with some concluding remarks. r~ What does the text of the measure say about compensation? There are two important passages in the text of Measure 37 that speak to the issue of how compensation should be measured: "Just compensation shall be equal to the reduction in the fair market value of the affected property interest resulting from enactment or enforcement of the land use regulation as of the date the owner makes written demand for compensation under the act." "Subsection (1) of this act shall not apply to land use regulations enacted prior to the date of acquisition of the property by the owner..." The two key points in the first passage are that compensation is for the reduction in fair market value and that compensation is paid for reductions in value that occurred as of the date the owner submits a claim. The second passage indicates that the property must have been acquired by the current owner (or family members) prior to enactment of the regulation. What does fair market value mean? To understand compensation under Measure 37, we need a definition of fair market value. Fair market value refers to the price that willing and well-informed buyers and sellers would agree upon for a piece of property. Some definitions emphasize the notion of competitive markets; namely, it is the price that would result in a market with a large number of potential buyers and sellers. A market dominated by a single seller (a monopolist) or a few sellers (oligopolists) would not be competitive, a point I will return to below. What does the price of property represent assuming it derives from a competitive market? Let's consider the price for a parcel of land. Suppose that the parcel can generate an annual income' for its owner of $100 in perpetuity. How much should this parcel sell for? A buyer ' Throughout this paper, I will define income as the money taken in by the landowner minus money paid out in costs. This is sometimes referred to as net income or the net return. 3 01 would be indifferent between buying the land, and gaining the $100 annual income stream, and giving up a sum of money that would generate an identical income stream. Suppose that banks are offering a 5% annual rate of return on deposits. A $2,000 deposit in a bank would generate $100 per year in interest. Thus, the income streams from owning the land and investing $2,000 at the bank are the same. In a competitive market, the land would sell for exactly $2,000. If the seller offered the parcel at a price higher than $2,000, say $2,500, there would be no buyers because the bank investment is a better deal. Instead of buying the parcel for $2,500, an investor could invest this amount at the 5% rate offered by the bank and generate an income stream of $125 per year. This beats the $100 income stream that the land parcel would provide. By the same argument, nobody would want to buy the parcel for any amount above $2,000, and the seller would be forced to lower the asking price. If the price is set below $2,000, say $1,500, then a lot of buyers would want the parcel. $1,500 invested at 5% yields only $75 annually, and so the land parcel which generates $100 annually is a better investment. Competition among buyers will bid up the price of the parcel. As long as the price is below $2,000, another buyer will always want to offer a little bit more. As shown, competitive market forces push the price of the land parcel toward $2,000. This price depends on the stream of income ($100 annually) that can be generated by the land and the interest rate (5%). The exact relationshipz is: Annual income Current price = Interest rate z The formula is more complicated when the income stream is expected to change in the future and when there is uncertainty about the income stream. 4 The current price for land (or any other asset) reflects the annual income stream generated in perpetuity starting from today. Or, in terms used by economists, the price equals the present value of the future stream of discounted annual net returns (the difference between revenues and costs). Is compensation under Measure 37 prospective or retrospective? Measure 37 requires compensation for the reduction in fair market value due to land use regulations as of the date a claim is filed. "As of can have different meanings depending on context. For example, if I say that my insurance policy takes effect as of next Thursday, I mean that I will be insured beginning next Thursday and on into the future. In this context, "as of refers to a prospective change. If I say that the reduction in my weight due to my diet is 5 pounds as of today, I mean that I lost 5 pounds between the time my diet began (some time in the past) and today. In this context, "as of refers to a retrospective change. Either of these interpretations could apply to compensation under Measure 37. In the prospective case, compensation would be paid for the reduction in fair market value on the date the claim is filed. For example, a regulation might be found to reduce the market value of a land parcel from $2,000 to $1,000 on a specific date, implying compensation of $1,000. The $1,000 would compensate landowners for the future stream of income losses the landowner would experience beginning on the date the claim is filed and on into the future. In this case, compensation is provided today for losses that will be experienced in the future. In the retrospective case, compensation is paid for the reduction in fair market value between the time the regulation was enacted and today. For example, a regulation might be found to have reduced the annual income from a parcel from $100 to $50, implying compensation of $50 for each year the regulation has been in effect. Here, compensation is provided for losses already sustained by the landowner. This is an appropriate interpretation of the reduction in fair market value because of the equivalence between the sales price of an asset and the discounted income stream generated by it. How is Measure 37 compensation different from compensation in a takings case? Under the U.S. Constitution, the government is required to compensate a property owner when it takes his or her property for some public purpose. A typical case is when the government exercises eminent domain to obtain land for the construction of a public road. In this case, determining the fair market value of the land is relatively straightforward. It is the amount for which the owner could sell the land in the absence of any government intervention (i.e., before the taking occurs). We observe this value (or can estimate it with relative precision) MEASURE 37 TAKINGS Fair market value with no regulation (hypothetical) Compensation Current fair market Current fair market value value with regulation before takings (observable) (observable) I Compensation Higher values Value to owner with takings (equal to zero) 6 because it is generated in the land market that exists prior to the government action. After the takings, the value of the land to the owner is zero and so the takings has reduced the value to the landowner by exactly the fair market value prior to the takings. This amount is shown on the right-hand side of the above illustration. Under Measure 37, we are asked to compute the reduction in value: specifically, how much the property would have been sold for without the regulation minus its value with the regulation. This amount is shown on the left-hand side of the above illustration. The difficulty with measuring the reduction in value-and why this is fundamentally different from a typical takings case-is that it involves an unobservable hypothetical. Namely, we do not observe a price without the regulation because the regulation is and has been in effect. We do observe (or can estimate with relative precision) the value with the regulation because it is generated in a land market that currently exists, but we need the hypothetical value to calculate the change in value. Compensation under a takings is prospective. Property owners are compensated for the lost income stream that starts today and continues into the future. To compensate owners today for future losses makes sense in a takings case because the property owner has been deprived of any entitlement to future income streams. As discussed above, Measure 37 also can be interpreted as requiring prospective compensation. However, under Measure 37 the property owner still retains the title to the property and, thus, is entitled to whatever income stream the property produces in the future. One could argue that, therefore, owners should be compensated for losses as they occur rather than upfront before they occur. For example, suppose that compensation is provided prospectively for the effects of a regulation that, five years from now, 7 is abolished. The owner will have been compensated for the entire stream of future losses. However, after five years, the owner does not experience any actual losses because the regulation has been removed. Because the owner retains title to the property, he or she receives the higher income stream and, in effect, is compensated twice for the effects of the regulation. An example To make the following discussion concrete, I will focus on an example. Suppose there is a parcel of agricultural land that was purchased prior to a zoning decision that prohibited development of the parcel for residential housing. Suppose, further, that at some point after the zoning regulation was put in effect, development became the most profitable use-that is, the use that would generate the highest income stream. I will assume that the parcel remained in agricultural use (because of the zoning restriction) and that, next to development, agriculture was the most profitable use of the land. What is the simplest approach to determining compensation? Consider the following method of determining compensation for the example provided above. We observe, or can estimate, the amount the land would rent for annually when it is used for agriculture. This is the annual value of the land with the regulation. We can convert this amount to a sales price for the parcel by dividing through by the interest rate (see the formula above). To find the sales price without the regulation, we could hire a land appraiser who could estimate how much the parcel would sell for if development were allowed on the parcel. We now have two prices for the parcel-the price assuming the land remains in agricultural use (the price with the regulation) and the price assuming development is an option (the price without the regulation). If compensation is to be prospective, then it should simply equal the difference between the two prices: Prospective compensation = Price without the regulation - Price with the regulation if, instead, compensation is retrospective, then we need the annual incomes generated by the parcel. We get these amounts by multiplying the above prices by the interest rate. Thus, Retrospective compensation = (Annual income without the regulation - Annual income with the regulation) X Number of years regulation has been in effect Here, the annual loss due to the regulation is multiplied by the number of years the regulation has been in effect.3 Finally, if the landowner is to be compensated for losses as they occur, rather than before they occur, compensation would be paid annually and would equal: Annual compensation = Annual income without the regulation - Annual income with the regulation These three methods of determining compensation are straightforward, but carry with them implicit assumptions about the operation of land markets. I will discuss the most problematic of these next. The simple approach treats the landowner like a monopolist To compute compensation, we need to determine the value of the land without the regulation. A question we must address is: In this hypothetical case, do we remove the 3 I am assuming that annual income is measured in current dollars (see more discussion of current dollars below) and that landowners are not to be compensated for foregone investment opportunities-namely, the opportunity to have invested historical losses due to the regulation. 9 regulation from only the single parcel under consideration, or do we remove it from all parcels subject to the regulation? The simple approach sketched above assumed the regulation was removed only from the parcel being evaluated. The land appraiser estimated how much the parcel could sell for if development were allowed. This implicitly assumes the regulation still applies to other parcels. In other words, we computed compensation under the assumption that the landowner had exclusive rights to develop land previously subject to the regulation. Or, we computed the income that would have accrued to a monopolist in the land market. In doing this, we are allowing the landowner to benefit-get higher compensation-from the restrictions imposed by the regulation on other properties. There are two immediate objections to computing development income in this way. First, anyone whose property is affected by the regulation is eligible for compensation. This is an argument for why our hypothetical value should be defined under the assumption that all such landowners pursue development. Second, the text of the measure refers to the reduction in fair market value. As discussed above, this is often interpreted as the sales price in a competitive market characterized by a large number of potential buyers and sellers. Assuming that only a single owner can develop a parcel would be incompatible with the definition of fair market value. What would be the value of the land assuming the regulation does not apply anywhere? If the zoning regulation currently restricts development of a large number of agricultural parcels, then in the hypothetical world without the regulation a single agricultural parcel will just be one of many that could be developed. Competition will drive down the value of the parcel for development. Suppose that the agricultural parcel in our example is located relatively far from centers of economic activity and does not have any distinguishing characteristics (e.g., a scenic 10 view). If this is the only parcel without the development restriction, then the development value could be high. But, if the zoning regulation is removed from all parcels, then the development value of this unexceptional parcel is likely to be quite low. Indeed, it could be the case that in this hypothetical world, agriculture-not development-is the most profitable use of this parcel. If this is true, then the value with and without the regulation is the same, suggesting compensation should be zero. The above discussion suggests that locational advantages and unique characteristics will increase the value of parcels for development. In a competitive market, these features of the parcel would "earn" income, relative to parcels without such features. The zoning regulation denies the landowner the opportunity to realize this income. If we can value these distinguishing attributes of a parcel, then we have an estimate of the compensation required under Measure 37. Economists have developed a technique-hedonic price analysis-for doing just this. The details of hedonic price models are beyond the scope of this paper, but the basic idea is to separate prices for property (land, houses, etc.) into components measuring the value of each attribute.4 In principle, the results of these studies could be used to develop compensation schedules listing how much owners would be paid given the particular attributes of their parcel. This would, however, be a challenging and substantial undertaking. Can compensation be based on the original purchase price? When an individual purchases a parcel of land, he or she is acquiring the income stream generated by the land. More specifically, the price of the land will reflect the market's valuation 4 For example, Oregon State University researchers estimated the effects of elevation on housing values in Portland, Oregon. For each 100 foot gain in elevation, the price of housing increased by $2.39 per square feet (or about $5,000 for a 2,000 square foot house). The citation for this study is: Wu, J., Adams, R.M., and A.J. Plantinga. 2004. Amenities in an Urban Equilibrium Model: Residential Development in Portland, Oregon. Land Economics 80(1):19-32. 11 of the income stream assuming the land is allocated to its most profitable use. Why the most profitable use? Suppose the price of the land was based on a use that generates a smaller income stream. Then, buyers could make money by purchasing the parcel and allocating it to its most profitable use. In a competitive market, many buyers will try to do this, and they will bid up the price of the land until its price exactly reflects the stream of income from the most profitable use. Measure 37 provides compensation only to individuals who acquired property before the regulation went into effect. As such, the original purchase price of the property for qualifying claimants should reflect the income stream that would have accrued to the landowner in the absence of the regulation. The regulation forced the owner to accept a lower-valued income stream. In my example, this is the income from agriculture. Suppose we convert the annual agricultural income to a price for the parcel by dividing through by the interest rate. Then, compensation could be calculated as: Compensation = Original purchase price - Price with the regulation We would need to express prices in current dollars to account for inflation since the property was purchased. The point here is that prices for all goods tend to rise over time. This general price inflation implies, for example, that $1 had greater purchasing power in 1965 than it does today. The consumer price index can be used to convert dollars from an earlier year to current dollars.s For example, a parcel of land purchased for $325 in 1965 would have a price of $1,970 in current dollars. Compensation calculated in this way would be retrospective and prospective. It would compensate owners for losses between the time the regulation when into effect and the present 5 See the inflation calculator at http.:,I/wwA,.bls.gov/cpi/home.htm. 12 and losses from now into the future. This approach has the advantage, in many instances, of using observable, rather than hypothetical, values. Often, the original purchase price is observable. In many cases, it will be the value generated when the regulation does not apply to any parcels-that is, it will be a fair market value.6 Likewise, the income from agriculture is observable. This is the value generated in the existing world with the regulation. One possible objection to this approach is that the market might have anticipated the eventual enactment of the regulation. If participants in the land market could see the regulation coming, then the original purchase price would not reflect the potential stream of income from development. This may seem to be a weakness of this approach, but, from one perspective, it is a strength. If the market anticipated the regulation, the landowner would have paid less for the property. In the extreme case, if the zoning restriction was predicted perfectly, the original price of the parcel would have reflected the stream of income from agriculture. As such, there is no difference between the income stream the landowner paid for originally and the income stream realized by the landowner. In fact, whatever the market anticipated, this approach always gets it right. The difference between the original purchase price and the income from agriculture equals the income stream landowners paid for when they purchased the property, but were later denied by the regulation. There is a practical side to basing compensation on the original purchase price. Presumably, claimants have to demonstrate that they have owned the property since before the regulation was enacted. They could be required to produce a document at the same time showing the original purchase price of the property. But, what if the sales price was for a collection of assets? In our example, the owner may have purchased agricultural land, buildings, 6 Exceptions could arise with regulations that are enacted over time. But, in any case, owners would still be compensated correctly for lost income (see below). 13 farm equipment, and so on. However, it is only the value of the land that is affected by the regulation. Thus, we need a price (or appraisal) of the land separate from the other assets. This may not be available, and could be difficult to reconstruct. Concluding remarks My main conclusion is that determining compensation under Measure 37 is not going to be easy. I have examined what I consider to be two logical approaches to measuring compensation: 1) a simple approach that considers the difference between current estimates of market value with and without the regulation and 2) an approach that considers the difference between the original purchase price and the market value with the regulation. As I have tried to demonstrate, both approaches have potential problems. My assessment is that the problems are particularly severe with the simple approach based on current estimates of market value. This approach requires us to imagine a hypothetical world without the regulation. Defming that world as one in which landowners are participants in a competitive land market seems logical and consistent with the idea of fair market value. Otherwise, we are allowing owners to benefit from restrictions imposed by the regulation on other property owners. As well, the order in which claims are submitted matters, with early claimants receiving more compensation. However, obtaining accurate estimates of property values under the assumption of competitive markets will require the use of sophisticated valuation techniques such as hedonic price analysis. Basing compensation on the original purchase price of the property is more straightforward because it typically would involve observable instead of hypothetical values. In this case, landowners are compensated for the income stream they paid for when they purchased 14 the property, but that was later denied by the regulation. Basing compensation on the original purchase price also treats all landowners the same-that is, landowners assumed to be participants in a competitive, rather than monopolistic, market. As I understand it, there is legal precedent for viewing compensation in this way. However, the major obstacle to this approach is that the affected property may be bundled other assets included in the original transaction. 15 y LCA&ding "0regonLive. com's Printer-Friendly Page" 11/09/2006 10:15 PM Z4C ftoolitain Owner seeks to build in Newberry Crater Measure 37 - A claim asks Deschutes County to pay $200 million or OK homes and other projects Tuesday, June 27, 2006 MATTHEW PREUSCH The Oregonian In one of the largest Measure 37 claims to date, a Portland man is asking Deschutes County for $200 million or the right to develop his property inside Central Oregon's Newberry National Volcanic Monument. James R. Miller wants to drill geothermal energy test wells, expand a small mining operation and build as many as 100 vacation homes on land he owns within the caldera. Miller, 82, a semi-retired mechanical engineer, said county land-use regulations and zoning enacted in the past 31/2 decades have limited the property's potential. "They superimposed one restriction after another on us," Miller said. His 157-acre property borders East Lake, a popular fishing and camping destination inside the monument. The land, a former mining claim from the early 20th century, has one cabin and two small pumice quarries, and is mostly covered by a thicket of spindly pines. The county zoned the property as open space and conservation land in 1992, a designation meant to protect important scenic or natural resources while limiting development. "It would be unfortunate to see either a geothermal plant or a 100-lot subdivision in the crater of Newberry Volcano," said Stu Garrett, a Bend doctor who led a citizens committee that drafted the bill creating the monument signed by the first President Bush in 1990. "It would totally change the character of Newberry Crater," Garrett said. The claim says Miller has owned or controlled the property since May 1969, first as a partner in La Pine Pumice Co. Inc. and most recently as general partner of LPP Resources Limited Partnership. The greatest share of his $203 million claim comes from the value estimated at $179 million, according to his filing of the 8.5 million cubic yards of high-quality pumice at the site. Pumice can be used in industrial and consumer products as a cleaner or filtering agent. "It was one of the finest pumice properties in the United States," Miller said. County limits on new home construction and power production reduced the property's value another $12 million and $11 million, respectively, the claim says. Geothermal plans Miller previously proposed a geothermal plant on his property. Geothermal plants use superheated steam from below the Earth's surface to spin turbines, creating electricity. Newberry, a collapsed volcano that last erupted about 1,300 years ago, is considered the best potential site for geothermal power generation in Oregon. The U.S. Geological Survey has said the volcano could produce as much as 740 megawatts of power for at least 30 years, enough to power 300,000 to 650,000 homes. But to date, no company has successfully exploited Newberry's potential. In 1996, a California company quit Newberry after its test wells didn't turn up adequate superheated steam at shallow enough depths. http://www.oregonlive.com/printer/printer.ssf7/base/news/ll5l37514411230.xml&co11=7&thispage=2 Page 1 of 2 Lolling "OregonLive.com's Printer-Friendly Page" Vulcan Power Co. of Bend is working on projects to develop as much as 180 megawatts next to the monument on the west flank of the volcano. Miller envisions a 50- to 100-megawatt plant inside the depression on top of a cinder butte on the property's western edge. With the land left over, he'd expand the pumice operation and eventually convert the mined land and what's left over into 100 lots for homes, each with its own septic system and well. Six months to respond The county received Miller's claim June 1 and has six months from then to waive its regulations, compensate Miller or deny the claim, said Kevin Harrison, the county's principal planner. "It will be processed like any other claim," he said. The county also has notified the U.S. Forest Service, which manages the monument land surrounding Miller's property. The agency said it would be inappropriate to comment on the claim. "This is a private land issue with the county," said Sue Olson, a Deschutes National Forest spokeswoman. In other Measure 37 claims, a Pendleton woman filed a $284 million claim in September for property in Umatilla County, state records show. Numerous claims have been in the $30 million to $50 million range. Directly across the lake from Miller's property is the East Lake Resort, which has rustic cabins, a cafe and general store that cater to fishermen and others. Kathy and David Jones bought the resort in April. On Monday as kids splashed in the shallows and men in boats stared at static lines, Kathy Jones said this was the first she'd heard of Miller's plans and wanted to find out more. But she hoped any development wouldn't damage the natural atmosphere inside the caldera. "I don't want anything that would affect the wildlife or the views," she said. "If it did, I would oppose it." Matthew Preusch: 541-382-2006; preusch@bendbroadband.com ©2006 The Oregonian http://www.oregonlive.com /printer/printer.ssf7/base/news/ 11513751441123O.xml&coll=7&thispage=2 11/09/2006 10:15 PM Page 2 of 2 Loading "Oregon Live. co m's Printer-Friendly Page" I Oregon 11-i r . COM Eventing Oregrm Pe ftoolliall Judge's ruling limits the bonanza from Measure 37 The voters' fairness fix was never intended to award a bottomless right to break land-use rules Monday, August 14, 2006 The Oregonian It sticks out, well, like a volcano. Of 2,940 claims filed since voters approved Measure 37, one claim now towers above the rest. It was filed over 157 acres that are privately owned and long the subject of a tug- of-war over price within the Newberry National Volcanic Monument. This claim exemplifies what few voters understood when they approved the property-rights measure two years ago. In the abstract, Measure 37 looked like a fairness fix, entitling property owners to compensation if regulations reduced the value of their land. But as the consequences of this terrible law play out across our landscape, it becomes clearer every minute that whatever voters thought they were doing in 2004, what they were really doing was triggering a high-stakes development bonanza. In Deschutes County, for instance, James R. Miller is seeking $203 million. If he doesn't get this astronomical sum and no local government has paid compensation yet under Measure 37 Miller wants the right to develop a large pumice mine, geothermal power plant and 100 vacation homes near one of the two lakes within the Newberry National Volcanic Monument near Bend. Miller's ownership interest in this land dates to 1969. But the monument a 62,000-acre wonderland with lava beds, hundreds of cinder cones and a spectacular obsidian flow wasn't created until 1990. So Miller can argue that his claim takes precedence over the public's interest in preserving the uniqueness of this area. Like many property owners who have filed claims under Measure 37, though, Miller has had a long- standing dispute with government agencies about the rightful price of his land. Measure 37 has strengthened his hand, multiplied his price, intensified pressure on the county and made it less likely that the public's interest will be served. In contrast, a recent court ruling in Crook County did advance the public interest. It may help to curtail the development boom voters unwittingly triggered in approving Measure 37. Circuit Judge George W. Neilson struck down a Crook County rule permitting development rights secured under Measure 37 to be almost immediately transferred to new owners, i.e. developers. Although it may not be the last word on "transferability," the judge's ruling for the most part backed the position that Attorney General Hardy Myers has taken. He has held that development rights secured under Measure 37 belong to the original owner of the land and cannot be just passed along to a developer. As a practical matter, that interpretation has already slowed down some development plans. Bankers aren't keen to loan money for subdivisions until Measure 37 development rights are secure. The "transferability" issue also poses a question of principle. Voters approved this law to address long-standing property grievances, not to award a legion of new owners, and developers, the right to break the rules. That's why we've always objected to Measure 37. It either pays people to obey the community's rules, or entitles them to break the rules. Neither is acceptable. Although the claim filed in the Newberry National Volcanic Monument is one-of-a-kind, equally worrisome claims have been filed all over the state. A 11/09/2006 10:19 PM http://www.oregonlive.com/printer/printer.ssf?/base/editorial/1155340522142360.xml&coll=7 Page 1 of 2 Loading "Oregon Live. co m's Printer-Friendly Page" database kept by the Institute of Portland Metropolitan Studies shows 2,059 of the 2,940 claims roughly 70 percent aim to roll back protections on 118,079 acres of irreplaceable farm and forestry land. When the Oregon Legislature convenes in 2007, it won't need to look far for evidence of Measure 37's potential to harm our state. It's now as conspicuous as a volcano. ©2006 The Oregonian 11/09/2006 10:19 PM http://www.oregonlive.com/printer/printer.ssf?/base/editorial/1155340522142360.xml&coll=7 Page 2 of 2 f ti a a Mining in a National Monument - Sightline Institute (formerly Northwest Environment Watch) 11/17/2006 11:01 AM View full page here: http://www.sightline.org/research/sprawl/res-pubs/property-fairness/measure-37- newberry-crater-mine Mining in a National Monument (This is one of a series of stories that tell how Measure 37 is affecting Oregon. All stories are in Sightline's Property Wrongs report.) **See the video version of this story! pot + x ~iy T - = The southern side of East Lake fizzes, as if a thousand tiny fish were blowing bubbles below the surface: pip-pip-pip-pip-pip. It's the sound of sulfuric gases rising from deep beneath the lake a sign of powerful underground forces. East Lake is tucked behind an ancient cinder cone in the Newberry Crater National Volcanic Monument amid Central Oregon's pine forests and high desert. At 6,400 feet above sea level, it's one of the highest lakes in Oregon, and it's a quiet place, with few sounds besides the occasional splash of a trout or kokanee salmon. Many a visitor has soothed aching muscles where the volcanic hot water mixes with the colder water from the lake. The area has other attractions as well. Wild ducks, bald eagles, osprey, elk, black bear, mule deer, and even the elusive pine marten call the area home. To maintain the area's tranquility, boats are required to stay below 10 miles per hour; on a warm autumn day, just three or four bob in more than a thousand acres of water. Newberry Crater has always been a peaceful place, with just a few campsites, plus the small summer-only East Lake resort that's been around since 1915. True, the area is known for its great fishing, and has attracted anglers from as far away as Maine, Florida, Germany, and even Zimbabwe. And its unique geological features and rich natural beauty earned it national monument status in 1990. But until recently the place has seemed like a well- kept secret. Until Measure 37. East Lake is now the focal point of one of Oregon's biggest Measure 37 claims. A private landowner, James Miller, who holds 157 forested acres inside the National Monument (which includes shoreline along the west side of East Lake) filed a $203 million claim for loss of use under the measure. Because the government couldn't pay up, the landowner now has approval to build a pumice mine, a geothermal plant, and as many as 150 vacation homes on the property. Geologists hired by the landowner will soon begin looking at where to tap the geothermal energy. http://www.sightline.org/research/sprawl/res-pubs/property-fairness/measure-37-newberry-crater-mine/print Page 1 of 3 Mining in a National Monument - Sightline Institute (formerly Northwest Environment Watch) 1111712006 11:01 AM d ` Locals and fishermen fear the big developments. So does David Jones, who owns East Lake Resort. He voted for Measure 37 back in 2004 and now its ramifications are staring directly back at him. The private land slated for development is in plain view directly across the lake from his small resort. "I thought it was a good measure," Jones says. "I do think that there is some place for some type of Measure 37. But I was one of the many people who voted for Measure 37 and thought it would be a good deal for Oregon." Like Jones, many who come to fish here don't understand how Measure 37 could have helped cause the proposed development. Old-timer Kermit Huck is among them. The fishing is so good here, Huck and his wife, who live in Glendale, California, have been coming to the lake for 35 years. Huck keeps his boat docked just below the resort. The couple arrives at the end of June every year and stays until October. Huck wasn't aware of Measure 3 7 or why the private landowner wants to develop the plant, mine, or vacation homes. But he doesn't think a big development has any place in the national monument. "This investment that we have in these wild areas can't be replaced," he says. "Once it's gone, it's gone." Fisherman Barry Wood just learned to fly fish four years ago on East Lake. Every year since then, he's come back to spend the summer. One year, he brought his grandchildren to the lake to fish, and his youngest granddaughter caught a brown trout nearly three feet long. The fish was so heavy it broke the line and got away underneath the boat. "That's the biggest fish I've seen in here--and the 3-year-old got it. We call it the East Lake Monster." A California resident, Wood knows nothing about Measure 37, but does know a lot about natural resource prospecting. Before he retired, he worked in the Middle East as an oil and gas engineer. "I'm all for developing our own resources to get our own energy," he says. "We've got to do something. However, I'd hate to see a big electric generating plant over there across the lake. It seems a shame to ruin a beautiful spot." Indeed, it was the setting that drew Bend residents Kathy and David Jones here. For years, the couple had dreamed of owning a lakeside resort in Central Oregon. In April 2006, the opportunity presented itself, and they purchased East Lake Resort-a collection of 16 rental cabins, RV park, tackle shop, and cafe-from its previous owners. They employ about a dozen people and enjoyed such good business this summer that they're thinking of putting in some yurts next year to handle more overnight guests. But both believe that a pumice mine and a geothermal plant would be bad for business. "My bottom line is that I don't want anything that's going to interfere with the wildlife and the pristine look up here," says Kathy Jones. "I would hate the vacation homes." David first came to the lake when he was eight years old and he connects with the natural features of the place. He especially dislikes the idea of the pumice mine since it could disrupt water runoff and change the ecology of http://www.sightline.org/research/sprawl/res-pubs/property-fairness/measure-37-newberry-crater-mine/print Page 2 of 3 b r Mining in a National Monument - Sightline Institute (formerly Northwest Environment Watch) 11/17/2006 11:01 AM the lake. The area along the privately-owned shoreline is prime kokanee spawning area. Jones is also concerned that the prevailing winds blow from across the lake right into East Lake Resort. "This is a unique piece of property," he says. "It's un-replaceable." http://www.sightline.org/research/sprawl/res-pubs/property-fairness/measure-37-newberry-crater-mine/print Page 3 of 3 La Pine Pumice Co. v. Deschutes County Board of Commissioners, 300 Or. 704, 707 P2d 1263 (1985) La Pine Pumice Co. V. Deschutes County Board of Commissioners (85-017/85-018; CA A36543) Argued and submitted August 12, affirmed October 16, reconsideration denied December 13,1985, petition for review denied April 1, 1986 Summary Proceeding was instituted on a petition to review an order of the Land Use Board of Appeals upholding two ordinances amending county's comprehensive plan and zoning ordinance to establish regulations for use of geothermal resources. The Court of Appeals, Joseph, C. J., held that ordinances which amended county's comprehensive plan and zoning ordinance to establish regulations for use of geothermal resources and which, though creating a conditional use procedure for geothermal production in some areas and for geothermal exploration in certain other areas, prohibited both production and exploration on petitioner's property, because county concluded that other uses in area, wildlife habitat and recreational uses, were in conflict with geothermal uses were not invalid as contrary to regulatory goal of the Land Conservation and Development Commission. Affirmed. Headnotes 1. Zoning and planning---Modification or amendment; repeal---Modification or amendment---In general---Comprehensive plan Regulatory goal of the Land Conservation and Development Commission requiring identification of resources as well as resolution of conflicts between uses in order to conserve open space and protect natural and scenic resources could not be read as requiring that the county, amending its comprehensive plan and zoning ordinance to establish regulations for the use of geothermal resources, permit all possible measures to locate a goal resource where the exploratory measures themselves would be destructive to other goal resources that had already been identified. 2. Zoning and planning---Modification or amendment; repeal---Modification or amendment---In general---Comprehensive plan Ordinances which amended county's comprehensive plan and zoning ordinance to establish regulations for use of geothermal resources and which, though creating a conditional use procedure for geothermal production in some areas and for geothermal exploration in certain other areas, prohibited both production and exploration on petitioner's property, because county concluded that other uses in area, wildlife habitat and recreational uses, were in conflict with geothermal uses were not invalid as contrary to regulatory goal of the Land Conservation and Development Commission. CJS, Zoning and Land Planning § 73. Judicial Review from Land Use Board of Appeals. Allen L. Johnson, Eugene, argued the cause for petitioner. With him on the brief was Sullivan, Josselson, Roberts, Johnson and Kloos, Eugene. Myer Avedovech Il, and Babb & Avedovech, Bend, are associated as co-counsel. No appearance for respondent Deschutes County Board of Commissioners. Before Richardson, Presiding Judge, Joseph, Chief Judge, and Newman, Judge. JOSEPH, C. J. Affirmed. Opinion Emphasis Added with Bold and Underline JOSEPH, C. J. Petitioner seeks review of LUBA's order upholding two ordinances of Deschutes County which amended, respectively, the county's comprehensive plan and its zoning ordinance to establish regulations for the use of geothermal resources. Petitioner is the owner of a 157-acre tract in the Newberry Crater area. The property is located above a volcanic chamber and fault zone, and it has been identified by the county as a very likely site of geothermal energy resources. The county's ordinances create a conditional use procedure for geothermal production in some areas and for geothermal exploration in certain other areas. However, the ordinances prohibit both production and exploration on petitioner's property, because the county concluded that other uses in the area, e.g., wildlife habitat and recreational uses, are in conflict with and should be fully protected against the consequences of geothermal uses. Both geothermal energy uses and the conflicting uses that,the county seeks to protect are subject to Goal 5 and to LCDC's implementing rule, OAR 660-16-000 et seq. Petitioner assigns six errors. We conclude that only the first and second warrant discussion. Those assignments raise the questions of whether the county's prohibition of exploration for geothermal resources on petitioner's property is consistent with the goal and the rule. Goal 5 provides, in pertinent part: GOAL: To conserve open space and protect natural and scenic resources. Programs shall be provided that will: (1) insure open space, (2) protect scenic and historic areas and natural resources for future generations, and (3) promote healthy and visually attractive environments in harmony with the natural landscape character. The location, quality and quantity of [specified] resources shall be inventoried * * Where no conflicting uses for such resources have been identified, such resources shall be managed so as to preserve their original character. Where conflicting uses have been identified the economic, social, environmental and energy [ESEE] consequences of the conflicting uses shall be determined and programs developed to achieve the goal. The following provisions of OAR 660-16-000 et seq are relevant to the issues we discuss or were perceived as relevant by petitioner or LUBA: (fn1) 660-16-000 * * (2) A'valid' inventory of a Goal 5 resource under subsection (5)(c) of this rule must include a determination of the location, quality, and quantity of each of the resource sites. Some Goal 5 resources (e.g., natural areas, historic sites, mineral and aggregate sites, scenic waterways) are more site-specific than others (e.g., groundwater, energy sources). For site-specific resources, determination of location must include a description or map of the boundaries of the resource site and of the impact area to be affected, if different. For non-site-specific resources, determination must be as specific as possible. (5) Based on data collected, analyzed and refined by the local government, as outlined above, a jurisdiction has three basic options: (b) Delay Goal 5 Process: When some information is available, indicating the possible existence of a resource site, but that information is not adequate to identify with particularity the location, quality and quantity of the resource site, the local government should only include the site on the comprehensive plan inventory as a special category. The local government must express its intent relative to the resource site through a plan policy to address that resource site and proceed through the Goal 5 process in the future. The plan should include a time-frame for this review. Special implementing measures are not appropriate or required for Goal 5 compliance purposes until adequate information is available to enable further review and adoption of such measures. The statement in the plan commits the local government to address the resource site through the Goal 5 process in the post-acknowledgement period. Such future actions could require a plan amendment. (c) Include on Plan Inventory: When information is available on location, quality and quantity, and the local government has determined a site to be significant or important as a result of the data collection and analysis process, the local government must include the site on its plan inventory and indicate the location, quality and quantity of the resources site (see above). Items included on this inventory must proceed through the remainder of the Goal 5 process. "660-16-010 Based on the determination of the economic, social, environmental and energy consequences, a jurisdiction must'develop a program to achieve the Goal'. Assuming there is adequate information on the location, quality, and quantity of the resource site as well as on the nature of the conflicting use and ESEE consequences, a jurisdiction is expected to 'resolve' conflicts with specific sites in any of the following three ways listed below. Compliance with Goal 5 shall also be based on the plan's overall ability to protect and conserve each Goal 5 resource. The issue of adequacy of the overall program adopted or of decisions made under sections (1), (2) and (3) of this rule may be raised by the Department or objectors, but final determination is made by the Commission, pursuant to usual procedures: (1) Protect the Resource Site: Based on the analysis of the ESEE consequences, a jurisdiction may determine that the resource site is of such importance, relative to the conflicting uses, and the ESEE consequences of allowing conflicting uses are so great that the resource site should be protected and all conflicting uses prohibited on the site and possibly within the impact area identified in OAR 660-16-000(5)(c). Reasons which support this decision must be presented in the comprehensive plan, and plan and zone designations must be consistent with this decision. (2) Allow Conflicting Uses Fully: * * (3) Limit Conflicting Uses: * * (Emphasis in original.) Petitioner's basic contention is that, by precluding exploration for geothermal energy resources in the area of petitioner's property, the county has effectively prevented the adequate inventorying of the resource. Petitioner maintains that the county has made it impossible to apply Goal 5 correctly to geothermal resources in the area, because it has excluded the use of the resource in favor of other uses before there has been the complete inventory of the resource that is a necessary precursor to the identification of its potential uses and conflicting uses and to the resolution of conflicts. (fn2) LUBA concluded: We believe the county's inventory, including as it does both general areas of geothermal resources and identification of existing recreational uses and other uses in the area, is sufficient to meet the requirements in the goal and rule. While petitioner interprets the information in the record differently, the information is sufficient for the county to identify conflicts and to state the consequences of allowing various uses over others. While we understand the county may, by refusing to allow exploration on petitioner's property, make it impossible to develop detailed knowledge of the value of the resource, we do not believe that potential is the issue under Goal 5. The issue is whether the inventories are sufficiently detailed so that the county can decide whether it wishes to allow one use over another. We believe that standard has been met * * 4 We agree with LUBA, but we think that more needs to be said. One of the objectives of Goal 5 is the creation of ongoing programs for resolving conflicts, as they arise, between protected resource uses and other uses. See Coats v. LCDC, 67 Or. App. 504, 679 1`2d 898 (1984). OAR 660-16-010(1) permits the complete exclusion of conflicting uses, presumably including conflicting uses of other Goal 5 resources, from a resource site. It is either an unstated underlying premise or an unstated ramification of petitioner's arguments that no absolute exclusion of a resource-related use from a site is ever permissible under the goal, at least in connection with resources discovered after a plan has been acknowledged. The possibility of future discoveries of resources is infinite, but acknowledgement must occur at a particular time. However, Goal 5 and OAR 660-16-010(1) may say inconsistent things about how future discoveries of resources are to be assimilated into a jurisdiction's land use scheme. But see Coats v. LCDC, supra, 67 Or App at 510-11. The goal may dictate that a conflict resolution mechanism be applied to each new potentially conflicting use as it becomes known. The rule may say the opposite with respect to the use of newly discovered resources on sites from which uses which conflict with other resources have been absolutely excluded; on the other hand, the rule may mean instead that an exclusion can apply only to known conflicting uses and that potential uses arising out of later- discovered resources must undergo separate ESEE analysis to determine whether they, too, should be excluded from the site. Whatever the premise or ramification of petitioner's arguments may be, however, it is unnecessary here for us to interpret OAR 660-16-010(1) or to decide whether it is inconsistent with Goal 5. Petitioner is not concerned with a failure by the county to apply Goal 5 to a newly discovered resource; its concern is over the county's prohibition of explorations aimed at discovering the resource. We understand the county to have found that geothermal exploration in itself, aside from any productive use that might follow from a discovery, is a use which conflicts with the other Goal 5 resources that the county has chosen to protect in the area of petitioner's property. 1, 2. Goal 5 does require identification of resources as well as resolution of conflicts between uses. Reduced to essentials, petitioner's argument is that the identification requirement of the goal means that planning jurisdictions must allow an eternal quest for Goal 5 resources that, if found, will necessarily be in conflict with other identified Goal 5 resources. That reductio ad absurdum may or may not be permitted by the language of Goal 5. However, all we need decide in this case is that we do not construe the goal as requiring that the county permit all possible measures to locate a Goal 5 resource when the exploratory measures themselves would be destructive to other Goal 5 resources that have already been identified. Affirmed. Footnotes: 1 The county failed to appear in this court, and the case was submitted on the record as to the county pursuant to ORAP 5.76. 2 As an adjunct to that principal point of its argument, petitioner contends that the prohibition of exploration prevents the site-specific inventory that OAR 660-16-000(2) requires. LUBA concluded that the site-specificity requirement of the rule does not apply to energy resources, which are "fugitive" by nature. Although we agree with LUBA, we think the site-specificity issue is a red herring. Everyone accepts the assumption that petitioner's property is a potential treasure chest of geothermal energy resources. The real question petitioner raises is whether the county has violated Goal 5 and the rule by its a priori exclusion of geothermal uses in an area, notwithstanding the area's recognized potential importance as a geothermal resource site. As we understand it, petitioner's point does not turn on inventorying factors, i.e., location, quality and quantity; it turns on whether all uses of the energy resource can be prohibited in the area before the exploration that must precede the identification of possible uses has taken place.