Opinion ID: 2264149
Heading Depth: 4
Heading Rank: 2

Heading: Events leading to MSB's termination of the contract

Text: Shortly after the Oilwell Road Agreement, Nash requested, and was given, permission to reduce the contract's timber harvest requirements so that he could work on the road. In his request, Nash stated: I need to get going on reconstructing the road for the Chijuk Sale. By way of this agreement, I would correct the problems that are open issues with Fish and Game. He added: It's a good deal for the Borough. In order to accomplish this work, I'm going to need a roll back in the first year's total harvested acres from 1,000 to 500. Still, Nash did not meet even the reduced goal of 500 acres harvested in the first yearin fact, he did not harvest any timber before June 30, 2000. He had, however, largely completed work on two important bridges and was preparing to do other work on the road. On June 28, 2000, Nash requested a second change to the timber sale contract in the form of an extension of time for harvesting the first 500 acres until September 30, 2000. The Borough manager approved the request. In August 2000 it became apparent that Nash would not meet the new deadline and a third accommodation would be necessary. In recommending approval of an extension, borough staff noted that the road being built was very good, and that because of the quality of the road construction it was in the Borough's best interest to grant Nash the additional time he requested to complete the construction of Oilwell Road and harvest his timber. On November 16, 2000, the Borough approved the third amendment of the contract, providing that Nash would harvest 500 acres by January 31, 2001, and an additional 1,000 acres by June 30, 2001, and every contract year thereafter. By January 15, 2001, Nash had fully completed the bridges, prepared the access road from the Moose Creek Bridge to the Kroto Creek Bridge, and begun to cut some trees. However, his progress was still not up to the contract's requirements, and on January 31, 2001, the Borough approved a fourth amendment pushing back the date for the harvest of the first 500 acres to February 28, 2001. However, Nash still did not meet his requirements, and on June 25, 2001, the Borough officially notified Nash that he was in breach of the timber sale contract. Eventually, the fifth amendment to the contract and all subsequent ones were issued under a notice of breachthat is, the extensions allowed Nash to continue harvesting timber, but did not relieve him of being in breach of contract. Ultimately the Borough would approve eight amendments under breach, bringing the total contract amendments to 12. Nash claims to have completed work on the road during the summer of 2001. Meanwhile, he subcontracted with RK Custom LLC to help him log and mill the timber. RK actively logged the area, and appears to have been responsible for much of the logging that was completed. However, relations between Nash and RK eventually broke down to the point that RK exercised an option in its contract with Nash, granting RK an assignment of part of the timber sale. Nash had granted the option to RK earlier, as capital to collateralize a loan for sawmill equipment. RK noted that it had no other recourse but to take this assignment because Nash continues to fail at meeting production levels as outlined in all agreements. On February 11, 2002, the Alaska Division of Forestry sent Nash a letter reminding him that he had failed to submit a required annual operations plan. The division also informed him that he would be in violation of the State Forest Practices Act if he did not remove felled white spruce that was piled along the logging roads by June 1, 2002. The state was concerned that downed logs could facilitate the spread of the spruce bark beetle, but Nash had stopped removing the logs in January pursuant to borough order because he had not submitted certificates of insurance for his contractors. Nash provided a certificate of insurance around February 22, but was ordered to cease all activity on February 28, 2002, because he had not provided the Borough with a notice of operations (as required by the contract when operations resumed after a shutdown). Nash provided the required notice on March 6, 2002. Another factor delaying removal of the felled logs was the closure of Oilwell Road during spring breakup in 2002 due to washouts. Unusual weather, including a heavy April 18 snowstorm, appear to have made road conditions unusually bad that spring. Nash claimed before the board of adjustment and appeals that the delay in reopening the road caused us great hardship because we missed the normal June and early July markets for spruce sales to local mills. On July 8, 2002, the Alaska Division of Forestry informed the Borough that failure to remove the logs by October 24 would constitute a violation of the Forest Practices Act. By letter dated July 22 the Borough informed Nash that he should take out downed logs. Borough staff estimated there were about 2,000 logs in Nash's portion of the sale area needing removal. Nash told the board of adjustment and appeals that he then started hauling right away, but he found the original 6 1/2 miles of road that is fully maintained by the Borough (the portion that extends from Petersville Road to the Moose Creek Bridge) [to be] in awful condition. On July 31, 2002, Nash filed a new operating plan stating that his initial focus would be on hauling downed logs rather than harvesting. The Borough responded that this plan did not meet the contractual requirements because it did not provide sufficient detail of planned operations. Accordingly, the Borough would not approve any activities other than removal of the fallen spruce logs. On September 12, 2002, MSB issued Nash and RK a notice of termination stating that the contract had been breached both with regard to removal of downed logs and failure to meet harvest level requirements. This letter stated that RK and Nash had until October 22, 2002, to cure the breach by paying for and harvesting 400 acres and removing about 2,060 spruce logs. The letter indicated that MSB is not inclined to grant any further extensions in order to cure the breach of this contract. The MSB has previously granted twelve (12) extensions in order to cure previous breaches. On October 24, 2002, borough staff performed a final inspection for contract termination. Staff inspected the sale area and noted that no new acres had been harvested since the September 12 notice of termination and that about 1,500 spruce logs remained on the ground. The next day, the Borough sent Nash and RK a notice of termination of the contract. It informed Nash that he was no longer authorized to enter the property for forestry work and must remove his equipment. The Borough subsequently removed some of Nash's equipment and demanded payment of some removal charges before it would release it to him.