A US agency is worried Hyatt Lake Resort might have run afoul of its lease by remodeling a restaurant and other facilities without permission and using federal property to access private lands.

A U.S. agency is worried Hyatt Lake Resort might have run afoul of its lease by remodeling a restaurant and other facilities without permission and using federal property to access private lands.

Rik Arndt, Pacific Northwest program manager for the U.S. Bureau of Reclamation, said he is still trying to determine what, if any, violations of a federal lease have occurred on the resort.

However, Bob McNeely, owner of Hyatt Lake Resort and nearby Campers Cove, said he has a stack of documents from the Bureau of Reclamation's Bend office that give him permission to remodel the buildings.

"We've got all the files that he wanted, and we've done exactly what he wanted," he said.

McNeely maintains the restaurant and other facilities on the federal land under a lease agreement with the Bureau of Reclamation, and he owns 30 acres next-door that contain 22 cabins that he describes as recreational vehicles.

A Jackson County hearings officer in September found the county Planning Department erred when it allowed McNeely to install the cabins at the resort, calling into question millions invested in the property. The resort filed an appeal on Oct. 13 with the Oregon Land Use Board of Appeals.

Hearings officer Donald Rubenstein concluded the cabins pose a fire danger for the resort and the surrounding forest.

He determined the resort, 20 miles east of Ashland, resembles a high-density residential development with some units only 7 feet apart.

Rubenstein rejected a request to add an additional 13 spaces.

McNeely filed for bankruptcy on Sept. 30 for his company Nor'wester Industries Inc. of Washington, which built the cabins.

According to the bureau's records, there should be a restaurant, about five cabins, two mobile homes and a workshop on the federal land.

Arndt will be using photos taken in 2000 and 2001 to help verify what improvements have been made to the property since then. In addition, an access road and parking area have been improved, possibly without permission from the federal government.

Arndt said the Bureau of Reclamation has reduced staff and closed some offices, making it difficult to determine whether McNeely received federal approvals. He said he would visit the Bend office soon to go through documentation to make the determination.

"We are trying to make sure we have treated Mr. McNeely fairly," he said.

The cabins have been installed on McNeely's land, but the access to these cabins is over federal land.

Arndt said the private property should have its own access off Hyatt Prairie Road.

"If we had some kind of emergency, how would the emergency vehicles get in and get out on the same road?" he said. "At some time we need to sever the lease lands from the private lands."

Arndt said he needs to clarify with McNeely that the public has free access to the lake over the federal road.

If McNeely made improvements on the buildings with federal approval, Arndt said it is difficult to say what steps his agency would take until he has fully reviewed the situation.

A letter sent by Arndt on Sept. 3 to the Jackson County Development Services Department asked county officials not to issue any permits for construction or renovation on the federal lands.

Under terms of a 1963 lease, concessionaires of Hyatt Lake Resort need approval by the federal government to build new buildings or remodel old facilities.

The original lease was given to the Talent Irrigation District and then transferred to Rick Franklin in 1990. Arndt said he hasn't yet found any clear record of transferring the lease to McNeely from Franklin.

The lease terminates on Sept. 1, 2012. Arndt said the government could either renew the lease through a competitive bid process or determine a lease is no longer appropriate, requiring the current lease holder to remove the buildings on the property.

McNeely said he has the documentation to show the lease was transferred. He said Arndt has never told him about any issues regarding access to his property.

The bankruptcy at Nor'wester and recent publicity have hurt business at Hyatt Lake Resort, said McNeely.

"A lot of people thought we closed down, and we've not," he said.

Reach reporter Damian Mann at 776-4476, or e-mail dmann@mailtribune.com.