Crescent Bar Island on the Columbia River near Kennewick, Wash.

Leaseholders on Crescent Bar Island in the Columbia River in central Washington have rejected offer from the Grant County PUD to settle the federal lawsuit they’ve filed to fight eviction. They’ve also refused a PUD demand to settle the dispute through arbitration.

The PUD received the rejection letter late last week and will now ask a judge to order the case into arbitration, the Wenatchee World reported.

In the letter dated March 16, the lawyer for Crescent Bar Inc., landlord to the holders of approximately 400 leases to island condos and RV lots, rejected the PUD’s settlement offer, saying that islanders are not opposed to a settlement, but that any settlement should involve all the island plaintiffs, not just CBI.

When the islanders filed suit in January 2010, CBI was one of the defendants in the suit, along with the PUD and the Port of Quincy.

Since then, the islanders have taken control of CBI, and CBI has switched sides. It is now a plaintiff.

The letter further rejects the PUD’s demands to resolve the dispute by arbitration, out of court, as a requirement of the 1979 lease between the PUD, port and CBI.

The letter says that the PUD “has waived its right to arbitrate under the 1979 lease,” because it has waited too long to demand arbitration.

The PUD’s Feb. 17 letter demanding arbitration came more than a year after the islanders filed their January 2010 suit.

Responding to a request for comment on the letter, PUD officials said in an email that their demand for arbitration has been timely. They are in the process of asking the judge to force the parties into arbitration.

PUD spokeswoman Sarah Morford said lawyers for the utility are studying the rejection letter.

The PUD has given CBI until April 1 to leave the island. The islanders, who pay their condo and RV-lot lease payments to CBI, have until June 1.

CBI manages Crescent Bar under a lease with the port which leases the island from the PUD.

The PUD owns the island as part of the lands around its Columbia River dams, Priest Rapids and Wanapum.

A lawyer for the islanders Monday said they’re hoping that U.S. District Court Judge Justin Quackenbush will grant an injunction they’ve requested that would allow the islanders to remain on Crescent Bar until their legal dispute is resolved.

The PUD seeks to return Crescent Bar to full public use for recreation and wildlife protection. The islanders’ private condos and RVs occupy about one-third of the 160-acre island.

The PUD claims that the islanders’ leases expire this year. Islanders say their leases expire in 2023.

They’re demanding that the PUD honor the 2023 expiration date or compensate them for their loses if they have to leave before then.