Ash and his friends spot Navel Island, the home of the second Orange League Gym and the Sea Ruby Badge. They touch down on the beach near a very quiet village, but the Gym is nowhere to be found. A man approaches on a sailboat, introducing himself as Danny and immediately appealing to Misty, shocking Ash and Tracey. Meanwhile, Team Rocket spots them from their Magikarp submarine. Misty notes Danny's large backpack and contrasts it to Ash's lack of preparation, which begins an argument. Danny notes that they are close, but Misty calls Ash a little kid, which irritates Ash.
They approach the Navel Gym gate, and Ash opens it. Inside, there is a cable car and a trail leading up the mountain. Pikachu points at a sign that explains challengers must climb up the mountain without using Pokémon, otherwise they risk disqualification, while spectators can use the cable car. Danny also climbs along, moving at a seemingly easy pace while Ash is struggling with both the exertion and a slight fear of heights. At one point, Misty and Tracey pass via the cable car, and Misty calls to Danny. This irritates and distracts Ash, which causes him to slip and fall down. He grabs onto a ledge and attempts to call out Bulbasaur, but Danny reminds him of the rule. Ash puts the Poké Ball back and manages to climb back up.
Ash takes a rest, exhausted, while Pikachu and Danny enjoy the mountain air. Suddenly, Team Rocket grabs Pikachu with a suction cup and attempts to pull him to their balloon. Ash grabs Pikachu and Danny removes the suction cup, cutting off Team Rocket's motto. They launch another plug, but Danny attaches it to a rock, which flies back and ruptures the balloon, sending it flying into the clouds. The balloon runs into a water geyser, which sends it flying even higher.
Ash and Danny continue hiking up, as the weather turns to snow. Pikachu collapses from the cold and Ash runs to him, taking off his vest and using it to warm Pikachu. At the summit, Misty and Tracey are waiting, wrapped in blankets. When Ash and Danny arrive, Misty runs past Ash to Danny, offering to share her blanket. Danny then reveals to everyone that he is the Gym Leader since nobody was at the top when Misty and Tracey arrived.
Danny announces that the match is composed of three rounds, and two of three wins. The first test is to freeze a hot water geyser. Danny uses Nidoqueen while Ash summons Lapras. Both Pokémon fire Ice Beam attacks at the geysers. While Lapras makes steady progress, Nidoqueen is much faster and freezes the geyser first, winning the round. Lapras manages to complete the task but winds up being exhausted.
The second round is to carve the ice into a sled with three Pokémon. Ash sends out Pikachu, Bulbasaur, and Charizard, despite its track record of disobedience. Danny uses Machoke, Scyther, and Nidoqueen. Danny's team uses brute force to make adequate progress while Charizard loafs around. Bulbasaur's Vine Whip and Pikachu's Thunderbolt are not as effective, putting them behind while Ash tries to get Charizard to work. Charizard uses Flamethrower on Ash before using four more to perfectly carve the sled and win Ash the round.
The final round is to race down the mountain to the beach. Danny puts Geodude, Electrode, and Scyther into his sled while Ash rides with Pikachu, Bulbasaur, and Squirtle. When the light turns green, both teams race down as fast as possible while Misty and Tracey use the cable car. Scyther steers his sled while Ash uses Bulbasaur's vines to steer, although Ash spins out of control. Just then, Danny runs into Team Rocket's pit trap, and Ash stops to help. Team Rocket reveals themselves, and Meowth activates a larger pit trap that both teams fall into, after which the trio takes Pikachu and tries to escape. Bulbasaur uses its vines to get Ash and Danny out, and the Pokémon create snowballs, with Geodude launching them. Scyther loads Electrode onto a plank as everyone else propels it to the balloon. Pikachu gets clear of the balloon, just as Danny orders Electrode to use Explosion to destroy it. This sends Team Rocket blasting off again.
Ash and Danny restart the race and begin when the sun rises. When the terrain changes from snow to rock, Ash's sled picks up too much speed and barely misses a large rock, causing it to cut through trees. Danny closes in on the finish line, but Ash soars through the sky and catches up with Danny. The landing causes Ash's sled to shrink in size, and the lighter sled allows Ash to pull forward and win the race. Danny congratulates Ash and hands him the Sea Ruby Badge. Misty and Tracey are glad that Ash won, but Misty is also partially upset that Danny lost. Ash and his friends then get back on Lapras and leave Navel Island.