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Report on GCC Energy Coal Transport Options <br />J. Comment letter from LaPlata County Planning Department to Colorado Division of <br />Reclamation, Mining and Safety as of June 10, 2015 concerning King Coal Mine (C- <br />1981-035) Mid -Term Review No. 7 (MT -07) and Technical Revision No. 24 (TR -24); <br />K. Preliminary Adequacy Review letter from Colorado Division of Reclamation, Mining <br />and Safety to Tom Bird of GCC Energy, LLC as of 14 June, 2015 <br />L. Response letter from GCC Energy to Division of Reclamation, Mining & Safety of July <br />14, 2015 Re: Technical Revision 424 — Midterm Permit Review No. 7(MT-07) Adequacy <br />Review 91 Response; <br />General Economics of the King II Mine and Available Coal Resources <br />Information which you provided and from documents above as well as the site visit of November <br />11, 2015 show the following: <br />a. Local citizens describe that approximately 80% of coal transported from the King II Mine <br />is hauled to Gallup, New Mexico for subsequent transfer by railroad to customers but this <br />has not been verified by GCC or by Mine Engineers, Inc.; LSC Transportation <br />Consultants, Inc. counted truck traffic at the intersection of SH 140 and CR 120N on <br />December 9 and 10, 2015 with 24% to/from the north and 76% to/from the south on SH <br />140; Destinations of these trucks is unknown but may include Pueblo, Colorado (north <br />bound) and Gallup, New Mexico (south bound) or other locations; <br />b. Haul distance from the King II Mine to Gallup, NM is approximately 155 miles one-way; <br />c. Transport is by over -the -road trucks with a capacity of approximately 30 tons each; <br />d. Coal is mined by underground room and pillar methods; <br />e. Based on information from Supplemental Narrative for GCC Energy, LLC mine <br />employment is approximately 150 people who are paid approximately $12 million <br />annually in salary and benefits with 282,402 man-hours reported to MSHA for 2014; <br />f Life of mine from remaining resources within the State of Colorado lease and the <br />adjacent federal coal lease COC62920 is unknown and may be as low as 2 years at the <br />current annual production rate of 970,780 tons for 2014. <br />The truck transport to Gallup, NM adds significant cost to the coal and is estimated to be <br />approximately $4.50 per loaded mile or $700 per 30 ton load or a unit cost of $23.33 per ton. <br />Based on the above labor cost, which is assumed to include payroll taxes and benefits, the direct <br />labor cost component of coal produced and loaded at the King II Mine is approximately $12.36 <br />per ton. Typically, operating supplies cost is approximately equal to labor cost, which means <br />that cash cost for production of coal loaded into the truck for transport would be approximately <br />$24.72 per ton. Considering that most coal is delivered to Gallup, NM for transfer on to the <br />railroad and delivery from there to the customer, which is unknown, the cost of coal to this point <br />would be more than $48.05 per ton. This cost also does not include depreciation, depletion, <br />amortization, production taxes and royalties, profit or corporate overhead. <br />MINE ENGINEERS, INC. 3 December 15, 2015 <br />